JANUARY 22 — As expected, to cope with the impacts of plummeting oil prices on the national economy, Prime Minister and Finance Minister Datuk Seri Najib Razak announced a series of economic austerity measures, including measures to promote exports of goods and services, as well as to implement national fiscal reform and consolidation, to boost investors’ confidence and increase national income.
As we all know, the plummeting international crude oil price has hit the lowest point over the past six years while the ringgit also fell against the US dollar, bringing an immediate blow to the country’s economy. An obvious result is, when tabling the 2015 Budget last year, the government expected to increase RM3.7 billion of revenue through a new oil price mechanism, but now, the plummeting international crude oil price is instead expected to bring a revenue reduction of RM13.8 billion. In the face of such a bleak economic situation, the government takes the initiative to start a variety of response measures. It is understandable and imperative.
The Prime Minister said that the ultimate goal of the economic adjustment measures and programmes is to ensure that the country’s economy can continue to grow steadily, while the people’s interests and welfare are not affected. We understand that all economic adjustments and market intervention policies bring both pros and cons. What the government must do is to try to achieve the new measures and programmes, and lead the country towards a favourable progress, while reducing the negative impacts.
Najib does not suspend development projects as economic analysts expected. It is believed to be related to the worry that it might hit the country’s economic growth momentum. All development projects, once suspended, will bring a certain degree of impact to economic development. Therefore, the government must carefully calculate the pros and cons they bring, instead of making hasty decisions, throwing away the apple because of its core and over rectifying, and as a result, lose the economic development goals. The country’s long-term interests must always be the first consideration.
Another unexpected announcement is, the government will also defer the National Service programme this year to cut RM400 million of operating expenditure. There were rumours earlier saying that the government would exempt visa for tourists from China. But due to national security reasons, the government only exempts visa fees for Chinese tourists. The former is one of the austerity measures while the latter is intended to revitalise tourism. However, neighbouring countries like Indonesia have exempted visa for tourists from China while Thailand has implemented visa-free measures in 2013. Therefore, it is afraid that the new measures might not help much in attracting Chinese tourists.
The most concerned problem now is, what impacts would the Goods and Services Tax (GST) scheduled to be implemented in April bring? In theory, the GST is a comparatively ideal tax system which can help the government to implement fiscal reforms and consolidation. However, we can’t have our cake and eat it. After the GST is implemented, would it trigger another wave of price hike? It is the people’s biggest concern.
In fact, after the fall of oil prices, the people can see only the fall of ringgit, while goods prices have surged instead. How could the surge be suppressed? Can delaying electricity tariff increase and increasing the frequency and duration of mega sales throughout the country really help? These questions need time to be proven.
Has the oil price plummeted to the bottom and would it rebound? It is believed that no economic expert will dare to give a confirmed answer for the questions. The government would also revise the deficit from 3 per cent to 3.2 per cent and reduce the economic growth to 4.5 per cent to 5.5 per cent. These mean that the country will continue facing a worrying economic situation this year, which is undoubtedly a very serious and huge wisdom-testing challenge for the Prime Minister, as well as the whole economic planning team of the country. — Sin Chew Daily
* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail Online.
