Prepare for an uncertain future — Lim Sue Goan
JUNE 6 — Prime Minister Datuk Seri Najib Razak pointed out that the country’s economy might face risks this year and next year due to global economic instability and therefore, the national capacity of response must be strengthened.
However, we have no idea how to strengthen the capacity of response as we have limited resources.
The worsening European debt crisis, the unstable US recovery and the slowdown of China’s economy have led to fears of another global economic recession. World Bank president Robert Zoellick warned that the summer of 2012 offers an eerie echo of the Great Panic 2008.
The northern hemisphere has now entered summer and even if Zoellick’s prophecy is not accurate, it is still certain that the euro zone will continue to cause troubles.
First of all, the Greek Parliament will have an election in the middle of this month and if the Greek people decide to leave the euro zone, it would cause the market to lose confidence in the euro and accelerate the flight of capital. The euro zone monetary system might also collapse.
Secondly, Spain is facing a financial crisis and it might need the assistance of international joint forces. The Spain economy is too huge to be saved and it might need RM1.8 trillion to save it.
Thirdly, social unrest would intensify. Unemployment in the euro zone was 11 per cent in April, with a seasonally adjusted total of 17.4 million people unemployed, up from 17.3 million. Spain had the highest rate at 24.3 per cent.
In addition, the situation of the world’s top two economic powers does not look good, too. Unemployment in the US had risen to 8.2 per cent in May, showing that it had affected by the European debt crisis and its pace of recovery was bounded.
As for China, the signs of its slowing economic growth are also very obvious and its economic growth of the first quarter was almost the lowest in three years.
In such an economic situation, Malaysia must get prepared early, particularly in strengthening domestic demand and investment to offset the reduction in exports and foreign investment. A sharp drop in exports might lead to a layoff in the manufacturing industry.
However, the country has faced fiscal deficits for 15 consecutive years and the deficit has increased to 54 per cent of the gross domestic product (GDP).
It is feared that the government might be unable to inject capital into the market and the Economic Transformation Programme (ETP) might also be affected.
It is bad news to hear of drops in prices of oil and palm oil. The government has been too dependent on oil revenues. National revenue drops when oil price falls. The fall of palm oil price to below RM3,000 also affects the people’s spending power.
Bank Negara also tightened its lending guidelines to prevent household debts from going out of control. Reduction in loans and the slowing of the economic growth engine would lead to the burst of real estate bubble bursting.
All in, the deterioration of consumer sentiment would affect the commercial industry, causing the private sector to reduce expenditure. The vicious circle would lead to a chain reaction.
Under the cloud of a possible global recession, Najib should cut the Gordian knot and schedule the general election in July. However, there is still no sign of election so far, probably due to the worries about the impacts caused by the Bersih 3.0 rally.
If the election is delayed to September or next year, the Europe debt crisis might have detonated.
Also, the government would not dare to implement massive tax reforms before the election, and the consequences would be difficult to predict.
Barisan Nasional is facing political and external economic risks, and the general public must prepare for an uncertain future. — mysinchew.com
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.