Food on the table, not credit ratings, the priority now, says economist

 

Two economists think Malaysia’s credit ratings should not be badly affected by the RM322.5 billion budget.

PETALING JAYA: An economist feels Malaysia should not be “too concerned” with its credit ratings over Putrajaya’s mammoth RM322.5 billion federal budget, saying the priority now is to ensure food on the table.

Concerns have been raised about the government’s debt-financed budget, and while Universiti Tun Abdul Razak’s Barjoyai Bardai said this is understandable, it is not as important as helping those who are struggling now.

He said although Covid-19 has affected the economy, the impact on Malaysia is “milder” compared with the situation in many developed nations which are likely to borrow more to deal with the pandemic, further increasing their deficit levels.

Barjoyai Bardai.

“So, I do not foresee our credit rating being badly affected. When compared with other developed nations, our expected deficit of 6% is rather mild,” he told FMT.

Barjoyai, however, said the government needs to keep an eye on medium- and long-term economic measures, particularly investments in human capital development.

This, he said, would serve to ensure that the vast majority of workers remain relevant in the next four to five years.

“Failure to do so would see the government having to spend on subsidies to help the people survive and that would be unsustainable,” he said.

Yeah Kim Leng, a professor of economics at Sunway University, said Malaysia is unlikely to be downgraded although the nation may be placed on a rating watch or the outlook downgraded to negative.

Yeah Kim Leng.

But, he said, there was “safety in numbers” as most countries, including those rated higher than Malaysia, are similarly confronting sharp deterioration in fiscal deficits and increases in government debt levels.

“As long as the increased government spending helps in the economic recovery and is well designed to rebuild the economy, the sovereign rating downgrade is unlikely to occur over the next 12 to 18 months,” he said.

The government, he said, should only worry about a ratings downgrade if the economic and credit fundamentals do not improve despite the large deficit.

Yeah, however, said the budget did several things right, by focusing on protecting lives through adequate resources to contain the pandemic.

This included a national immunisation programme once a vaccine is available.

“The other priorities that stand out includes the protection of livelihood of the vulnerable groups and low income households and small- and medium-sized enterprises.

“Other priorities includes the continuation of wage subsidies, job creation programmes and access to financing for business upgrading and digitalisation,” he said. - FMT