Cost of living behind doubt in economic recovery, say experts

Economist Yeah Kim Leng said that for many, the rising prices of essentials would overshadow the improvement in this year’s GDP.

PETALING JAYA: 

Economists have pointed to the rising cost of living and sluggish wage growth as key reasons why many Malaysians in a recent survey remained unconvinced that their economic well-being is improving under Prime Minister Anwar Ibrahim’s administration.

Yeah Kim Leng, an economist at Sunway University, said this was in spite of a low unemployment rate of 3.2% and gross domestic product (GDP) growth climbing from 3.3% last year to 5.1% in the third quarter of 2024.

He said while the strengthening ringgit might ease inflation slightly, for many the rising prices of essentials would overshadow the improvement in this year’s GDP.

“What matters most to people is how much money ends up in their pockets, and that hasn’t improved for many people due to the lower GDP last year,” Yeah told FMT.

Yeah Kim Leng.

“Medical expenses, insurance, and tuition fees continue to rise, and the low- and medium-income households are feeling the elevated cost of living… They have not seen any improvement.”

He added however that given the strong GDP growth this year, companies that performed well might increase wages and hand out bonuses at the end of next year.

According to a Merdeka Center survey released yesterday, Anwar’s approval rating rose by 4% to 54% in his administration’s second year.

While survey participants praised Anwar’s efforts to attract foreign investment and improve Malaysia’s international image, they were less enthusiastic about his progress in strengthening the economy.

Ahmed Razman Abdul Latiff of Putra Business School said the mixed public sentiment might stem from the delayed impact of fiscal and monetary policies.

Ahmed Razman Abdul Latiff.

He said while initiatives such as the Rahmah cash aid and Bank Negara Malaysia’s decision to maintain the overnight policy rate at 3% were aimed at alleviating the public’s financial burden, their effects would take time to materialise.

“The new minimum wage of RM1,700 and progressive wage policy to be implemented next year could bring tangible improvements, but… these measures aren’t immediate,” Razman told FMT.

“Economic policies need time, but then the public becomes restless.” - FMT