This article first appeared in The Edge Financial Daily, on December 4, 2015.

KUALA LUMPUR: US-based economic research organisation The Conference Board (TCB) expects Malaysia to register gross domestic product growth of 4.5% and 4.6% in 2015 and 2016 respectively, before slowing gradually to just over 3% annually in the decade after on slower productivity growth.

This is what TCB executive vice-president, chief economist and chief strategy officer Dr Bart van Ark told pressmen on the sidelines of the Global Economic Outlook 2016 conference yesterday.

Van Ark said hence the adoption of technology and innovation is particularly crucial for Malaysia and other Asean emerging markets.

Deferring the adoption, he warned, would result in gradually weaker productivity, as it takes time for businesses to translate technology and innovation into profit.

“Companies should not hunker down and wait for better times while missing the opportunities that arise as new technologies take off. As interest rates rise, it becomes more important to invest productively.

“A broad approach to investment is still needed as [opportunities arise from] the commercialisation of technology. Risk assessments and contingency plans are needed in times of uncertainty, but agility and resiliency can turn risk into opportunities,” said van Ark.

He said that businesses can benefit from high liquidity and low interest rates to seek opportunities for growth that may come at a premium in the short run when they are rare but have a high return.

Van Ark said in his presentation that deceleration in Malaysia’s productivity growth is expected to fall below that of neighbouring Thailand and Indonesia up to 2025.

He also noted that there is a need for Malaysia to reallocate economic resources in order to improve the country’s productivity.

“For Malaysia, I think it is very important that the investment agenda is driven by higher returns and faster productivity growth. That means very intensive collaboration [between the] public and private sectors,” he said.

“I think the real challenge for Malaysia is to let new companies grow, [and] to let the existing companies that do not drive growth to fail. That is the way to reallocate resources and make the economy more productive; that is where a lot of reforms in Malaysia have to go,” he said.

Asked about the future trend of the ringgit’s valuation, van Ark said it ties closely with whether Malaysia can curb the slowdown in economic growth moving forward.

“My understanding is that recent estimates have shown the currency will begin to stabilise. I think that a rise in interest rates by the US is already largely factored in, and will be absorbed by the economy,” he said.

“But ultimately, of course, a lot is going to depend on whether the emerging markets generally — not just Malaysia and including China — will stabilise next year. If further declines in economic growth are stopped, then I think the chance [for] the currency [to] stabilise is quite substantial,” said van Ark.