Can the economy turn around in 6 months?

(Bernama pic)

The state of global economy, and our own national economy, will determine and shape our cost of living.

For the common man, this boils down to bread and butter issues.

Among the factors that would influence the political perceptions and sentiments of the people, bread and butter issues are the most crucial.

It has been acknowledged by most parties that during the last three by-elections – in Cameron Highlands, Semenyih and Rantau – which were won by Barisan Nasional, it was this issue that was in the psyche of the voters of all backgrounds.

In Cameron Highlands and Semenyih, I spoke to voters to understand their perceptions and sentiments on both sides of the political divide.

While racial and religious issues loomed large in the psyche of the Malay voters, the impact of the cost of living was the recurring theme and an obvious bane to the people generally irrespective of race and religious faith.

I could not cover the Rantau by-election, but I learnt from the media reports that the state of the economy and high cost of living were again the main grouse of the people, whether Malays, Chinese or Indians.

Perhaps that is the main reason for the big victory margin of more than 4,000 votes garnered by Mohamad Hasan, double the number predicted by political observers.

In short, if this issue is left unresolved or the situation does not improve in time for the next general election, it may end up as the real game changer to the political equation of the nation.

Economic turnaround

A few days ago, Daim Zainuddin, Dr Mahathir Mohamad’s close confidante, said the economy should recover in six months’ time.

This is of course great news welcomed by all. The economic pains and sufferings faced by the people should end soon and we could look forward to better days again before long.

People’s perceptions and sentiments towards the government would improve and Pakatan Harapan would benefit in terms of restored public faith and confidence in them.

They could then continue with the reform and transformation agenda at a greater and faster pace.

But how realistic and pragmatic is Daim’s prognosis?

There are things which the government can control, there are things it could do to prime-pump the national economy.

But there are also external factors at play which are beyond the influence or control of the government.

The state of the global economy, the fear and prospect of world recession, trade and tariff wars between superpowers and a host of other factors, are all outside the government’s control.

Is Daim making his assessment based on the assumption that all that would be improving very soon? If so, how realistic is that assumption?

Sometime in March of this year, Mahathir said the country would recover in three years from the administrative and financial problems left by the previous government.

In January this year, Finance Minister Lim Guan Eng said Malaysia needs three years to restore its fiscal health and take its position as “the most promising emerging economy” to achieve high-income status.

He noted that Bloomberg had already placed Malaysia at the top of 20 emerging economies and all three international credit rating agencies, despite the need to clean up the “financial mess” caused by the previous government, maintained the country’s ratings.

What about the key economic agencies, bodies and experts? What are they saying about the economic outlook of Malaysia?

In January 2019, the World Bank released a report, which among others, said that Malaysia’s real gross domestic product (GDP) growth has been estimated to slow to 4.7% in 2018 from 5.9% in 2017 by the World Bank and forecast to dip further to 4.6% in 2020.

They said the lower public investment is weighing on growth, reflecting the completion of several infrastructure projects and a more prudent approach toward new ones.

The Malaysian Institute of Economic Research also said that the available data is pointing towards a moderation in growth for this year.

The global economy continues to grow at a moderate pace amid uncertainty over the trade war between US and China, together with other emerging concerns, including slower growth than expected in emerging market economies.

More recently, FTSE said Malaysia’s accessibility level is in danger of being downgraded under its global classification framework.

This will see Malaysia fall out of the World Government Bond Index (WGBI), which it has been a part of since 2004, to the Emerging Markets Government Bond Index (EMGBI)

They noted that the Malaysian stocks were underperforming because “there is nothing to be positive about over the next 12 months”.

Daim’s double-edge sword

Given the above scenario, Daim’s upbeat and optimistic forecast is a double-edge sword that could cut both ways.

Undoubtedly, it is a great piece of news and could inspire confidence of the various players and stakeholders in our economy. It could help spur the economic activities. If it happens, then we could expect the political fortunes of PH and the government to improve considerably.

However, if it does not turn out as forecasted, then it could backfire badly and caused greater dismay to the populace.

If things remain unchanged or get worse after six months, we could expect people to be up in arms and become more angry than before.

The fallout and damage to PH and the government will be worse.

The road ahead

Apart from the state of our national economy and its attendant cost of living issue to the people, the PH government must also deal with many other daunting challenges as well.

It has to address and deal with the racial and religious politics played by Umno and PAS, which is causing much discord, disharmony and creating hatred or enmity among the various communities in the country.

We are evidently becoming more and more divisive now along racial and religious lines than at any time in our history.

Then there is the worrying trend of interference and involvement of the monarchy in the politics and administration of some states.

The constitution and our system of constitutional monarchy, are being severely tested now. If not dealt with wisdom and delicate care by all parties, it may lead to another constitutional crisis similar to the constitutional crisis of 1983 and 1993.

The people want to see the constitution upheld as the supreme law of the nation and which should apply to all states. They do not want to be pushed to a position where they have to choose between the government of the day or the monarchy.

From the various feedback and statements, there is no doubt whatsoever which party the people would choose and which side they would support when it comes to the crunch. Let us spare the people from making that painful choice.

Wan Haron Wan Hassan is a senior practising lawyer, active in civil society movements. - FMT