Athi Shankar | February 23, 2014
The economic reforms by Najib are bearing fruits, though they may not be popular.
GEORGE TOWN: Prime Minister Najib Abdul Razak’s economic reforms, such as reducing subsidies on fuel and sugar, along with the planned introduction of goods and services tax (GST) next year appeared to be yielding positive results.
Although unpopular among certain quarters, Centre for Political Awareness Malaysia (CPA) president Huan Cheng Guan claimed that the fiscal measures had boosted the country’s fourth quarter gross domestic product (GDP) growth last year, stronger than expected.
He said that the GDP growth for last year’s 4th quarter was 5.1%, which was above the annual GDP growth for 2013, 4.7%.
He pointed out that the foreign direct investment for 2013 was the highest on record while budget deficit had been reduced to 3.9%, exceeding the government’s target of 4%.
“Strong growth, low unemployment, poverty reduction, and manageable inflation has international markets, ratings agencies and commentators from near and far praising Malaysian government’s economic competence,” said Huan.
Before Budget 2014, he said international markets, ratings agencies, and commentators were warning that Malaysia could be headed for economic trouble.
He said that if Malaysia had continued down the path as last year, like spending too much money on general subsidies and with inadequate long-term tax revenues, the country could have been headed for default, credit-rating downgrades and a run on the ringgit.
He said it would have had a devastating impact on the people, unemployment would have increased as investors pulled money out of Malaysia.
He said the government might have been forced into drastic cost-cutting measures and pay more interest on its loans.
“All of this would have hurt the bank balance of each and every Malaysian,” Huan told FMT.
Since 1997 Malaysia has been running on fiscal deficits, which meant the government had to borrow money in order to pay its bills.
But since Najib took the initiative and introduced subsidy reforms, said Huan, the long term prospects for the Malaysian economy look bright.
“The premier’s reforms may not have been popular but were necessary.
“In implementing them, Najib has proven his economic credentials,” said Huan.
He said Najib cut wasteful subsidies, such as on sugar that not only would make the population unhealthier but also would benefit the middle class and wealthy Malaysians.
He said the Prime Minister focused on expanding measures such as BR1M that would give cash directly to those needy poorer families and boost growth as poorer households, unlike rich ones, would tend to spend the cash hand-outs.
“Though unpopular, Najib’s economic policies are producing positive results,” said Huan.