`Malaysian economy in fairly good shape'

Publication: NST

Date of publication: Apr 20, 2013

Section heading: Business Times

Page number: 002

Byline / Author: By Rupa Damodaran

KUALA LUMPUR: EXCEPT for some financial issues, a prominent local economist gave his thumbs up to the Malaysian economy, saying it is in a fairly good shape after considering the adverse external circumstances.

At five per cent, the growth outlook for Malaysia this year is still credible, said Prof Emeritus Dr Mohamed Ariff Abdul Kareem, referring to the latest outlook by United Nations' Economic and Social Commission for Asia and the Pacific's (ESCAP) economic and social survey.

Inflation outlook of between 2.5 per cent and three per cent is still manageable for Malaysia.

Mohamed Ariff, who is also a senior fellow at the Malaysian Institute of Economic Research (MIER), said the think tank expects domestic demand and private investments to continue to lead the economic growth.

A slower industrial output and lagging loans growth in the banking sector, however, point to a weaker first quarter gross domestic product (GDP) in 2013.

Mohamed Ariff said Malaysia's current level of debt-to- revenue ratio should signal the need to broaden the tax base.

Speaking at the launch of the ESCAP's survey here on Thursday, he said one way to address the issue is to introduce the Goods and Services Tax (GST) as only 10 per cent of the population are paying taxes.

Malaysia has postponed the implementation of the GST several times.

The GST Bill was tabled in Parliament for its first reading in December 2009 but it was later withdrawn from its second reading in 2010.

Mohamed Ariff, who is attached to the International Centre for Education in Islamic Finance, acknowledged that the budget deficit to GDP is being addressed by the government.

As for the government debt to GDP ratio of 55 per cent (65 per cent if government-guaranteed debts are included), he said it is "not unmanageable", considering it is largely based on domestic borrowings.

Except for these financial issues, the Malaysian economy, he said, is in fairly good shape.