Petaling Jaya (The Star/ANN) - Despite the challenging global outlook painted by the International Monetary Fund (IMF) for 2013, domestic demand will continue to support emerging economies although the question remains open on whether even this leg of support will hold up should the slowdown prolong.
MIDF Amanah Investment Bank Bhd chief economist Anthony Dass told StarBiz that for Malaysia, there were still multiplier effects from investments to be rolled out next year, possibly following the general election.
He said there would be a rebound in commodity prices, with crude palm oil to end the year around 3,050 ringgit (US$990) per tonne with price levels maintained into the coming year.
"We're looking at $90 per barrel for crude oil," Dass added.
CIMB Investment Bank Bhd economic research head Lee Heng Guie said in a report that domestic demand must pick up the slack given that the outlook for exports remain bleak.
"Exports will remain a big drag on overall economic expansion in the second-half of 2012. If domestic-led growth falters, it is likely to trigger monetary easing and fiscal stimulus actions," he said.
The IMF said in the October update of the World Economic Outlook (WEO) report that downside risks had become more elevated than in the April 2012 and September 2011 reports with global gross domestic product (GDP) growth cut to 3.3 per cent from 3.5 per cent for this year while the outlook for next year had been lowered to 3.6 per cent from 3.9 per cent.
This followed the release of the World Bank's East Asia and Pacific Data Monitor on Monday, in which the region's growth projections was cut to 7.2 per cent from 7.6 per cent.
The bank raised Malaysia's outlook to a 4.8 per cent GDP growth from 4.6 per cent earlier on domestic demand factors.
"For the medium term, important questions remain about how the global economy will operate in a world of high government debt and whether emerging market economies can maintain their strong expansion while shifting further from external to domestic sources of growth," the IMF said.
The IMF chief economist Olivier Blanchard said in the foreword to the update that low growth and uncertainty in advanced economies were affecting emerging market and developing economies, through both trade and financial channels, adding to homegrown weaknesses.
"Alternative risk-off and risk-on episodes, triggered by progress and regress on policy action, especially in the euro-area, are triggering volatile capital flows," he added.
The report said indicators of activity and unemployment showed increasing and broad-based economic sluggishness in the first half of 2012 and no significant improvement in the third quarter.
GDP growth for the Asean-5 (Indonesia, Malaysia, Philippines, Thailand, and Vietnam) has been maintained at 5.4 per cent but the 2013 outlook has been cut to 5.8 per cent from 6.1 per cent.
China's GDP growth for the year has been cut to 7.8 per cent from 8 per cent while India's has been lowered to 4.9 per cent from 6.2 per cent. For next year, China's GDP growth has been cut to 8.2 per cent from 8.4 per cent while India's have been lowered to 6 per cent from 6.6 per cent.
It added that tail risks including those relating to the viability of the euro-area or major US fiscal policy mistakes continue to preoccupy investors.
"Looking ahead, no significant improvement appears in the offing. The WEO forecast includes only a modest reacceleration of activity, which would be helped along by some reduction in uncertainty related to assumed policy reactions in the euro-area and the United States, continued monetary accommodation, and gradually easier financial conditions," it said.