This painful measures become necessary as the government ran short of options after overspending for 15 years straight and accumulated a record debt equivalent to 55 percent of the GDP.
“If people cooperate then short term pain can lead to long term gain…
“Otherwise, they can go to the street if they are impatient… we can say we don’t want this nonsense anymore… the political masters will read this indication and react,” MIER’s executive director told reporters after a briefing on the state of economy.
He however qualified that he was not a politician able to judge people’s moves but an economist, just assessing the economy.
At the 19th MIER Corporate Economic Briefing, Zakariah elaborated on the think tank’s most famous products: economic surveys.
After hitting its lowest in five years in the last quarter of 2013, MIER’s consumer sentiment index saw an uptick in January and February, Zakariah said.
But it was still below 2008 levels and he described it as in a subdued mood, looking skeptical somewhat, yet hopeful of better times.
“Consumer confidence has yet to turn the corner,” Zakariah said to an audience of economists, academicians and government officials at the Park Royal Hotel in Kuala Lumpur.
This simply means that people don’t feel it is time to go shopping yet, and given that domestic demand is the country’s key economic driver, that’s not a good sign.”
Add to that was the government’s taking away subsidies since September last year and the wide-reaching GST to come next April.
The former will cause inflation and the latter will require strong political will.
“The on-going subsidy rationalisation needs to be carefully reviewed, properly sequenced and definitely not aggressively pursued,” Zakariah noted in his executive summary for the MIER economic report.
As for the GST, which has already been announced to start at six percent from April 2015, Zakariah cautioned that although it would strengthen the government’s coffers, the move still requires “strong support and ownership by all the stakeholders, especially the rakyat.”
Bracing for economic downturn
Citing another MIER survey, Zakariah noted that more than half (53 percent) of chief executive officers (CEO) out of 384 respondents were of the view that economic conditions have worsened, while only nine percent thought otherwise. They were bracing for an economic downturn.
“Their major concerns include rising costs, weaker ringgit and impact of recent measures on property market,” Zakariah said, noting that the ringgit had depreciated seven percent this year but this did not necessarily helped businesses to be more export competitive.
Tourism sector meanwhile took a nosedive after the MH370 incident, MIER noted.
In a bad start to Visit Malaysia Year 2014, MIER’s tourism market survey showed that the industry saw fortunes fall sharply due to slow travel season and MH370 incident. Before that, tourism market had been mostly growing steadily since 2009.
“The Malaysian Airline MH370 tragedy is also believed to be one of the factors that contributed to this fall when the number of Chinese tourists to Malaysia following this incident dropped considerably,” the MIER report said.
The Tourism Index also incorporates the Hotel Operators Index and Travel Agencies Index. All components recorded a sharp drop off.
While MIER noted that a rebound can be expected, one fact from the survey remains troubling.
“More than 60 percent of the respondents still felt that the incidence of petty crimes,like snatch thefts and pickpocketing, are at a worrying level. Therefore, tougher measures are needed to tackle this problem,” the report said.