Address Malaysia’s economic resilience in Q1 2023 through holistic approach, combined govt policies - Economists

SHAH ALAM –The economic performance for Q1 2023 showed remarkable growth at 5.6 per cent, followed by a solid four per cent in June, positioning Malaysia as a standout performer in the region.

Notably, unemployment witnessed a significant drop of 7.8 per cent, settling at a rate of 3.73 per cent, while employment rate increased by 2.3 per cent, creating a total of 16.31 million jobs.

Despite these promising figures, some Malaysians may still face challenges in their daily lives, particularly regarding housing, food, utilities and transportation costs.

Prior to this, experts emphasised the need for a holistic approach, combining government policies, market reforms and individual efforts to address Malaysia's rising cost of living and promote a sustainable economy for the rakyat.

Bank Muamalat chief economist and head of social finance Dr Mohd Afzanizam Abdul Rashid said the increase of cost of living has undoubtedly affected Malaysians at all income levels.

However, he said individuals with higher incomes and substantial savings were better equipped to address this challenge.

“Why are prices rising? There are many reasons for this. For one, is the demand itself. Since the reopening of the economy in Oct 2021, there has been a surge in domestic demand, putting upward pressure on prices.

“The other is the shortages in raw materials especially during the early phase of the reopening of the economy. Also, weaker ringgit would also result in imported inflation,” he told Sinar Daily.

Traditionally, he said the government often turned to price controls and subsidies as tools to mitigate inflation.

“With regards to monetary policy under the purview of Bank Negara Malaysia (BNM), increasing the Overnight Policy Rate (OPR) is typically recommended to manage situations of excessive demand.

“In fact, considering other measures, Malaysians should also prioritise prudent financial management and explore avenues for boosting their income, which could involve engaging in entrepreneurial activities.

“Not to mention, upskilling through training and taking additional qualifications that will improve employability could also be considered by Malaysians,” he added.

Professor and Provost for Research and Innovation at the Malaysia University of Science and Technology Dr Geoffrey Williams agreed with Afzanizam, saying that the prices of goods in Malaysia were now rising.

He said the current increased prices can be attributed to past inflationary trends, causing most goods and services to become more expensive.

“Encouragingly, there is a positive development in the form of a slowdown in inflation, resulting in less rapid price increases.

“Regrettably, it's important to acknowledge that many prices are unlikely to decrease rapidly, if at all. Therefore, it's necessary for all of us to adapt to these higher price levels,” Williams said.

Consequently, he said the rising incomes had taken centre stage in the government's economic policy.

He said the government has exerted considerable efforts and as a result, Malaysia's inflation rates have remained lower than those of many other nations.

“Inflation has shown a substantial decline and is expected to continue its deceleration throughout the remainder of the year. This reflects the effectiveness of the policy.

“I think that more liberalisation of markets is required to promote competition.

“For example the price hike in imported rice can be addressed by opening up the rice market to competition.

“Other than that, raising incomes is the key to the cost of living issue because although prices are higher, if there is an income rise, they become affordable. So this is the priority,” he added.