Is Malaysia’s economy U-turning back 20 years under the PH Government? — Pamela Yong

DECEMBER 20 — Call it what you may, bankruptcy, recession, economic downturn, but what really concerns many Malaysians today is whether the country’s economy will pick up anytime soon OR will the country’s reserves continue on this bleak downward spiral, forecasting a rather hard and harsh year ahead. Instead of ushering in 2019 with great hopes for New Malaysia, foreboding silence and apprehension instead fill the air. 

This foreboding is not unexpected as the following recent economic trending and forecasts are seemingly not bringing much jolly goodwill and merry-making to the common Malaysian, with many feeling the pinch of a rising cost of living and year-end festivities just around the corner.

For example;

1)      On 19 Dec 2018, the Ringgit fell further against the greenback by another 0.047% to 4.1770 in just 24 hours. Similarly, it also fell against the SGD by a whopping 0.15% to 3.0485, and against the yen to 3.7145 from 3.7141.

2)      With the continued weakening of the Ringgit, the World Bank at the same time lowered yet again its gross domestic product (GDP) growth expectation for Malaysia this year to 4.7% from a 4.9% prediction set earlier in October 2018. So that is not just one but two GDP downgrades in under 3 months.

3)  The bad news continues with MIDF Amanah Investment Bank Bhd Research reporting on the 17 Dec 2018 that the foreign outflow of Malaysian equities of Bursa Malaysia widened further to RM314.3 million from RM80.3 million in just 7 days!

One can only guess that the doom and gloom trending in the Malaysian economy may have been a domino effect from the tabling of the Budget 2018 by Finance Minister Lim Guan Eng which tottered on a deficit, and yet sought a one-off special RM30 million dividend from Petronas’s astute management.

Immediately following that, Moody’s Investors Service on the 8 Nov 2018, downgraded Petronas’ ratings outlook from “stable” to "negative" due to its higher dividend payouts to the government and Moody was quoted as saying " that the negative outlook on Petronas's ratings reflects our view that the financial profile of Petronas may deteriorate if the government continues to ask the company to keep dividend payments high, especially so should oil prices decline.” And indeed, with Citibank’s price forecast which projected Brent Crude Oil to hover around US$55-US$65 per barrel, which is substantially below the assumed 2019 Budget price of US$70 per barrel, this certainly does not bode well and poses a risk to the government’s fiscal plans and finances and further down slide the local economy.

With such a huge depreciation in the crude oil prices, the deterioration and the decay of the Malaysia economy will be inevitable seeming that the Malaysian Government’s dependence on oil related revenues is set at a high 30.2% in the Budget 2019 compared with a very cautious 20.9% in 2018, and a realistic 15% back in 2017. This was not overlooked by Fitch Solutions who has since also hopped on the bandwagon voicing out their concerns over Malaysia’s greater reliance on oil revenues.

Unfortunately, these voices of concerns tempted Lady Fate, and on 19 Dec 2018, Brent Crude Oil prices plummeted to US$56.45 due to concerns of oversupply. Now with the Ringgit’s continued depreciation, how will the Pakatan Harapan government look upon Petronas to “bailout” the Malaysia’s economy? With this nosedive in crude oil prices, how will the PH government make up the shortfall in Petronas’ earnings and keep their Budget 2019 afloat?

Certainly one cannot be all wrong to suggest that this steady foreign equity outflow, and depreciation of the Ringgit started when Putrajaya fell to Pakatan Harapan on the 9 May 2018. At this juncture, it seems that PH’s hopes of improving the economy as branded during their 14th general election campaign seems to have failed miserably. And ironically this time, it is not a U-turn on one of their promises but rather a U-turn in our economy regressing towards, dare I say it, the financial crisis some 20 years ago!

*Pamela Yong is Chairman of Wanita MCA Sabah and an MCA Central Committee Member.

**This is the personal opinion of the writer or publication and does not necessarily represent the view of Malay Mail.

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