The World Economic Outlook and implications for Malaysia

Abstract

After much turbulence in 1997-98, global economic and financial conditions improved markedly in 1999, with a favorable impact on Asian economies recently in crisis. Macroeconomic stability, investor confidence, and capital flows have returned to most of the emerging markets in the region, as reflected in the stabilization of the currencies and some rallies, albeit uneven, in equity markets. Evidence of output recovery has become more firm, although risks remain. Malaysia's economic performance and near-term prospects are similar to the other Asian crisis countries, with output recovery likely to strengthen in the year ahead in response to fiscal and accommodative monetary stance, and expected to be sustained if financial and corporate reforms are vigorously pursued. Importantly, the world economy and global financial markets will continue to define some of the key policy challenges for Malaysia.