KUALA LUMPUR, Oct 30 (Sin Chew Daily) — Economists estimate the economic growth for next year to be be between 5% and 5.2%, and not the 5.5% to 6.5% projected by the government.
Lee Heng Guie, Executive Director of Socio-Economic Research Center (SERC) of the Associated Chinese Chamber of Commerce and Industry Malaysia (ACCCIM), said to achieve a minimum of 5.5% economic growth as targeted by the government, several hurdles need to be cleared: increase productivity, speed up national transformation, upgrade efficiency in capital investment, digitization and solve the aging issue.
“The average potential output of Malaysia was 4.9% for the period between 2011 and 2019. Last year. it recorded 3.3%, and for this year the estimate is between 3% and 4%. Overall, the potential output is slowing down.
“The government is focusing on stimulating economic recovery next year. It is likely to implement a series of tax reforms in 2023 to increase revenue and ease fiscal deficit at the same time,” he said.
The government maintains its expansionary budget and has projected the economic growth to be in the range of 5.5% to 6.5%, but the ACCCIM is conservative and estimates the growth to be just around 5.2% as there are signs of global economic slowdown where exports are likely to be weaker while growth in private investment will slow down next year.
Over-dependence on consumption and public investment are also regarded as risky.
Lee is of the view that China’s economic data have also indicated a slowdown, and based on the 2022 economic report, the government is placing hope on the domestic consumption and public investment in infrastructure projects.
Despite the fact that opening up will boost economic recovery, retail, aviation and tourism industries will need time to recover.
“Families are more inclined to keeping their savings than spending due to the lockdown measures imposed in the last two years. Public investment will depend on the implementation by the government,” he added.
Lee also said the high unemployment rate is not to be neglected. Labor shortage may drag some industries’ pace in recovery and inflation may be a cause for concern too.
“Feedback received by ACCCIM indicates that the cost is rising. Some businesses have no choice but to transfer the cost to consumers.
“Apart from other potential risks, we still need to tackle cost and inflation as well as preparing for a rebound in COVID-19 cases,” he said.
Associate Prof Wong Chin Yoong from Universiti Tunku Abdul Rahman (UTAR) is of the view that the 5.5% in economic growth projection by the government was overly optimistic, as the country’s economic growth averaged only 4.9% over the past ten years.
An economic growth of 5% will be a good performance, he said.
Wong said external factors should be given the attention especially China’s 4.9% GDP growth in the third quarter did not meet market expectations and was also slower than the second quarter, he explained.
China is Malaysia’s main trading partner and a major export market.
Wong said the United States, another major export market for Malaysia, is currently facing inflation and this may lead to the Federal Reserve implementing rate hike earlier than anticipated.
On whether the domestic consumption will be able to drive the domestic economy, Wong said although the government had allowed social and economic activities, economic recovery would not be V-shaped due to the rise in household debt which is a cause of concern, adding that Malaysians are now focusing more on structuring household debt than consumption.
“Malaysians have resorted to digging into their savings or even EPF savings over the last two years. The focus for next year will be reducing household debt.
“If the external factors are stable, strong economic growth can only take place in 2023 to return to pre-pandemic levels,” he said.