‘Normal folk not feeling economic growth’

Sharon Tan

Experts say people are not seeing spending power increase despite the economy growing as prices have gone up, especially for housing, food and transport. – The Malaysian Insight file pic by Nazir Sufari, October 17, 2017.

THE cost of goods and services increasing faster than income is one reason why feelgood sentiments are not being felt on the ground, despite economic growth of 5.6% and 5.8% in the first two quarters of this year.

iMoney chief executive officer Lee Ching Wei said a recent survey found that 49% of respondents believed the economy was in recession.

“People are not seeing spending power increase despite the economy growing,” said Lee, a panelist at the todays iMoney.com FB Live discussion called “Budget 2018: Is Malaysia Finally on Track”.

DM Analytics chief economist Dr Muhammed Abdul Khalid said because household income was growing at a such a slow rate, people did not feel directly affected by gross domestic product growth.

“The average income growth for B40 is the slowest compared to other income classes between 2014 and 2016. In fact, in terms of wages, the median wage for Malaysians last year only increased by 0.9% in real terms, or about RM17 in absolute amount.

“However, average salaries for millennials or young entrants into the workforce is stagnant. It is alright if the prices of things don’t go up but prices have gone up, especially for housing, food and transport. All these items grew faster than inflation,” he said, adding that the drop of the ringgit against currencies like the US dollar, British pound, Singapore dollars and even Bangladeshi taka had a profound effect.

“We import a lot of food items. If the ringgit drops then food prices goes up,” he said.

Dr Jomo Kwame Sundaram, who holds the Tun Hussein Onn Chair in International Studies at the Institute of Strategic and International Studies (ISIS) Malaysia, said scandals, such as the 1MDB and Felda Global Ventures controversy, do not inspire confidence.

Kelana Jaya MP Wong Chen said although there was no dispute about the strong growth numbers in first two quarters of the year, he acknowledged that “GDP growth will only materialise on the ground in about six months to a year. If we want to find out the public’s perception, then we must look at consumption. People don’t feel confident enough to spend”.

Meanwhile, on the upcoming 2018 Budget announcement and whether education would see a cut in allocation, Muhammad said it was unlikely.

“What this budget should not do is cut development spending on education and health. These two areas are investments and not expenses.

“Allocation for education and health is only RM6 billion. We pay RM24 billion in interest for our debts,” he said.

Lee echoed his sentiment, saying cuts to education, which occurred in the 2017 Budget, meant there was a lack of funds for staffing and research.

“In the long term, it is the students who will suffer from any cuts,” said Lee.

On Pakatan Harapan’s intention to restore the fuel subsidy, Wong Chen said it was unethical for oil-producing countries not to provide subsidies for the poor.

“We don’t know how to implement this but we know that morally, we as an oil-producing country must safeguard the poor. There is no oil-producing country in the world that does not subsidise its population,” he said.

However, Jomo said there was no justification for fuel subsidies at the current oil prices.

“We all know that the oil subsidies were enjoyed by the middle class and not the poorest. What we should do is to make public transportation much more attractive.  Unfortunately, right now, it is not attractive,” said Jomo.

He said a strategic decision was made in the 1980s to promote Malaysian cars and, as a consequence, public transportation was neglected.

“This has been rectified recently but not quite enough. We should move towards public transportation and if subsidies are needed, it should be for public transportation,” said Jomo.

Muhammad said that fuel subsidies were regressive and states should never revert to it, except in the exceptional circumstance that fuel prices skyrocket, as the poor do not benefit from the subsidy, only those with luxury cars. – October 17, 2017.

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