A fool’s paradise?
But how quickly times change. Within a week, even The Star was forced to concede that a number of economists thought the growth forecast of 5 per cent to 5.5 per cent for 2012 was somewhat optimistic, without which premise the entire fiscal deficit reduction claim would appear to be a pipe dream.
Kapil Sethi, The Malaysian Insider
Spot on! Screamed out page after page in The Star the day after the Budget 2012 announcement by the prime minister. Barisan Nasional was at pains to paint it as a caring budget which emphasised its concern for the underprivileged through a number of cash handouts and maintenance of subsidies across the board.
But how quickly times change. Within a week, even The Star was forced to concede that a number of economists thought the growth forecast of 5 per cent to 5.5 per cent for 2012 was somewhat optimistic, without which premise the entire fiscal deficit reduction claim would appear to be a pipe dream.
In less than another week, the Malaysian Institute of Economic Research (MIER) revised its growth forecast down to 5 per cent for 2012. The Monetary Authority of Singapore, in an even gloomier tone, said that it expected growth might be below its potential rate of 3 to 5 per cent next year. US unemployment feeding into a probable double-dip recession in its economy and the eurozone crisis has the whole world bracing for a year of desperate belt tightening.
Already, volatility in the investment, stock and currency markets has reached such a level that Bank Negara recently reported that foreign investors sold Malaysian equities to the tune of US$439.6 million (RM1.36 billion) in August and September alone. This was reflected in a drop in Malaysian foreign exchange reserves to the tune of US$5.3 billion at the end of September. The ringgit has also been continuously weakening against all major currencies in the same period.
At this juncture, it might be wise to ask why the Malaysian government’s blithely rosy forecast and expectations for 2012 are at such complete variance with the rest of the world, and what it may mean for the Malaysian consumer in the coming months.
In one word — politics. The raison d’être for politicians is to promise a better future to voters. In an election year especially there is undeniable pressure on the ruling coalition to deliver that elusive “feel-good” factor through all the instruments of state at its disposal to win re-election.
Having said that, the government and BN are distinct entities. While it is the job of a political coalition to influence voters positively, it should be the job of the government to take a more responsible stand when the future livelihood of its citizens is at stake.
A reasonably independent civil service is a prerequisite to reining in the natural propensity of all politicians to spend, spend, spend and leave the consequences to the distant future. When the bureaucracy is supine, the result is a budget like the one recently presented — a free-for-all spending plan with no acknowledgement of the economic realities and forecasts on the ground.
Due the perceived unpopularity of the proposed GST and an extremely narrow taxpayer base, simply put the plan to raise revenue seems to be one of cross your fingers and hope for the best. If the US goes into another recession and oil prices plummet, even the current revenue of the government will drop, let alone increase. Whereas on the expenditure side there is a plethora of proposals set to precipitously increase operating costs.
