KUALA LUMPUR – The high commodity prices experienced globally will be a benefit to Malaysia, analysts at Moody’s Analytics stated.
Based on the report titled ‘Emerging Market View: The Growth Recession” by Moody’s, Malaysia is expected to pay less of a price on inflation due to high exports of the country’s domestic production.
Aside from Malaysia, the report also names Colombia, Indonesia and Saudi Arabia as countries that would benefit from high commodity prices.
“Colombia and Saudia Arabia export crude oil. Indonesia and Malaysia, on the other hand, export palm oil which has seen prices surging after worldwide shortages of Russian and Ukraine produced sunflower oil,” Moody’s senior economist, Jesse Rogers, stated.
Additionally, throughout the rest of the emerging markets, inflation is rising and central banks will not give up until it is under control, he said.
“Monetary policy is mostly restrictive in the majority of Latin America. Even in Southeast Asia, where inflation is relatively uncommon, prices are rising.
“Central banks have increased rates in the Philippines and Malaysia. Indonesia and Thailand would be following,” he added.
Rogers further explained that central bank surveys indicate that inflation expectations are still climbing which might be a problem if consumers start to use price hikes as reasons to request for higher salaries – something that is not yet widespread due to labour markets still being weak.
He continued stating that the situation in emerging Asia is likely worse.
As there is still a general lack of current labour market statistics, he remarks that emerging Asian countries were badly impacted by the Delta wave last summer and had contractions to their gross domestic product in the second and third quarters.
“Given that labour market improvements tend to lag that of the overall economy, it is not unreasonable to conclude that labour markets are in less-than-stellar conditions,” he explained.
In explaining the meaning of it, Rogers stated that the best that emerging markets could hope for in 2022 is a growth recession. He defined it that economies will grow but at low rates so that labour markets may stop improving or even decline.
While emerging markets are less dependent on consumer spending, the report stated that consumers now make up a larger portion of the economy than they once did and that their importance is growing.
Even if the central banks are able to tame inflation, whether through supply-chain resilience and geopolitical conflicts have subsided, or even if the banks forcibly squeezed it out of the economy, the report said the best emerging countries can hope for is a slow growth with little momentum to the employment market.
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