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Saturday, March 30, 2013

WHAT THE POLITICIANS DON'T TELL US: How will the economy really fare after GE13?


WHAT THE POLITICIANS DON'T TELL US: How will the economy really fare after GE13?
Both BN and Pakatan Rakyat have outlined a rosy bed of economic outlook prior to the general elections, obviously downplaying the underlying risks.
According to the 2012 Economic Transformation Programme Report, the per capita income will increase from US$6,700 in 2009 to US$9,970 in 2012. It further forecasts that Malaysia will be able to reach the US$15,000 per capita income target before 2020.
Pakatan Rakyat, meanwhile, promised the minimum monthly family income of at least RM4,000.
Such presumed statistics indeed will engage many a person with fanciful dreams, believing that high income is within reach in no time. But, there are two things which both BN and Pakatan Rakyat have not mentioned, namely, as pointed out by Bank Negara's latest "Financial Stability and Payment Systems Report," the increase in the ratio of family debts to GDP from 75.8% to 80.5%, and the fact that Malaysia will turn into a net oil importer by 2015.
Why is family debt soaring
If allowances and aids can verily increase people's income thus alleviate living expenses, why do family debts soar high? When the increase in family incomes fails to break even with newly acquired family debts, the stability of the country's financial system could be at stake.
It is further noticed that as PEMANDU (Performance Management Delivery Unit) stated in the report, the international appraisal committee responsible for the assessment of the Economic Transformation Programme recommended that the government review the proposed objectives for 2020. Two days later, PEMANDU revised downward per capita income growth between 2009 and 2012 from 49% to 41%.
Notwithstanding the growth in per capita income, it is undeniable that the burden shouldered by Malaysians is getting heavier, especially with a surge in housing prices aggravating debt accumulation. If family debts are not addressed, promising statistics for income growth would be insignificant and meaningless.
Fuel prices
Pakatan has pledged to slash fuel prices but given the fact that the country will turn into a net oil importer by 2015, the viability of such a move is questionable. In the absence of oil revenues, promises to take care of the people's welfare will not be honoured, including reduced vehicle prices and utility cost, the repeal of highway tolls, free education nationwide, and 20% royalty for oil-producing states.
Politicians ought to reveal the other side of the story. with oil revenues dwindling by the year, will the GST eventually be put into implementation? Will fuel prices go up after the election?
3 risks
Our politicians have made plenty of promises with regard to economy, but they fall short of offering clues how to manage the national economy properly to avert domestic and external risks.
There are at least three risks we ought to take note of: the exit from quantitative easing, entrenched European crisis with the bailout of Cyprus and the bubbling of Asian assets.
The US quantitative easing will eventually be withdrawn, and once it does, the stock market will fluctuate tremendously. The earliest date is known to be this November. If Cyprus cannot fails to get liquidity from the ECB and is forced to withdraw from the currency union, the consequences could be grave. The economy of Asia and Malaysia will have to take the brunt of it.
We are living in a world teeming with economic risks, and should therefore make self adjustments from time to time to fit into the bigger environment. But our politicians tell us very different stories. Whom should we trust?
-mysinchew

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