Economists laud IMF assessment

Publication: NST

Date of publication: Dec 19, 2013

Section heading: Main Section

Page number: 004

KUALA LUMPUR: Local economists have lauded the International Monetary Fund's sound economic assessment on Malaysia but reminded that the country still faces tough challenges ahead.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng said the IMF assessment was proof of Malaysia's prudent macroeconomic measures to strengthen its fiscal and financial positions.

"The IMF endorsement is reflective of Malaysia's strong monetary policies and macroeconomic management which put the country in a favourable light."

He, however, said there would be price adjustment pressures brought about by price hikes but the economy would adjust to it over time.

The IMF had commended Malaysia for its "adept management" of the economy against a difficult external environment this year. Its mission chief for Malaysia, Alex Mourmouras, said the local economy had shown remarkable resilience in weathering the global financial turbulence in mid-year, reflecting the depth of its financial markets.

An IMF team led by Mourmouras, which just completed its annual Article IV Consultation for Malaysia following its visit here and Penang from Dec 4 to 16, also commended the role of its exchange rate as a shock absorber, coupled with Bank Negara's strategy of intervening to avoid excessive volatility in the ringgit. Mourmouras also said the Federal Government was on track to reach its fiscal deficit target of four per cent of Gross Domestic Product (GDP) this year.

"The 2014 national deficit target of 3.5 per cent of GDP is feasible if as assumed in the mission's baseline, growth in current spending is contained within a tight envelope."

The IMF also noted that the government had taken important steps to strengthen fiscal management and policy to reduce debt and rebuild fiscal buffers.

It welcomed the setting up of a high-level Fiscal Policy Committee, fuel and electricity subsidy rationalisation, and the introduction of Goods and Services Tax (GST) in April in 2015.

Asian Strategy and Leadership Institute chairman for public policy studies, Tan Sri Dr Ramon V. Navaratnam, said Malaysia had so far done well in managing its economy and external shocks.

"We welcome the (IMF) assessment but adept management is for now.

"We have to look at the medium and long term as well, especially at the rising inflationary pressures such as the fuel and electricity hikes.

"Malaysia must not just manage the budget deficit and the debt, but it must also look at addressing structural reforms which are being undertaken right now, but not fast enough."