Youth can stabilise economy, says analyst

KUALA LUMPUR: The government needs to put more money into the B40 and M40 income groups to boost spending and focus on creating more jobs for youth who are big spenders who could help stabilise the economy, says an economist at an investment bank.

She said the government needs to emulate the Indonesian government’s initiative in urging the people to accelerate their spending when the economy slows down.

“By putting more money into their pockets especially the youth, it could actually help the government to kickstart the economy. But at the same time, I am more concerned about the job employment rate, which is very high,” she told Bernama.

Data shows that the youth unemployment rate in Malaysia was 11.9 per cent in 2009, falling to 9.7 per cent in 2011 and reaching 10.9 per cent in 2018, more than triple the national unemployment rate of 3.3 per cent.

“Previously we had more job creation schemes for example in the telecommunications and banking sectors, but now there are fewer of them. We are going into Industrial Revolution 4.0, so you already produce the talent, but where do they go?” she said.

She noted the crucial importance for the government to first stabilise the economy and next have a monetary intervention (rate cut) and defer the floating of petrol prices.

Another move to boost consumer spending is for the Employees Provident Fund (EPF) to cut employees’ contributions, putting at least RM5 billion into consumers’ pockets, she said.

The government had previously used the same measure to stimulate the economy in 2009, 2013 and 2016, when the fund lowered the EPF contribution rate for employees from 11 per cent to eight per cent on an optional basis.

On Wednesday, Bank Negara announced Malaysia’s economy grew by 3.6 per cent in the fourth quarter of 2019, dragging the fullyear GDP growth to 4.3 per cent, the lowest since the 2009 financial crisis amid supply disruptions in the commodity sector.

Governor Nor Shamsiah Mohd Yunus said the full-year growth would have been higher at 4.7 per cent without the supply disruptions in the commodity sector.

The economist said for agriculture, the fertiliser cut by planters had resulted in lower production.

“I foresee that agriculture may continue to drag down the economy in 2020. But I should not worry about mining and agriculture, as these sectors only contributed about 14 per cent to the economy. More importantly, our engine of growth is actually services and manufacturing, which contribute about 80 per cent to the gross domestic product.

“What we are afraid of is that the COVID-19 (coronavirus) outbreak can affect spending in the tourism, retail and manufacturing sectors,” she said, adding her projection of the 2020 full-year gross domestic product growth amid the uncertainties is 4.4 per cent. — Bernama