Saturday, January 2, 2016
No respite for poorer Malaysians in 2016
Independent economist Lee Heng Guie said that despite Malaysia’s positive overall performance, the country was still adjusting to fiscal reforms such as subsidy rollbacks and introduction of the Goods and Services Tax (GST), with the burden heaviest on the lower income segments.
“You hear positive macro data coming out that is saying that the mean household monthly income has increased [RM6,141 in 2014 compared to RM5,000 in 2012], but it doesn’t sync with the reality when you talk with the average Joe who will tell you that they are struggling to make ends meet,” he told Malay Mail Online when contacted.
“These necessary reforms have pushed Malaysia into an era of a higher cost environment, and it will continue through the coming year. The rakyat is supporting the fiscal reform. This era of adjustment will take a while to wear off.”
He said that the higher costs were affecting Malaysians at every level, but said the lower income groups were more vulnerable due to their low savings rate that leave them with little, if any, financial buffer to withstand the period of turmoil.
In 2014, the Khazanah Research Institute noted in its State of Household report that more than half of Malaysian families take home less than RM5,000 a month.
According to the Malaysia Human Development Report 2013 commissioned by the United Nations Development Program, 86 per cent of urban households and 90 per cent of rural families have zero discretionary savings. The same report also showed that a third of Malaysians do not even have a bank account in which to retain any financial reserves.
Aside from low savings, Malaysians also contend with high monthly debt obligations. The Khazanah Research Institute report also revealed that households earning less than RM3,000 had borrowings of up to seven times their annual income.
Malaysian household debt, currently around 86 per cent as a ratio of Gross Domestic Product (GDP), is also the highest in the region.
Dr Yeah Kim Leng, dean of the school of business at the Malaysia University of Science and Technology, concurred with Lee, stressing that even though key economic indicators such as the country’s GDP still showed modest growth, it was still an economic slowdown overall.
“The estimated growth this year is still between 4 or 5 per cent, compared to last year being close to six. This kind of growth is not enough to generate the high income needed to cope with the adjustment,” he told Malay Mail Online.
“Now it is about surviving the adjustment period. Bigger companies, and people with more wealth and higher rates of savings will be able to weather it, but smaller companies and those with lower rates of savings will have less of a buffer to the rising costs of living and doing business,” he told Malay Mail Online when contacted.
While there is no final data on 2015 as of yet, 2014, 2013 and 2012 recorded an average annual inflation rate of 3.2, 2.1 and 1.7 per cent respectively.
Both Yeah and Lee agreed that the government needed to take its policies on creating opportunities for smaller businesses and increasing wages seriously to ensure that those with smaller financial buffers can recover after the adjustment period.
“Government has shown effort in addressing this issue by trying to create opportunities for the bottom 40 per cent, but it has to be narrowed to those who need it. BR1M can be seen as a good effort in immediate aid but it has to be more targeted and specific to those who really need it,” Lee said.
Another observer, adjunct professor of Economics and Development Studies in Universiti Malaya Tan Sri Kamal Salih suggested that Malaysians did not enjoy the country’s apparent economic growth because the expansion was likely overstated and inflation, understated.
He added that the official rate of general price increase did not reflect the cost pressures that Malaysians are actually facing.
“I believe the public sentiment [of feeling poor] is in sync with reality... A low 2.6 inflation is certainly not realistic,” he told Malay Mail Online.
“The government is currently in no position to stimulate consumption in the country, and at the same time there are talks of cutting back on Budget 2016 because crude oil prices are still going down. We might see our progress at best be stagnant, but we won’t see much change until the end of 2016,” he said.
2015 saw rise in public outcry over rising cost of living as the government continued economic reform and subsidy rationalisation initiated in 2010 with early subsidy cutbacks on sugar and petrol.
Among the recent moves, was the complete removal of petrol subsidies and introduction of a price float system which began in December, 2014 and the introduction of the six per cent GST as a means to broaden government revenue.
Posted by wikisabah at 3:17:00 PM