The Star – Need for clear economic policies from government

KUALA LUMPUR: The government needs to present a clear and firm set of economic policies to give confidence to the people that it can navigate the country through the current challenging economic times, an economist said.

According to Alliance Bank Malaysia Bhd chief economist Manokaran Mottain, Malaysia is currently perceived to be lacking in clarity on economic policies amid several flip-flops made by the Pakatan Harapan government since the coalition came into power in May last year.

“We need firm economic policies coming from the right people,” Manokaran said, citing, for instance, the uncertainties surrounding the fate of East Coast Rail Link (ECRL) project due to conflicting statements from different ministries.

Speaking at the 2019 Malaysia Economic and Strategic Outlook Forum here yesterday, Manokaran said of the Pakatan government: “We came into a new era but we have not seen the light.”

“We all thought things will change and growth can accelerate,” he said, but what happened was there had been policy uncertainties and growth had been decelerating in the last few quarters.

Manokaran was one of the panel speakers at the forum organised by Kingsley Strategic Institute.

During his presentation, he noted that the synchronised global growth in 2017 had already come to an end, and we’re going into “risky momentum” and “very volatile” environment.

Manokaran said that amid the challenging environment, he projected Malaysia’s gross domestic product (GDP) growth to slow to 4.6% this year, and 4.5% in 2020.

In 2017, Malaysia’s GDP expanded 5.9%.

Meanwhile, IQI Global Malaysia chief economist Shan Saeed summed up his view on the 2019 global economic outlook with the acronym, “CUT”, which stood for “chaos, uncertainty and turmoil.

“This will be one of the toughest years the world has seen,” Saeed, who was also a panel speaker at the event, said.

“First, we have the Brexit, then we have the (volatile) oil movement, geopolitical risks, and (a fragile) Europe,” he added.

While there were concerns about the US-China trade war, Saeed noted some countries were benefiting from such tensions.

Among the beneficiaries in the region were Malaysia, Thailand and Vietnam, as demand shift to these countries, while those suffering from the effects of the US-China trade war were Singapore, South Korea and Japan, he said.

On Malaysia’s prospects for 2019, Saeed said GDP growth was projected to be 4.5%-5%.

He remained confident that the country’s fiscal deficit would remain under control, as he said the government remained focused on managing its finances.

On the ringgit, he expected the local note to trade between 3.95 and 4.45 against the US dollar in 2019.

“The ringgit will be following the movement of the yuan (which might go down further) and oil prices (which might go up),” Saeed said.

He said oil prices were expected to trade from US$73 to US$107 per barrel this year.

According to Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias, the main factor that’s going to affect Malaysia would be trade.

“Export is still a major growth driver of Malaysia’s economy. Even though net trade only accounts for 10% of the country’s economy, a slowdown in trade could also affect the domestic sectors,” Zahidi explained.

He noted that data from the World Trade Organisation suggested that trade had slowed since the second half of 2018.

On that note, he reckoned that what would happen to Malaysia’s economy would be mainly dictated by external factors such as US-China trade wars, health of the US economy, China’s growth trend and the situation in Europe.

Meanwhile, Zahidi said the narrowing US yield curve was a worrying indicator that a recession would be around the corner.

“I have butterflies in my tummy looking at this,” he said, citing that the phenomenon of narrowing US yield curve had previously preceded the 2008/09 Global Financial Crisis and the 1997/98 Asian Financial Crisis, among other economic downturns.

On the interest-rate outlook for Malaysia, Manokaran expected no rate hike by Bank Negara this year.

Given the low inflation environment, he said, the overnight policy rate would likely be maintained at 3.25% through 2019.

However, Manokaran said he still expected a rate cut by the end of the year. This was because while he thought Malaysia’s economy could still be sustained in the first half of 2019 without much stimulus, the second half of the year would be tough to sustain the country’s momentum.