S&P Global Market Intelligence senior associate Benjamin Ng said that with global growth prospects picking up, the economic conditions are likely to improve and this could be observed from the global purchasing managers index (PMI) data, improvement in the electronic industry, as well as tourism segment.
“We saw that the US economy is stronger than expected although the Western Europe sector continued to underperform.
“Growth in Asia-Pacific (APAC) was uneven with India and Indonesia leading the region as the fastest growing while China was still struggling with multiple headwinds,” he said during a webinar organised by the Malaysia External Trade Development Corporation.
He said global PMI data showed the global gradual improvement of economic positions, with indications of further improvement with new orders and future output indications rising to its highest level since mid-2023.
“The market condition also sees improvement in demand prospects as reflected in the pickup in the employment and services segments despite the manufacturing segment remaining in a relatively challenging environment.
“APAC is expected to drive world growth in 2024 benefitting from a gradual recovery in China, and resilient domestic demand in the other APAC emerging markets with real gross domestic product (GDP) for APAC expected to increase to 4.5% in 2023 and continue to grow at a similar pace for 2024 and 2025,” he noted.
Ng said APAC’s contribution to global growth is about 55% of the world’s real GDP whereby half of the growth came from China, followed by India and Asean, especially Indonesia.
“Gradual recovery in electronic exports combined with a continued rebound in international tourism in 2024 will support the export sector of many APAC economies,” he said.
As for Malaysia, he said its economic momentum that was observed at the end of 2023 will continue in 2024 with real GDP growth projected to accelerate to 4.6% driven by the recovery in merchandise exports as well as tourism and the continued strength in private consumption and investment.
Ng added this was accompanied by steady improvement in export orders and quantity of purchases while the electronic segment growth in 2023 saw an improvement in early 2024, and is expected to persist throughout 2024.
However, he noted the textile and apparel manufacturing segment is expected to slip by 1.6% and will not recover on a quarterly basis despite the ongoing period of restocking.
Nonetheless, he shared that evidence of recovery in the electronic supply chain is mixed with the artificial intelligence (AI) boom driving the industry revenues up by 33% in the first quarter (Q1) of 2024.
On another note, he said that there is an upside risk to supply chain activities which may come later in 2024 if US importers choose to anticipate tariff increases of imports from China.
“We anticipate prior to the increase there would be a pre-tariff surge which could add 20% to 30% of imports from China in the fourth quarter (Q4) 2024.
“Meanwhile, there had been an ongoing process of reshoring from the US away from China for supplies and this strategic rivalry between the US and China had played out actively in the semiconductor industry with a variety of restrictions and retaliations across trade and industry since the launch of ‘Made in China 2025’,” he noted.
Amid the geopolitical uncertainties, he said there are both unintended consequences in limitations as well as market potentials.
He said China remained a huge market for semiconductor suppliers, equipment providers, and raw materials suppliers and accounted for almost 30% of revenues of the 10 largest chip companies while the US accounted for 25%.
“Given that this may likely split the market, exporters may need to take into consideration various strategies to mitigate the market risks,” he added.