Tighten your belt in 2014, say economists
Middle to lower income groups will likely face more financial distress next year in the wake of the simultaneous price hike of electricity tariff, toll, public transportation and fuel.
Anisah Shukry, FMT
2014 will be a bleak financial year for Malaysians as they face an increase in toll prices, electricity tariff rates, public transportation and possibly even further fuel subsidy cuts.
This will only mean two things: higher inflation and less money in pockets for consumers to spend, economists confirmed today.
“Consumers will have to brace themselves for rising cost of living as the price hike started with the fuel subsidy cut, followed by the complete abolishment of the sugar subsidy,” Lee Heng Guie, CIMB’s chief economist, told FMT.
“Going into 2014, we have higher electricity tariff, toll rates, and there could be other forms, including rising fuel costs. This will definitely put pressure on inflation and the result is inflation has moved to 2.0 percent in October, to next year where we are looking at 3 percent.”
He said the lower income group – those households earning below RM3,000 – would be hit the hardest, and the BR1M cash vouchers would only provide partial relief to the poor.
“BR1M would not offset the rising prices 100%. To do that would only worsen the budget deficit and incur more expenses for the government,” said Lee.
Dr Yeah Kim Leng, group chief economist of RAM holdings, said the lower and middle income groups would likely face more financial distress and an increase in household debt starting from next year, and this would in turn incur social repercussions as individuals took on extra jobs to manage the higher cost of living.
He also warned Malaysians to expect two or three more subsidy fuel cuts from this year and 2016, and said a rise in water tariff was not off the cards, either.
“Our subsidy cut for fuel is still not finished because there is still a gap between our price and the world price that would be closed. We still expect further subsidy cuts, and is likely to be spaced between now and 2016.
“But once it goes beyond 2017, that would be too close for the general election, and the government would want to be in the good books ofall,” Dr Yeah quipped.
Not all is bad
But not all is doom and gloom: he said that the economic situation was still “manageable” and employers next year would likely be pressured to increase wages in light of the inflation and rise in cost of living.
“The national average income is rising by five to six percent every year. But of course it depends on the profitability of the firm, the different skill categories of the employees, and to what extent the lower income group is receiving higher income.
Dr Yeah added that it was unlikely Malaysia would see an increase in unemployment and poverty levels next year, as the country’s export economy was thriving and expected to improve.
