hit counter for tumblr
CPPS - Centre for Public Policy Studies
  • Home
  • About Us
  • Events
  • Policy Areas
  • Publication
  • Resources
  • Be in The Loop
Election Watch

How is Our Economy Doing?

Source: Malay Mail

At this time of the 13th general election there is much speculation and even confusion as to how the Malaysian economy is doing. Is it strong or weak and declining?

It is fortunate that both Bank Negara and the IMF have come out with sound reports on the Malaysian economic performance and prospects.

Both reports have much in common as they traditionally consult each other to ensure that their assessments of the economy are consistent and credible.

Thus the Governor of Bank Negara Tan Sri Dr. Zeti Aziz has stated confidently that the Malaysian economy is well on track to achieve five to six per cent growth this year. This is creditable considering the slow growth rates and the economic slide that is taking place in many countries around the world! Both the IMF and Bank Negara agree that the Malaysian economy is being strengthened by domestic demand, that is by more local private spending and more Government spending.

Private consumers like you and me could be spending more because of the "handouts" many of us have been receiving from government. Furthermore, consumers tend to increase their spending when they think inflation and prices are rising. They feel that it is better to buy goods and services now before price hikes through likely inflation.

Government spending has also risen due to stepped up investment in infrastructure projects such as the MRT and LRT and defence and many other projects that we see all around us.

This is good counter cyclical strategy in the short term. But this expenditure has to generate income. It has to be productive and create employment and be viable. Otherwise more spending, mainly to boost the growth rates and to keep Malaysians happy and grateful can become counterproductive in the longer term.

So we have to ask ourselves, how long can we keep spending without weakening the structure of the economy in the longer term? Fundamental issues like the national debt burden, and especially the budget deficit need to be always kept in mind, lest we lose sight of our fiscal and financial stability. Is our greater spending able to build our institutions to produce more or less efficiency?

These are the questions which have caused the IMF to rate Malaysia on the IMF Index on Institutional Strength at 70 out of 100. This is higher than Indonesia, China and India. However, we have to compare our performance with other advanced countries in Asia like Korea, Taiwan and Singapore.

The IMF also stresses the need to cut down on subsidies. We have to be careful not to reduce genuine subsidies for the really poor. But, to continue subsidising the well-to-do is unfair and has to be phased out.

Both reports refer to the importance of maintaining fiscal sustainability. This means that we have to curtail wastage, unnecessary expenditure, and observe competitive tendering in the awarding of contracts.

In conclusion, the Malaysian economy is doing well. But this healthy position can deteriorate if we are slow to adopt sustainable structural adjustment to the economy in the near term.

Then, the slide that began in Greece many years ago may also happen here. So let's get our act together after the elections, please!

Back to Top


Copyright © 2011 CPPS. All Rights Reserved.