World Bank: Time right to consolidate fiscal condition
It’s time to consolidate on the fiscal side to ensure that buffers are built in case the shocks are larger than anticipated.
KUALA LUMPUR: Malaysia should take the opportunity from thecurrentgloomyglobaleconomic environment to consolidate the country’s fiscal condition, says World Bank chief economist for East Asia and Pacific Region Sudhir Shetty.
He said Malaysia should look at long-term economic sustainability instead of propping up growth in the short-term.
“It’s time to consolidate on the fiscal side to ensure that buffers are built in case the shocks are larger than anticipated. In that respect, having a slower growth might be a worthwhile trade-off in favour of greater stability, going forward,” he told reporters during the ‘East Asia and Pacific Economic Update’ yesterday.
World Bank Lead economist, Macro Economics, Trade and Investment, Richard Record said there was an opportunity for the country now to undertake deep and structural reforms which held back Malaysia in the past.
Record also said the structural reforms should be undertaken particularly in areas such as education, skills, productivity, competition and regulation of markets.
“The nation should also put more emphasis on quality instead of the quantity of growth. Especially, if we are looking at risk factors, volatility, trade tensions and so
Sudhir Shetty, World Bank chief economist for East Asia and Pacific Region
on.
“Think about ways to better protect the poor from the impact of these kinds of shocks including issues such as the cost of living, health, inflation and wage growth,” he added.
On Malaysia’s economic growth, Shetty said the country was forecast to experience a lower growth rate of 4.9 per cent this year compared with 5.9 per cent last year. This was due to slower export, trade and lower public investment and consumption as some large infrastructure projects have been cancelled, he added.
“Malaysia is very exportoriented to the extent that export and trade prospect, in general, is looking dimmer than it was six months ago and that will affect the prospects for the Malaysian economy,” he said.
Meanwhile, Record said Malaysia’s slower growth pace was not an unusual situation, considering the country was approaching a high- income economy status.
“Its only natural that when a country’s wealth increases, the rate of economic growth declines,” he said.
Nevertheless, he pointed out that Malaysia has been doing well in placing careful and prudential regulations for banks, flexible exchange rate and substantial reserves to boost investors confidence. Record also said the diversification of the economy and exports also helped in mitigating the economic challenges.
“Export is diversified across all product markets, both in advanced and newly developing economies across the world, and across products type, both manufacturing and commodities, as well as, oil and gas, and agricultural,” he said.
He said the country’s balanced consumption between export and domestic also helped to provide some mitigation against external challenges.
“The fact that Malaysia has a different source of growth would certainly help. Having seen very strong growth on the external side would perhaps see the domestic side picking up a little bit next year,” he added.
On the ringgit, Record said the weakening of the local unit against the US dollar was because of the strengthening US economy and the increase in interest rate which lured investors to the country. — Bernama