KUALA LUMPUR, March 4 — The power of populism and nationalism in advanced economies is the most apparent risk affecting Malaysia’s economic trajectory in the spectre of the global economic slowdown, says a prominent economist.
Harvard Club Malaysia president Professor Tan Sri Lin See-Yan said advanced economies today generate the most disruptive political risk to businesses.
“US President Donald Trump’s shift to protectionism is one example and disruptive Brexit is another,” he said at the Asian Strategy and Leadership Institute (Asli) Economics Conversation here today.
“Italy’s fiscal choices could yet roil markets while in Sweden and Germany, the need to build coalition is already weakening traditional parties,” he added.
Lin also said another risk was the rising regulatory chaos that had already begun to constrict opportunities for cross border transactions.
“In recent years, we have seen competition regulators outside of a multinational firm’s domestic market kill-off some transactions, delay others for months and force divestitures when there seem to be little evidence of monopoly,” he said.
He added that regulators were weighing in on major transactions using different criteria, often with little transparency.
Lin said the increasing use of an elastic definition of “national security” was also disrupting trade, investment and supply chains.
“More importantly, the threat of enhanced regulatory constraints is making it almost impossible for some multinationals to plan for the long term,” he said.
Apart from that, he said other risks that could be affecting global economic growth was the widening inequality globally and the likelihood of recessions.
He said for many global markets, the yield curve and credit spreads were now pricing-in a probability of at least 50 per cent within the next 12 months.
Lin said the recession was projected to be caused by a spontaneous slowdown in aggregate demand triggered by the Chinese slowdown, the depressing impact of secular stagnation and the failure of US fiscal authorities to prepare infrastructure spending in advance to stabilise demand.
“This view sees recent financial turbulence as correctly anticipating, not causing, a weakening economy,” he said.
The half-day talk brought together leaders from different ends of the spectrum to discuss macroeconomic factors that would affect Malaysia, its private sector and institutions, domestically and globally. — Bernama
