KUALA LUMPUR – Nov 4, 2015: It is currently a common assumption among Malaysians that they are having a hard time due to the country’s perceived discouraging economic condition.
For instance, a large number of netizens expressed their distress over the speech by Prime Minister Datuk Seri Najib Razak at the 11th World Islamic Economic Forum last Tuesday which paints a bright picture of the country’s economy.
Mohammad Badlishah on his Facebook account commented “Really, we are not in economic crisis? Then why are a lot of people has been laid off from their jobs? Why are there a lot of increments in taxes and basic stuff – train fares? You are always in denial”.
Kjoo Ong said “To say our economy is not in crisis, why are there price increases such as fuel, toll, GST and lately cigarettes by 40% (even though it is bad for health). Sucking money from Malaysians to pay for the government expenditures.”
Meanwhile, Holoke Foo said “We do not covet high income; we just hope that our RM has high purchasing power!”
Mohd Adrian Atiq added “With this current economic they will be more poverty soon to come.”
Ni Meomeo briefly lamented “Yahoo……Malaysia is on track towards BANKRUPTCY.”
Nonetheless, The Mole was told by local economists that such negative perceptions were too simplistic and actually inaccurate.
They said Malaysia is actually recovering economically and is not on the verge of an economic collapse.
Institute of Strategic and International Studies (ISIS) senior analyst Ahmad Rafdi Endut when contacted said the prime minister was relaying the true condition of the country’s economy.
“Based on the macro-data, for instance the World Bank’s data, our economy is growing albeit experiencing slow expansion. The country’s import and export are basically in good numbers. In macro-level, Malaysia is not experiencing any crisis at all,” he added.
It is explained that the country’s market needs time to recover. Rafdi further declared that Malaysia’s foreign exchange was overwhelming due to the increase of rate in US dollar and will soon recover after a period of time.
In response to the netizens’ outrage on the country’s economic state, Rafdi clarified that currently, the bigger problem that the people are facing involves wages depletion and household debt.
“The people need to understand and learn to distinguish between economic crisis and household crisis. Currently, the country’s household debt is soaring, and because of this, the public’s disposable income is depleting.
“This (household crisis) is the real crisis that the public are currently facing; the people’s wages are not up to the level of a developing nation. This leads to complication especially when the government introduces the Goods and Services Tax (GST) and other alternatives to correct the patch of the economy. Depletion of wages occurs because of the corrections we made in the market,” he added.
Since the majority of the netizens are observed to state that the public is facing a hard time due to a crisis, Rafdi stressed on the real negative impacts should the economic condition gets worse.
“There is no doubt that the people are facing a (household) crisis, but when the economic condition is in total doom, then only we would face total misery.
“The worst that could happen is three to four times increase of inflation and the further depletion of income. In fact, there would be high number of unemployment. This is the time when people will actually suffer in sustaining the living cost,” Rafdi added.
Rafdi did not dismiss the fact that the country’s economy is going for a downturn of it its economic cycle. Nevertheless, the condition will reach a stable patch should the government improve the fiscal and monetary policies.
“We are going into a rough patch where the market is not stable due to the depression area that we are currently experiencing. If we look back at the history of the 1997 crisis, it took about four years to stabilise Malaysia’s economy back then. At the moment, it is depending on the government’s initiatives to improve fiscal policy,” he said.
Reassessing the people’s discontent upon the economic condition that was deemed as devastating; Rafdi agreed that the government must make people understand of their market corrective reasoning. He added, the government can implement a policy that will help securing the public’s income.
“For lower income, the government can come up with a comprehensive social security net, as for example – BR1M, even though BR1M incentive alone is not enough. The government must consolidate all incentives to help the poor.
“Whereas for middle income, the government can help increase their disposable income by imposing tax relief,” he added.
Equally, independent macro-economic analyst, Professor Dr Hoo Ke Ping when contacted told The Mole that currently, the country is on a more secure condition compared to the Asian financial crisis in 1997.
“Definitely, our economic fundamental is resilient not only because of the government’s transformational measures, but is also due to the fact that we are well diversified.”
Contrary to various claims circulated regarding ringgit depreciation, Hoo clarified that it is just a minor economic setback and is related to a financial problem suffered by several other countries.
“Financial problem is what most people and even large countries suffered. It involves two linked drawbacks in terms of over-debt of foreign currency borrowing, and high household debt. Ringgit depreciation is indeed a financial issue, instead of an economic issue.”
The economy is in a stable patch, said Hoo. However, he further exemplified that the downbeat claims resurfaced as the people are being influenced by the country’s negative political sentiment.
“They are several parties who are sabotaging the country’s credibility by magnifying several issues, for instance, the 1MDB flop and ringgit depreciation. There would also be few organisations that would produce unverified reports on the matter and circulated them to the public.
“When this political sentiment gives negative psychological effects, it eventually causes the people or consumers to be worried. When they are worried, they would become too afraid to spend. This leads to a quiet or inactive market, and would further cause shrinking in business,” Hoo added.
Judging that the political atmosphere is rather in stable and neutral condition, Hoo stressed on the importance to improve the current sentiment.
“We must expect the sentiment to change and improved. Although the 1MDB issue lingers around for quite some time now, the local political sentiment is improving, as the opposition could not overthrow our prime minister, even by establishing the vote of no confidence against him,” he added.