THE start of a new year prompts people to do some soul-searching. Many go on earnestly to make New Year resolutions.
Plato once said: “An unexamined life is not worth living.”
And so, the year-end prompts some to reflect on what has gone on during the year. It is also the time to make predictions what 2018 holds for us as a nation.
“Prediction is very difficult, especially if it's about the future," so admitted Nils Bohr, a Nobel Laureate in Physics. But, predict we should, lest we fail to guard ourselves against any prospective ills that might afflict our economy.
As Oscar Wilde, an Irish novelist, once asserted, “To expect the unexpected shows a thoroughly modern intellect”. Arnold Toynbee, a renowned historian, contends that the past is the key to understanding the present. The past also serves as a crystal ball enabling us to foresee what 2018 has in store for us.
First the economy. Malaysia’s growth rate is expected to stay the course at 5.0 per cent. The world is recovering. It is expected to grow by 3.0 per cent in 2018. While the US, our third largest export destination, is largely fueling world growth, it is not the only economy to do so. There is systemic expansion across the world — from the west to the east. China is our second largest importer after Singapore. Its growth will stabilise at 6.7 per cent as it restructures its economy from consumption-led to higher quality development. Our seventh largest export market — India’s recent stellar growth has earned it the appellation “Tiger cub of Asia”. And Japan, our fourth largest export market that had erstwhile been comatose, will maintain its one-and-a-half year growth streak in 2018.
This all-round global growth should offer an added impetus to our exports. However, increasing protectionism might be a dampener to our growing exports. Oil prices are rising as well. At around US$63 (RM257) per barrel, and if that price holds for the rest of the year, revenue from oil should increase government coffers by RM3 billion, as the 2018 budget was prepared on the basis of oil being at US$50 per barrel. That should shave 0.2 per cent off the 2.8 per cent budget deficit projected in 2018. This 7 per cent deficit reduction will add roughly 0.2 per cent to the expected growth rate. That will put us on track to achieving our maximum targeted gross domestic product (GDP) growth of 5.5 per cent next year.
Organisation of the Petroleum Exporting Countries (OPEC) has announced that it will maintain output restriction to push up the oil price amid steadily growing demand. Crude oil stocks too are declining as the US shale gas production stabilises. And, rising tensions in the Middle East from Trump’s recognition of Jerusalem as Israel’s capital should keep oil prices hovering at this level, if not higher in the months ahead.
Malaysia depends on commodities to bring in a quarter of its revenues from exports. Apart from oil, we depend on palm oil for export revenues. Palm oil prices are expected to be steadier amid increasing demand from China and the EU. At a conservative estimate, oil prices are expected auspiciously to grow by 10 per cent.
Compounding these favourable prognosis, inflation will trend lower at 2.5 per cent in the coming year — a rate that would be an envy of advanced nations that are desirous of bringing inflation up to 2 per cent. Indeed, research suggests that after a one-off spike following the introduction of the Goods and Services Tax (GST), inflation growth rate will taper off.
Given the above scenario, it looks like the outlook for 2018 is rather sunny. Lest we throw caution to the wind, the government must ensure strong fiscal discipline without compromising the wellbeing of the citizens. It should also continue to allocate money to productive sectors that can ensure high economic growth in the long run.
Foreseeing the future is akin to looking for a black cat in a dark room which may not even be there. As Lao Tzu, the 6th century BC Chinese philosopher opined: “Those who have knowledge, don't predict. Those who predict, don't have knowledge.”
Happy New Year!
Datuk Dr. John Antony Xavier a former public servant, is a distinguished fellow at the Graduate School of Business, Universiti Kebangsaan Malaysia