Given the uncertainty of the global economy, there is an overall trend of monetary tightening by central banks worldwide. As Chief Economist at Ambank Research, Dr. Anthony Dass stresses that fears over the trade war are not just over the impact on GDP, but also on the competitive depreciation of currency that could potentially lead to a currency war. Tariffs alone are not the issue – it’s the knock-on impacts bound to result due to the interrelated nature of the world’s economies.
Related to this, economists are keeping an eye on the emerging market debt that could turn into a full-blown crisis -- Dass notes that foreign currency debt has tripled since 2008.
In Malaysia, the equity market is not doing well post-election, with a high net outflow. With the public debt standing at 1.09 billion (80% of GDP), the nation is quite vulnerable to contagion effects from other countries. That is because much of the money is tied to the US market, where the unpredictability of Trump can produce far-reaching consequences. At the same time, Ambank predicts that Bank Negara will maintain the interest rate this year and next.
Looking forward, global business sentiment is turning optimistic in spite of overall uncertainty. There are two key elections that economists and investors will look at: the US House of Representatives elections in November and Japan’s internal Liberal Democratic elections for party presidency in September, the outcomes of which would further determine the volatility of the market.
An effective ERM programme takes into account that risks, including reputational risk, can be spun into opportunity. All in all, the participants from various industries were highly invested in discussing the topic of reputational risk as they found they faced common challenges in their respective organisations.
The IERP® August Newsletter August 2018 4
Global Economic Overview
Dr. Anthony Dass, Chief Economist, Ambank Research