Global trade tension threatens Malaysia's growth prospect

14:42 | 02/07/2018 Global Economy

The trade spat intensified by the US protectionism has prompted analysts to cut forecast on Malaysia's gross domestic product (GDP) growth this year by 0.1 percentage point to 5.2 percent.

Source: themalaymailonline.com

According to a report issued by the Hong Leong Investment Bank (HLIB), President Donald Trump administration’s tariff increase policy could hurt global growth momentum, forcing the bank to revise down global GDP growth from 3.9 percent to 3.8 percent.

Given Malaysia's trade openness, the slight downgrade of global GDP is expected to weigh slightly on firms' export prospects, said the HLIB.

The US has recently imposed a 25 percent tariff on Chinese goods worth US$50 billion. In response, China has retaliated by an equal amount.

On June 18, Trump announced a 10 percent tariff on Chinese imports worth up to US$200 billion.

Should the tariff dispute involve more major economies on a larger scale, the impact to global growth will be more significant, the bank said.

It cited an IMF study on protectionism in the global arena that raising tariff by 10 percent on imports would lead to lower global GDP by approximately 1.75 percent.

Overall, HLIB foresees that Malaysia will experience more moderate growth this year.

Even though the abolishment of goods and services tax (GST) and reintroduction of fuel subsidy will boost the country's consumption, the bank said that the positive impact will be offset by lower government expenditure.

Theo VNA