October 10, 2011
Datuk
Seri Najib Razak and Tan Sri Muhyiddin Yassin (right) shake hands after
the tabling of the 2012 Budget in Parliament. — File pic
KUALA
LUMPUR, Oct 10 — Economists said today that the 2012 Budget risks
committing Malaysia to the path of unsustainable spending at a time when
the global economic outlook remains uncertain.
Bank of America director of global research Chua Hak Bin noted that both Malaysia’s public
and household debt levels were at worrying levels, and said the
government appeared to be kicking the debt can further down the road by
not addressing it in the Budget.
“Will debt dynamics increase and will Malaysia face a year of
reckoning?” he asked at the post-Budget dialogue organised by the
Malaysian Economic Association and University of Malaya here.
Chua said there was a chance government revenues would be hit by a
recession, which would make it harder to meet the commitment to trim the
deficit to 4.7 per cent next year from 5.4 per cent now.
“The deficit is extremely sensitive to the state of the economy,” he pointed out.
The economist also said that despite plans by the Najib
administration for the private sector to drive the economy, his analysis
showed that the bulk of investment so far has been from the government,
government-linked corporations (GLCs) and Petronas.
“The private sector has not kicked in [meaningfully],” he said.
Marie-Aimee Tourres, a senior research fellow at the faculty of
economics and administration at the University of Malaya, said that the
Budget’s “goodie strategy” was not linked to any productivity
commitment.
“A lot of tax collection (projections) is based on optimistic growth,
which may not have taken into account the deteriorating global
situation,” she said.
Tourres said that the Budget was good in a way that it was a
“socialist type budget” where “a lot is given but little is asked”, but
added that the sustainability of such an approach was a concern.
“I can only worry about the end cost,” she said. “It is common that
what is supposed to be a one-off (handout) becomes permanent and long
term.”
She added that the allocation of RM2.1 billion by Amanah Ikhtiar
Malaysia according to race appeared to contradict the 1 Malaysia
concept.
The 2012 Budget was supposedly formulated to address rising cost of
living, with salary hikes for civil servants and cash grants to select
groups, including RM500 payments to those earning below RM3,000, as well
as billions in blanket subsidies.
The structural issue of distortions and inefficiencies in the economy
that result in lack of competition and subsequently high prices was
left largely unaddressed.
As a percentage of gross domestic product (GDP), Malaysia’s household
debt increased from 66.7 per cent in 2004 to 76 per cent in 2009, which
is uncomfortably close to the levels seen in the US prior to the 2008
financial crisis.
It is also the second-highest level of household debt in Asia, after South Korea.
Malaysia’s public debt, meanwhile, stood at about 54 per cent of GDP in 2010.
No comments:
Post a Comment