KUALA LUMPUR: Strong public infrastructure spending in Malaysia and Hong Kong will ensure more broad-based economic growth than other trade-dependent economies, says Moody’s Investors Service.
“In the event that solid external demand persists and ongoing government infrastructure spending supports a further wave of investment by private businesses, that could mean that growth there slows less in 2018 than we currently expect,” Moody’s said in its latest report today.
Global demand has picked up since late last year and that has buoyed Asia Pacific's trade-reliant economies, but that faster export growth has yet to feed into a more sustainable acceleration in output growth.
Support to sovereign credit profiles will be strongest where the export upturn combines with structural reforms and investment in infrastructure, it said.
“The world's biggest economies are recovering at the same time, giving a boost to trade. Among them, China and Japan have been contributing to the global pickup, supporting regional demand.”
Some of those Asian economies that do not benefit from the pickup in global demand, such as Thailand might end up depending on additional fiscal stimulus to support their economies.
It noted that trends in gross fixed capital formation have differed markedly among the region's trade-dependent economies.
“Some businesses have started to invest in new or replacement equipment and facilities, while others are still using existing idle capacity to meet increased demand.”
On the back of signs that global growth is likely to remain robust through 2018, Moody's has raised its GDP forecasts for a number of Asia Pacific economies.
“If solid external demand and robust domestic conditions combined to sustain business investment, that would further boost the medium-term growth outlook for the economies in question,” the firm said.