By Lim Sue Goan
Bank Negara Malaysia (BNM) announced the third quarter GDP growth at a better-than-expected rate of 4.3 per cent, but Malaysians have remained unimpressed, thanks to the drastic fall of the local currency last Friday.
As a matter of fact, the public have not only grown indifferent to the GDP numbers but also a host of other figures, such as the 1.5 per cent inflation rate for September, which many know is not true, given the skyrocketing price of goods.
The ringgit plummeted to an intraday low of 4.5395 to the greenback last Friday, the lowest in 12 years, comparable to the 1997 regional crisis levels.
The weak ringgit is pushing up the cost of imports. This, coupled with the higher cooking oil and fuel prices effective earlier this month, has added some burden to the already tough lives of average Malaysians.
The drastic fall of the ringgit also has a negative bearing on consumer sentiment while making it harder for local employers to hire migrant workers.
If our fundamentals are as good as our government officials claim, why has the local unit remained sluggish ever since it declined beyond the RM3.80 to the USD psychological barrier on July 6, 2015? Why has China’s plan to increase investment in Malaysia failed to lift market confidence?
I’m quite sure those in the market are well aware of the weaknesses in the country’s economy even though those in power are most reluctant to admit it.
Firstly, the Budget 2017 tabled last month has exposed the predicament of the government’s finances with the operating expenditures rising and revenue creation target overly optimistic. Many people simply do not believe that Prime Minister Najib Razak is able to achieve the “zero deficit” target by 2020.
Secondly, development expenditures have been squeezed, making up only a mere 18 per cent of all allocations or RM46 billion. That is not sufficient to spearhead the country’s economic development and transformation.
Thirdly, in order to retain the sovereign credit rating, Najib is unwilling to come up with more allocations to stimulate the economy while running out of new ideas to lure more foreign investments or reform the country’s economic structure.
As such, Budget 2017 and the PM’s fruitful visit to Beijing are not expected to have any remarkable catalytic effect on the national economy.
Meanwhile, the government has also failed to conclude the 1MDB case that has deepened Western investors’ skepticism on the country’s administrative, judicial and enforcement transparency. The government’s reluctance to cooperate in overseas probes into alleged money-laundering linked to 1MDB has further dented the country’s image.
After Donald Trump’s election to the US presidency, Malaysia’s economic weaknesses have been further exposed.
We had prepared for the Trans-Pacific Partnership (TPP) trade pact for five years now with the hope the trade initiative would help stimulate the country’s economic growth. The World Bank once projected that Malaysia would be the second largest beneficiary nation under the TPP, which is expected to boost the country’s GDP growth to 8 per cent.
Unfortunately Trump’s protectionist stand means the TPP may be scrapped and Malaysia will lose the engine that could have thrust the nation’s economy forward.
If Trump is against free trade, a full-fledged trade war could ensue, and the export-reliant Malaysian economy is poised to take the brunt of any resulting impact.
We must be psychologically prepared for the possibility that Trump’s anti-globalisation agenda could plunge the entire world’s economy into an unprecedented dilemma. Do we have what it takes to deal with the impending disaster?
Another negative factor is that Trump has promised energy self-sufficiency for America, and is prepared to remove the restrictions on oil exploration. If this were to materialize, crude prices will head south as a result of oversupply, dealing a further blow to Malaysia.
Although the treasury has reduced its dependence on oil revenue, the RM10.6 billion tax revenue target for next year will likely be missed if crude prices slip below US$40 per barrel. More subsidy and development expenditure cuts are on the way.
We simply have too many economic challenges ahead of us, but unfortunately our government gets so carried away by the flashy economic data, that it has overlooked the potential risks and the people’s feelings, and has failed to adopt the necessary preventive measures.
We can only pray now that external conditions will not get too nasty. If the country sinks into another recession, the rift in Malaysian society is set to widen.
We can never count on Malaysians to donate their gold bars to salvage the national economy like the Koreans did during the Asian financial crisis.
In addition, we must also cross our fingers that the Red Shirts will not go beserk during this weekend’s Bersih 5 rally, or the country’s vulnerable economy will take a further beating.
Both the ruling and opposition camps are only serious about wresting power without workable solutions to tackle the country’s economic plight.
The national economy is akin to a steerless vessel in the wide open sea. We can only pray that the sea is calm and we make it to the opposite shore in one piece.
Lim Sue Goan writes for Sin Chew Daily.