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

Much to be Done for the Economy

Source: New Straits Times
2 May 2013

AT this 13th General Election, there is much speculation as to how the Malaysian economy is doing. Is it strong, or weak and declining?

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

Thus, Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz has come out to state that the Malaysian economy is on track to achieve a 5-6 per cent growth this year. Both the IMF and Bank Negara agree that the economy is being strengthened by domestic demand, that is, by more local private and government spending.

Also, consumers tend to increase their spending when they think inflation and prices are rising.

Government spending has also risen due to the government's stepped-up investment in infrastructure projects such as the MRT, LRT and defence.

This is a good counter-cyclical strategy in the short-term. But, this expenditure has to generate income. It has to be productive and create employment. Otherwise, more spending can become counterproductive in the longer term.

So, how long can we keep spending without weakening the economy in the longer term? Fundamental issues like the national debt burden, and especially the budget deficit need to be kept in mind. 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.