Year-old govt must turn economic plans into reality, say economists

Alfian Z.M. Tahir Desmond Davidson

Economists say inflation has dropped for nine consecutive months since early 2023. – The Malaysian Insight file pic, November 22, 2023.

THE unity government is on the right track with its plans for economic recovery one year after coming into power, economists said.

They, however, warned that next year is vital for Prime Minister Anwar Ibrahim and his cabinet to put the plans into action so that results are achieved.

The unity government was formed in November last year after Anwar gained the backing of lawmakers from Barisan Nasional as well as from Sabah and Sarawak parties.

Anwar enjoys a strong two-thirds majority in parliament with 151 MPs backing him, including four from Bersatu.

Unirazak academic Prof Dr Barjoyai Bardai said Malaysia’s economy remains competitive amid a global economic crisis.

He added that the country’s economic performance was growing and expected to further expand next year.

“Overall, our economy is competitive despite problems from within and outside the country. The war in Ukraine, global inflation is an example of an outside problem while within we are facing the high cost of living and most of our income has been stagnant.

“However, our performance is showing good signs. Our GDP is expected to grow 4 to 5% next year.

“The government has also come up with several plans in their latest budget. We have not seen the results yet because it is a long term project. There are processes to be undertaken by ministries,” he said.

On the employment rate, Barjoyai, said the unemployment rate has dropped but employment growth has not increased either.

He praised Anwar and International Trade Minister Tengku Zafrul Tengku Abdul Aziz for wooing many investors into the country.

“RM270 billion worth of investment are said to be coming in. This is because of the working visit by the prime minister and his minister.”

The government has announced some RM123.3 billion in approved investments in the first half of 2022.

The total actual investments for 2022, however, came in at RM74.6 billion, according to data from the Statistics Department.

Ahmed Razman Abdul Latiff at the Putra Business School said inflation has dropped for nine consecutive months since early 2023.

“The overnight policy rate is still under control, there is no recession plus inflation has decreased. We can say it is going well.”

Economists say the drop in the value of the ringgit does not trouble Malaysians as basic essentials are reasonably priced while the government is still subsidising some staples. – The Malaysian Insight file pic, November 22, 2023.

Political stability, weak ringgit

Razman agreed that productivity has improved, adding that this was due to political stability.

“It gives confidence to investors and business players that there will be no political uncertainty.

“This also causes our foreign direct investment (FDI) to increase as foreign investors see no potential crisis anytime soon,” Razman said.

According to the Human Resources Ministry’s website, Malaysia saw a steady increase in the number of employed persons for the month of May 2023, at a rise of 0.2%, or equivalent to 28,100 persons.

This brought the total to a record 16.28 million people employed, compared to 16.25 million in April.

Meanwhile, the employment-to-population ratio, which indicates the ability of an economy to create employment, also rose 0.1 percentage points (pp) for the month, to reach 67.6% as compared to the previous month (67.5% in April 2023).

On the worry surrounding the weak ringgit, the economists said the matter should not be of concern.

Razman said the drop in the value of the ringgit does not trouble Malaysians as basic essentials are still priced reasonably while the government is still giving out subsidies for certain essential items.

He said a weak ringgit can attract more foreign tourists.

“There is no direct effect on us. Prices of basic food items are still being controlled, electric tariffs, fuel prices and subsidies are still being rolled out. People can still purchase all of these items plus our inflation is low.

“Those affected are companies that rely on imported goods, which will increase their cost. It is not all bad for Malaysians.

“We can attract tourists and we can increase our exports. The ministries should work to funnel more money into our country,” he said.

A weak ringgit has the benefit of attracting more foreign visitors to Malaysia, say experts. – The Malaysian Insight file pic, November 22, 2023.

Barjoyai said the value of the ringgit is beyond government control.

“The value changes every minute and every day. Today it is at RM4.66 to US$1. Early this year it was RM4.24l at its highest it was RM4.79. It is not always increasing. The ups and downs are determined by the dollar interest rate.

“If we increase our OPR, we will burden industry. What we need to do is to restructure our market including our stock market, we need big investments – long term ones. Only then can we see our ringgit appreciate,” he said.

In his Budget 2024 speech in October, Anwar said the budget aimed to support economic recovery and sustainable growth through increased investments, higher tax receipts and bigger development expenditures.

He said new investments will be focused on infrastructure and technology to spur innovation, job creation, and economic diversification.

The budget is largely seen as being mildly expansionary to support the 4-5% growth target for 2024.

It also includes holistic measures that complement other recently announced policies such as the National Energy Transition Roadmap and the New Industrial Master Plan 2030.

Strengthen trade, investment policies

Swinburne University of Technology lecturer Nivakan Sritharan said to optimise social programmes for the poor, the programmes must reach the targets.

He suggested that in the short term, the government launch community programmes as part of targeted stimulus packages to revive consumer spending, support affected industries and boost economic activity.

“One exemplary initiative is the Community Drumming Programme introduced by the federal government. This ongoing programme makes it easier for residents of rural and remote areas to access seven essential commodities at government-determined prices, promoting affordability and economic participation,” he said.

He also said the government can implement strategies to safeguard and generate employment, including initiatives like wage subsidies, job training programmes, and support for industries grappling with immediate challenges.

In the long run, Nivakan said Anwar’s government must strengthen trade and investment policies to attract FDI and promote economic integration with global markets.

“Conduct consultations with various stakeholders, including businesses, industry associations, academics and civil society to gather a range of perspectives and insights.

“Align policy objectives with the current focus on job creation, technology transfer and the development of strategic industries. Enhance international trade development through the implementation of technology for customs clearance, the reduction of trade barriers, and active participation in international agreements.

“Improve education and workforce development programmes to equip the population with skills essential for emerging industries, fostering innovation and competitiveness,” he said. –  November 22, 2023.

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