Post-Sodomy II, economy takes centre stage in battle for Putrajaya
Economists warn that Malaysia’s national debt will hit 100 per cent of the Gross Domestic Product (GDP) by 2019 should Putrajaya continue to borrow more than it earns. “If nothing is done to reverse the current trends in government expenditures and revenues, extrapolation suggests that Malaysia’s national debt will explode to 100 per cent of GDP by 2019,” Mohd Ariff Abdul Kareem with the Malaysian Institute of Economic Research (MIER) told The Malaysian Insider.
The economy is likely to become the main political battleground ahead of the next general elections as Malaysia begins to put behind it the controversies and divisions of Sodomy II.
Acquitted of a sodomy charge yesterday, Datuk Seri Anwar Ibrahim’s fight to topple the ruling Barisan Nasional (BN) from Putrajaya will now be based on keeping Malaysia’s economy afloat, analysts say.
The Opposition Leader must return to winning support for his disparate Pakatan Rakyat (PR) alliance based on economic policies and blunt the impact of political foe Datuk Seri Najib Razak’s election sweeteners as announced in the 2012 Budget last October.
They added that Anwar will no longer have recourse to play the “political victim” with the end of the court case that had divided Malaysian voters.
“The public is looking for leaders who are able to manage Malaysia through economic turmoil,” Bridget Welsh, a political science lecturer at Singapore Management University was quoted as saying today by Bloomberg.
Observers also believe that both sides are now playing on a level playing field to win the next general elections they believe will be called ahead of its 2013 expiration date.
Kenanga Investors Bhd fund manager Nik Hazim Nik Mohamed told Bloomberg the prime minister may call for general elections as early as March to capitalise on the BN’s budget handouts.
The Malaysian Insider recently reported that Najib could reshuffle his Cabinet as early as this month and delay calling elections until later this year as scandals engulfing at least two ministers are threatening the feel-good factor of Budget 2012 where the prime minister dispensed direct cash aid to some 5.3 million households.
MIDF Amanah Asset Management Bhd’s chief executive Scott Lim was quoted by Bloomberg report as saying that with the sodomy verdict out, “nobody can accuse the other party of being unfair or having a political advantage.”
Ooi Kee Beng, deputy director of the Institute of Southeast Asian Studies in Singapore, also told Bloomberg, “both sides have held their ground quite well, so the campaign will be important.”
Both Anwar and Najib must persuade Malaysia’s 28 million population they are the right choice to overhaul the country’s US$238 billion economy laden with economic policies that are seen to benefit only one race and which the World Bank has warned is holding back the country’s growth.
Information Minister Datuk Seri Rais Yatim has made the case for the government’s reform push in a statement issued immediately after the sodomy verdict yesterday in which he said “the current wave of bold democratic reforms introduced by Prime Minister Najib Razak will help extend this transparency to all areas of Malaysian life.”
But economists warn that Malaysia’s national debt will hit 100 per cent of the Gross Domestic Product (GDP) by 2019 should Putrajaya continue to borrow more than it earns.
“If nothing is done to reverse the current trends in government expenditures and revenues, extrapolation suggests that Malaysia’s national debt will explode to 100 per cent of GDP by 2019,” Mohd Ariff Abdul Kareem with the Malaysian Institute of Economic Research (MIER) told The Malaysian Insider.
He warned that federal government revenue was growing too slowly to keep up with its borrowings, which hit 53.1 per cent of GDP in 2010.
Malaysia’s debt-to-GDP ratio jumped from 41.4 per cent in 2008 to 53.1 per cent in 2010 while government debt grew 14.6 per cent in 2008 and 18.3 per cent in 2009, far outpacing the country’s GDP growth, Ariff noted.
He said while the current size of government debt relative to GDP was not troubling, the pace of its growth in recent years was cause for concern.
RAM Holdings Bhd chief economist Dr Yeah Kim Leng also told The Malaysian Insider there needs to be political will on the part of Putrajaya to execute its Government Transformation Plan (GTP), which is partly aimed at stopping fiscal deficit from rising further.
“We must follow it religiously because [fiscal deficit] is currently the main vulnerability of Malaysia’s economy,” he said.
“There is a close correlation between growth and government revenue,” he said, noting that for every one per cent decrease in GDP growth, tax collection will drop by 0.8 per cent.
“During a slowdown we can expect government fiscal deficit to actually widen.”
Yeah added that the government does not have long to consolidate its fiscal position as income from the oil and gas sector, which makes up about 40 per cent of total government revenue, was expected to fall over the next five to 10 years as Malaysia’s oil reserves dwindle.
According to a Bloomberg report, the FTSE Bursa Malaysia KLCI Index (FBMKLCI) was Asia’s third-best performer over the past month when it inched forward 0.5 per cent to 1,521.73 yesterday.
But the ringgit, which has outperformed other Southeast Asian currencies in the past month, dipped 0.3 per cent.
