Malaysia’s Economy: Steady State?

Juwai IQI Global chief economist Shaun Saeed views the country will weather through the tempestuous global economy. Malaysia’s GDP growth is forecast at 3-4% by Juwai IQI with ringgit to track between RM3.67 and RM4.10 to the dollar. Local currency’s strength is primarily due to higher oil prices, movements aligned with the Yuan and macroeconomic stability. DBS Group Research is predicting BNM to cut OPR by another 25 basis points this Wednesday. That will leave OPR at a new low of 1.5%.

The move is to address potential impact on the economy due to recent announcements of state of emergency and MCO.

The overall GDP in 2021 is expected to trim by 0.8% to 5.2%, down from earlier forecast of 6%. Domestic consumption will be most affected. This will be a drag on the growth rate. Tighter restrictions on social and work mobility across Penang, Selangor, Melaka, Johor and Sabah as well as the Federal Territories of Kuala Lumpur, Putrajaya and Labuan will impact somewhat on GDP growth. The above states/ territories account for about two-thirds of the country’s GDP. Foreign flows into MGS and MGI issues have remained robust in recent months, due to higher energy prices and buoyant global risk sentiments.

Malaysia needs an injection of RM45 billion to overcome the recent MCO and Emergency declarations. There are sectors and people severely impacted. Without any further politicking, the Prime Minister has six months to deliver initiatives. It is pointless for him to examine Bersatu’s likely performance in GE15 or invite others from the Opposition into his grouping/ alliance. This is an opportunity for him to shine with new and courageous measures that will change a gloomy outlook to one more optimistic.

 Six months may not provide enough time but surely, he could:

·       Raise support/ funds for the unemployed;

·       Provide grants/ loans to SMEs or a loan moratorium up to mid- 2021;

·       Reduce his Cabinet by 50%;

·       Initiate construction of new hospitals and provide additional funds for KKM to mitigate Covid;

·       Improve all state and Federal roads (zeroize “potholes”);

·       Provide shelters for the homeless, especially in cities;

·       Assist old folks’ homes and orphanages with essentials;

·       Create motorcycle lanes and rain-shelters for motorcyclists;

·       Do a one-off tax relief for businesses;

·       Roll-out the vaccines free of charge to the public;

·       Provide free “meals on wheels” for the poor, elderly and marginalised;

·       Enhance corporate governance;

·       Expedite trials of the corrupt;

·       Strengthen law enforcement and the police;

And the list goes on ...

Many of the above seem very populist measures. Yes, they are! Six months is not a lot of time to implement large, infra projects. And if you are politically savvy, then being populist is the way to go. Most assuredly the economy and confidence will turn hugely positive rather than remain in a steady state.

Good luck Mr. PM!

 

Reference:

1. Business news, Daily Express,15 January 2021.

2. DBS Group Research, The Edge, 15 January 2021