The National ICT Association of Malaysia (PIKOM) has revised down its forecast of the Gross Domestic Product (GDP) growth for 2016 and 2017 to 4.2% and 4 % respectively.
The depreciation of the Ringgit against the US dollar, the unexpected outcome of the Brexit vote and the US presidential election results as well as the uncertain future of the Trans-Pacific Partnership Agreement (TPPA) are the significant factors attributed to the lower forecast.
PIKOM chairman Chin Chee Seong said the association is taking a conservative approach with regards to the revised GDP growth forecast, to take into account the potential long term impact of these factors on the economy. He said this today at the media briefing of the PIKOM ICT Strategic Review 2016-2017: Age of Disruptive Technology, an industry report, published for the eight year in a row.
“We are living in economic uncertain times and we cannot ignore the impact of the internal and external factors could have on the future of our economy and our country in particular the potential changes in US economic policies and the threat of a slower Chinese economy,” he said, adding that the effects could be far more reaching in 2017.
“The lower forecast is based on concerns over uncertainty and upward risks in the external environment,” added Chin.
According to the Department of Statistics Malaysia, the GDP growth for Q1 2016 was 4.2% — a 0.3% reduction from Q4 2015. Quoting excerpts from this year’s ICT Strategic Review report, Chin said the declining GDP growth rate continued in Q2 of this year, which marked the slowest expansion since 2009
However the GDP growth in Q3, demonstrated a better-than-expected performance.
Exports grew in August, after 22 consecutive months of contraction.
“PIKOM expects the strong performance of Q3 to be carried through to Q4 ending the year with an overall estimated GDP growth of 4.2% ,” he added.
Chin also commented that it would be interesting to see how bilateral and economic relations with China will strengthen especially after the Prime Minister’s recent 3rd official visit to the country since 2009, as this can potentially have a galvanising effect on the Malaysian economy in the long term.
“We certainly look forward to any positive developments as China presents a strong source of Foreign Direct Investment (FDI) and is also a potential huge market for Malaysian products and services,” he said.
He added that domestically, Malaysia remains largely stable with low inflation and unemployment rates, a Y-o-Y declining budget deficit, ample liquidity in financing and a well- supported prudent financial management systems and fiscal policies.
Chin is confident that the emergence of disruptive technologies – the focus of this year’s ICT Strategic Review report, will serve as catalytic game-changers to continue boosting the ICT sector and the economy.
PIKOM Research Committee Chair Woon Tai Hai who was also present at the media briefing, also noted the impact of the recent depreciation of the Ringgit against the US Dollar and the imminent changes in US policy especially on trade related matters, may have far reaching dampening impact; depressing an earlier expectation of a more positive outlook for 2017.
According to the ICT Strategic Review 2016/2017, the total ICT value in Malaysia for 2015 of 155.2 billion, is based on the Average Annual Growth Rate (AAGR) of 8% for the period 2010-2015, quoted Woon.
“The share of the overall ICT industry to the economy expanded from 16.5% in 2010 to 17.6% in 2015 and is on track to reach 20% by 2020,” he said.
Woon also said that the underlying growth in the industry arises from the ICT services (ICTS) sector clocking an average annual growth rate (AAGR) of 11% at RM70.2 billion in 2015 and projected to reach RM77.5 billion in 2016.
“The ICTS sector alone contributed up to 6.6% of GDP in 2015 and is projected to reach 7% by end of 2016”, he said.
Woon also said there will be a continuing relentless parade of new technologies and each of them professes to be the breakthrough and the next big thing to come! In fact, the age of disruptive technology will perhaps create more confusion and distract from realizing the full benefits of the technology adopted.
However it is important that business and government leaders keep themselves abreast of all these disruptive technologies including the new ones that are coming in the near future, he added.
“While you may not necessarily rush in to adopt them, it is important that you are aware of the impact and implication should you or should you not adopt them,” he said.
“Obviously there is no perfect answer to this and hence, realising that dilemma, PIKOM has decided to adopt this theme – Age of Disruptive Technology for this year’s ICT Strategic Review publication,” he added. PIKOM has selectively focused on several key technology disruptors to provide readers with a better perspective and appreciation of these technologies and platforms that are already in our midst, he added.
The 11-chapter report covers a broad range of topics relevant to the disruptive technology, such as Big Data, Internet of Things (IoT) and Digital Governance. For the first time, in its eight year history, the ICT Strategic Review report writes about the growth journey of young and established startups who are making a mark in the industry and perhaps one day in the world.
Global Business Services sector (commonly known as the Outsourcing industry) – long touted as a future growth engine for Malaysia – is also now taking a more prominent place in ASEAN. The chapter Shifting Sands in the GBS Regional Scene delves on the importance of countries in the region to jostle for the top and preferred destination for this sector. Many are also leveraging on high value services offerings instead of a cost arbitrage model approach.