By Zarul Effendi Razali

KUALA LUMPUR, Oct 11  -- Global growth is expected to remain modest moving forward, supported by solid domestic demand in emerging market and developing economies (EMDEs).

Nevertheless, growth in advanced economies is expected to ease further, mainly due to the ongoing trade restrictive policies, according to the Finance Ministry (MoF) in its Economic Outlook 2020 report released today.

"Downside risks remain a threat to world growth. These include the re-escalation of trade tensions between the United States (US) and China as well as broadening tariff hikes to other countries which will further hamper global demand.

"Moreover, exposure to financial vulnerabilities due to prolonged low interest rates may weigh on growth. Additionally, heightening geopolitical tensions, climate change effects and technological disruptions will adversely affect the global economy," it said.

According to MoF, the global economy is projected to grow by 3.2 per cent this year and 3.5 per cent in 2020.

It said growth in advanced economies was expected to ease from 1.9 per cent this year to 1.7 per cent in 2020 while EMDEs were forecast to grow slower at 4.1 per cent this year before seeing a better growth rate of 4.7 per cent in 2020.

The US is poised to register solid growth of 2.6 per cent in 2019. But this growth, it said, was projected to slow down to 1.9 per cent in 2020 due to the winding down effect of its fiscal stimulus as well as ongoing restrictive trade policies.

For the euro area, the ministry said growth was expected to moderated in 2019 due to weaker industrial production and business confidence amid slower external demand, but projected to pick up slightly in 2020 as industrial activities regain momentum.

"The uncertainties caused by Brexit continues to affect business confidence and domestic demand in the UK. Nonetheless, growth in 2020 is expected to stabilise after Brexit on Oct 31, 2019," it said.

On EMDEs, MoF said the expected slower growth this year was largely due to easing external demand and investment following the impact of rising tariffs.

However, it said, growth in major EMDEs was forecast to rebound next year after recovering from the effect of financial market pressures.

China's gross domestic product (GDP) is expected to expand at a slower pace in 2019 and moderate further in 2020, mainly due to structural slowdown and the escalation of trade tensions, it said.

ASEAN, meanwhile, is forecast to grow both in 2019 and 2020, largely thanks to robust domestic demand.

"ASEAN is also expected to benefit from China's large domestic market and increasing per capita income through exports and investment," it said.

On global inflation outlook, MoF said it was projected to be at 3.6 per cent in both 2019 and 2020.

For this year, it said that inflation in advanced economies was expected to record 1.6 per cent while in EMDEs, it was projected at 4.8 per cent. For 2020, inflation in advanced economies is expected to be 2.0 per cent while EMDEs are expected to record 4.7 per cent.

The ministry said world trade growth was expected to ease to 2.5 per cent in 2019 amid deepening trade tensions between the US and China, but improve to 3.7 per cent in 2020 supported by robust GDP growth in EMDEs.

"Foreign direct investment (FDI) is anticipated to expand 15 per cent to US$1.5 trillion in 2019 mainly due to rise in cross-border merger and acquisition activities and an increase in greenfield investments," it added.

-- BERNAMA