CALL it Monday blues. Of all the days, rating agency Moody’s chose the first business day of the week to add to the growing global gloom. Troubled by disruptive and unpredictable politics around the world, Moody’s, on Monday, sliced its global sovereign outlook for next year from “stable” to “negative”. Malaysia is rated A3 stable, meaning a slowdown is coming our way. There is one other thing.
On the very same Monday, the United States’ Federal Aviation Administration (FAA) downgraded Malaysia’s air safety rating from Category 1 to Category 2. Happily, the Civil Aviation Authority of Malaysia, having acknowledged “shortcomings” in its performance as an aviation regulator, is addressing the issues raised by the FAA. Way to go.
How can the world and Malaysia respond to the “slowdown” warning of Moody’s? First, the world. A reading of Moody’s report will reveal that the rating agency had already slapped downgrade warnings on Britain, South Africa, India, Mexico, Turkey and Hong Kong. Here, disruptive politics must end. Brexit is an area of darkness.
To paraphrase Moody’s earlier assessment, increasing inertia and, at times, paralysis that has characterised Brexit-era policymaking, is making life miserable for Leavers and Remainers alike. Hong Kong? A land of riots and more riots. India? A nation divided in many mutinous ways. No good marks for South Africa, Turkey and Mexico too.
But Moody’s eyes are fixed elsewhere: the US-China trade war. And rightly so. Much of the global disruptive politics originate from the US. Accusing China of unfair trading practices and intellectual property theft, President Donald Trump has imposed tariffs on more than US$360 billion worth of Chinese goods, in the estimate of a September BBC report. China has retaliated with tariffs of its own exceeding US$110 billion worth of US products.
This tit-for-tat between Washington and Beijing needs to stop. Dr Carmelo Ferlito, senior fellow, Institute for Democracy and Economic Affairs, puts it thus: China and the US will have to deal with deadweight losses caused by their behaviour before wisdom visits them.
What makes it worse is that the trade war is happening in the midst of rising nationalism and protectionism, especially in the West. But Ferlito sees an opportunity for Asean countries to counter these tendencies. But first, Asean must stop being coy of speaking with one voice. To Ferlito, the “single voice” can be an Asean trade council that can start trade talks with the US and China. Next, the council could be the intermediate body to have the US and China talking between them.
As for Malaysia, quite a few economists are taking comfort in the fundamentals of our economy. But it is complacency such as this that has put others in danger. We are an export economy, much at the mercy of international trade winds. When the wind blows, we rock. At other times, we rely on fortifications.
Plus, there is no telling what trade barriers will be put up against Malaysian goods in the future. Ferlito recommends that Malaysia take this chance to make our economy less reliant on raw material export. This is good advice. Because, ready or not, moody blues is headed our way.