Civil servant salary increase: A boost for the economy, but potential pitfalls remain

SHAH ALAM - The recent announcement of a salary increase for civil servants has the potential to stimulate domestic demand and bring economic benefits.

However, Economist and O2 Head Researcher Anis Anwar cautioned that there are potential social and fiscal drawbacks.

Speaking to Sinar Daily, Anis highlighted the announcement's potential to boost consumer spending, particularly during the post-pandemic recovery.

"By increasing disposable income for a significant portion of the workforce, the government aims to drive economic growth through a multiplier effect," he said.

This means increased spending by civil servants would support businesses and potentially lead to more jobs, he added.

However, Anis pointed out a potential political pitfall.

"While public sector employees may be pleased, private sector workers could feel left behind, leading to a perception of favouritism and social friction," he said.

He also opined that using salary increases purely for short-term political gain could be seen as irresponsible fiscal policy.

"Critics may question the government's long-term economic plans if the increase isn't sustainable.

"They could frame it as a shortsighted move that prioritises loyalty over the nation's economic health," Anis said.

Prime Minister Datuk Seri Anwar Ibrahim announced a more than 13 per cent increase in civil servants' remuneration, among the highest in Malaysia's history.

The increase will be effective Dec 1 this year.

The last time the civil servants' salaries were revised was 12 years ago.