PETALING JAYA: Economists believe the World Bank’s recent revision of its projection for Malaysia’s GDP growth to 3.3% for the year is still too optimistic given the risk of stalled spending by the public.
This is the bank’s second downward revision of the year, having predicted 6% in March and 4.5% in June. Its current forecast aligns with Bank Negara Malaysia’s current expectation of 3% to 4% growth.
Economics professor Geoffrey Williams of the Malaysia University of Science and Technology said his expectations early in the year of muted growth had “unfortunately come to bear” and that he expected negative growth in the third and fourth quarters of the year.
“For the year as a whole, we’d expect an annualised growth of between 1% and 2%, probably around 1.8%,” he told FMT.
Paolo Casadio of HELP University agreed, saying it was unlikely that private consumption would be enough to drive growth past 2% for the year.
He said there would be some improvement with the reopening of the economy, but it would be weak.
“Consumption is not a magic bullet,” he said.
There has been some speculation that the public’s pent-up demand after months of restrictions could see consumption bounce back strongly, but Casadio said the 9% drop in average salaries for the year and high unemployment meant many would not have the disposable income.
“In addition, household savings are exhausted and Employees Provident Fund savings have been wiped out for 6.3 million Account 1 holders and 9 million Account 2 owners.”
He said these were compounded by rising household debt and the end of the loan moratorium.
Barjoyai Bardai of Universiti Tun Abdul Razak said he expected growth to be around the 3% mark, but he too did not foresee a significant uptick in consumption.
“However, this could all change when interstate borders reopen, provided people take advantage of it and go on holidays,” he said.
“This would be even more pronounced when international borders reopen, again assuming we get a lot of international arrivals whose spending can stimulate the economy.” — Free Malaysia Today