Malaysia cannot rely on monetary policy to spur growth, warns ex-Bank Negara deputy governor

The logo of Bank Negara Malaysia is seen at its headquarters in Kuala Lumpur January 29, 2019. — Picture by Ahmad Zamzahuri
The logo of Bank Negara Malaysia is seen at its headquarters in Kuala Lumpur January 29, 2019. — Picture by Ahmad Zamzahuri

KUALA LUMPUR, Sept 30 — With more than a week before the tabling of Budget 2020, former Bank Negara Malaysia (BNM) deputy governor Tan Sri Lin See Yan said that Malaysia needs a fiscal policy to generate growth for its economy.

The country, according to him, could not depend on monetary policy.    

“This is especially when interest rates are getting lower and lower, the effect of the monetary policy gets less and less effective, so you need fiscal policy to counter (in terms of) development spending, as that is important, we need that,” he told Bernama recently.

Lin said Malaysia has reached a stage where the country can be described as a ‘sugar high’ economy with monetary push for growth.

“Sugar high is good for the economy for a year or two, it doesn’t solve your problems, and we cannot depend on monetary policy to push growth,” he said.

Also for the Budget 2020, Lin was in the opinion that the middle class in Malaysia requires further tax relief.

“I’m a champion of the middle class, if you look at it in an overview, at yield, income tax, the middle class don’t pay as much as the rich, but the middle class pay a lot of other taxes in the form of import duties and sales tax.

“The economy depends on your (middle class) spending but the more you (middle class) spend the more taxes you pay, however, it is an illusion, you think you’re paying less tax,” he said.

Lin added the middle class are paying more tax, because the upper class goes abroad, and does not pay taxes in Malaysia. — Bernama

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