-  Based on the World Economic Outlook released by the IMF yesterday, the Fund has revised downwards 2013 and 2014 global growth projections to 2.9% and 3.6% respectively. Much of the pick-up in growth is expected to be driven by advanced economies. However, capital outflows will likely weaken emerging markets while the US government default could be damaging to the world economy.

-  The IMF highlighted downside risks to global growth arising from growth transitions and US monetary policy adjustments. Although the US Federal Reserve recently decided not to slow down the pace of its asset purchases, bond yields remain well above the levels in early May and there is a distinct risk that financial conditions will tighten going forward.

-  In the US, projections are based on the key assumption that the ongoing shutdown in the federal government will be short-lived and the debt ceiling will be raised on time. Growth in the US is expected to rise from 1.6% this year to 2.6% in 2014 driven by continuous strength in private demand, recovery in the housing market and a rising household wealth.

-  Meanwhile, policy actions in the Eurozone have reduced major risks and stabilised financial conditions, although growth in the periphery is still constrained by credit bottlenecks. The region is expected to gradually pull out of recession to register a growth of 1.0% in 2014.

-  In Japan, fiscal stimulus and monetary easing under the authorities’ new policy package has enabled an impressive rebound in key economic activity. However, the expected unwinding of fiscal stimulus, reconstruction spending and consumption tax hikes in 2014 will potentially slow down the economy’s growth momentum from 2.0% in 2013 to 1.2% in 2014.

-  As for China, growth is projected to decelerate slightly from 7.6% this year to 7.3% in 2014. Policymakers have refrained from stimulating activity due to the need to support a more balanced and sustainable growth path ahead.

-  In tandem with exacerbated risks in emerging market economies, the IMF has also revised Malaysia’s growth projections lower to 4.7% in 2013 and 4.9% in 2014. In April 2013, the IMF had envisaged grow rates for Malaysia of 5.1% and 5.2% for 2013 and 2014 respectively.

-  As for 3Q13, net trades have improved while domestic demand remains healthy in Malaysia. Based on our estimates, GDP may advance by 4.7% in 3Q13 backed by an aggregate domestic demand growth of 9.8%. Statistical release for Malaysia’s 3Q13 GDP is scheduled for November 15.

Source: AmeSecurities