| Rokiah Mahmud |
THE International Monetary Fund (IMF) forecast a positive global growth of 0.2 percentage points to 3.09 per cent for 2018, with the developed market – particularly the United States and Eurozone – contributing to the growth.
This was highlighted in a keynote speech yesterday, at the Standard Chartered Bank (SCB) Brunei Global Research Briefing by Pehin Orang Kaya Seri Kerna Dato Seri Setia (Dr) Haji Awang Abu Bakar bin Haji Apong, the Minister of Home Affairs, in his capacity as the Deputy Chairman of Autoriti Monetari Brunei Darussalam (AMBD) Board of Directors.
“Asia will remain the key driver for global growth, led by China and India. The World Bank has also upgraded its outlook for 2018 and 2019. This is supported by accelerating global growth momentum, which managed to surprise on the upside. Global trade has also been seen to make a comeback and expected to remain healthy and expand by 4.6 per cent in 2018,” said the minister.
“The labour market has also been encouraging with positive jobs growth in many countries, including the United States, the United Kingdom and Japan. However, inflation continues to be benign in many of these countries. Nonetheless, economies can still benefit from low inflation.
“We are in fact facing a ‘Goldilocks scenario’, the best of all possible worlds, experiencing ideal conditions of robust growth and mild inflation. This observation may signal a shift in the structure of the global economy.
“The rapid waves of innovation and globalisation have led to structurally cheaper goods, and services.
“This structural change may be driven by the prevalence of disruptors in the by-products of technological advancement.
“They can take various forms, from a simple idea such as mobile banking, to as complex as artificial intelligence. Disruptors have changed the ways traditional processes take place. They bring convenience and more choices to consumers, spurring competition, and in turn, driving prices down.”
Innovation and globalisation, the minister added, has benefitted consumers and producers alike. “But as the world becomes more interconnected, high dependence on global trade exposes economies to global demand volatility.
“Perhaps, this is why many developing and emerging economies are implementing policy reforms, to achieve a more sustainable growth. For instance, China is focussing more on domestic demand, and committed to strengthen their financial sector.
“India, meanwhile, continues to address inefficiencies in their economy through a series of initiatives, including GST reforms. These domestic structural reforms will strengthen their economies, and reduce vulnerabilities to external shocks.
“2017 was an exceptional year for the global economy, and especially more for financial markets.
“Most assets classes rallied, with the US, Emerging and Asian equities among the star performers.
“Even more impressively, risk-off assets such as bonds and gold outperformed expectations. Commodity markets, generally, also did well. Oil prices recovered on the rebalancing of excessive inventories.
“Looking ahead for 2018 and in light of positive global growth forecast, healthy earnings projections, and favourable US tax policies, it seems that stock markets may continue to see record highs.
“Despite that we need to be very cautious. The spanner in the works, though, could be the transition from quantitative easing to tightening. This possibly will create headwinds for bond markets, and high leveraged economies, as this could mean higher debt service payments.”
The minister said the direction for oil prices was dismal. “Geopolitics and oil inventory levels will remain key determinants on where old prices will go,” he said.
“Closer to home, the Asean region continues to grow steadily. The region continues to attract healthy foreign direct investments. Regional stability, growing wealth favourable demographics, pro-growth governments are some of the attractive attributes of the region.
“The stronger global growth environment will place Asean in a good stead. The region is one of the most open economies in the world and will benefit from continued open policies.
“Ongoing infrastructure developments around the region will also provide some buffer against any unexpected downturn in external demands. The medium-term growth prospect for the region remains very upbeat.”
The minister also noted that 2017 had been a good year for the global economy and markets.
“Although prospects for this year look just as bright, we must be cognisant of what lies ahead, as 2018 will bring lots of uncertainties and new challenges,” he said.
“Geopolitics, trade protectionism, potentially over-values assets are but some of the global risks we need to be mindful of. These uncertainties may require reassessing our investment strategies,” the minister said.
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