This Is How The Gov’t Should Instill Confidence In The Economy

By Sathish Govind

Good governance and efficiency of the delivery system are paramount in instilling confidence in the Malaysian economy before the various incentives outlined in Budget 2022 find traction, an economist says.

Sunway University Business School Professor of Economics,  Dr. Yeah Kim Leng says that although the government appears to be on track by providing incentives, it needs to inspire the confidence of the rakyat by addressing two of the most endemic issues above affecting the economy.

“It must ensure the various agencies such as the MACC goes after the big fish and there are no leakages in the delivery system to ensure the incentives unveiled reaches the target groups,” Dr Yeah adds.

On the oncoming budget, there is a greater need for increased cash transfers to the distressed group notably the B40, those who have lost their jobs, and daily wage earners which will immediately encourage consumer spending.

“What is important is that these cash transfers will immediately bolster consumption which will have a positive multiplier effect on the economy,” Yeah says.

He believes the consumer confidence will also lead to consumers who have postponed investments such as “buying a car or postponing a wedding” to go ahead with their investments and this will have an overall positive effect on the economy.

The government can do its part by reducing stamp duty and subsidies that will facilitate consumers who deferred spending to immediately start spending. With increased consumer confidence and spending, Yeah says producers will be tempted to make more investments and this will have a positive effect on the overall economy. Malaysia’s debt-to-gross domestic product (GDP) ratio is expected to be under 60 percent.

Reappointed Finance Minister Tengku Zafrul is mulling to raise the statutory debt limit to 65 percent from the current 60 percent of the gross domestic product. Malaysia has kept its debt ceiling relatively under management, however, with the government’s commitment to introduce more support for the people and businesses, the debt-to-GDP ratio would probably increase to above 60 percent by year-end. According to Zafrul, Malaysia is still below 60 percent, at about 58 percent of the statutory debt limit and even if it’s breached, it will be marginal.

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