Economy showing signs of picking up

IT was a pleasant surprise that the economy grew by 4.7% last year. The performance would have been better at 5.2% if not for the drag from the commodities sector last year.

The performance was better than expected and the economy is likely to perform better this year.

Bank Negara will give the official projection for 2019 next month and indications are that it should be better than last year as there are more reasons to be upbeat with construction activities picking up, which have tremendous linkages to the domestic economy, and the private sector doing its part to support growth.

The economy will also be helped by the commodities sector returning to growth this year, while fourth quarter data showing RM12.9bil worth of foreign direct investment had flowed into the country is a good sign moving forward.

The economy was hurt last year with over RM40bil leaving the capital markets while investments by companies in Malaysia posted slower growth.

Furthermore, domestic demand, which is how much of the private and public sectors spend and invest, slowed down last year amid post general election blues and the dip in consumer and business confidence.

Even though inflation for last year was at a low 1%, much of that was related to lower oil prices, there having been concerns over the rising cost of living.

Such was the case that the government formed the Economic Action Council (EAC) to look into ways to reduce the cost of living and improve the economic and financial welfare of the country.

The 16-member council features prominent figures from within the country and is led by the Prime Minister.

The EAC is also advised by Bank Negara, though it does not have a representative on the council, which stressed that there were bread and butter issues that needed to be looked at.

The central bank said that the cost of living should be tackled but not only from the cost side of the equation.

The advise was meant to encourage income growth, a thorn on the side of the economy where wage share of the nation’s GDP is on the low side for the size and shape the economy is in.

The EAC will likely form working committees to study and formulate policies to address economic issues, though one cannot help but notice the stark absence of experts in a field the country has spoken on as needing to grow.

“Industry 4.0” has been a buzzword used by the government with regards to Malaysia’s next level of growth but the EAC is short of people who are experts in it.

Whether the EAC is a body meant to look at the low-hanging fruit or actually devise long-term economic policies is also up in the air.

There are concerns over just how long the EAC will sit for and its role in influencing policies, which is usually the domain of ministries.

Nonetheless, establishing any body that can help with the economy is welcomed.

There is much work that needs to be done and devising policies that can help Malaysia catch some wind under its wings this year and for the immediate future should help in lifting economic growth and alleviating the cost of living issues many Malaysians grapple with.