Posted: 05 Jan 2016 08:26 PM PST
The establishment of the Asean Economic Community means growth prospects for the new common market of 625 million people have never looked better. Rupali Karekar looks at what 2016 may have in store for five of the biggest economies of the 10-member bloc.
Last year was one that Malaysia will be keen to forget. Biggest trade partner China slowed down, global oil prices slumped, the new goods and services tax curbed consumer spending, and the 1MDB sovereign fund saga turned into a political scandal.
There will be more headwinds this year, say economists, with the same negative factors continuing to weigh on the economy.
The fiscal deficit may swell over the oil-price plunge, the political crisis surrounding 1MDB may worsen, and uncertainty over a successor to outgoing central bank governor Zeti Akhtar Aziz is a concern, noted Bank of America Merrill Lynch analysts.
“We assign a high probability that the fiscal deficit in 2016 will miss the target of 3.1 per cent of gross domestic product, given probable weaker corporate income tax and GST collection,” the analysts said.
Fiscal revenue will likely be hit by weak oil and gas revenues, with Petronas’ dividend contribution slashed to RM16 billion (S$5.2 billion) from RM26 billion last year.
“Higher palm oil prices will provide some support… along with continued government investment in the infrastructure sector,” BMI Research analyst Shuhui Chia said.
The open Asean market provides an opportunity as well as competition. Ringgit depreciation remains a concern due to rising interest rates in the United States and depreciation of the yuan.
Prime Minister Najib Razak may focus on 1MDB and politics, so attention on growth and the economy may remain diluted and tensions continue to simmer, Ms Chia said.
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