Long Term Plans To Strengthen Economic Resilience — Marc
9 Oct 2014
KUALA LUMPUR: The government needs to consider long-term plans to strengthen the resilience of the economy to withstand shocks going forward, said Malaysian Rating Corp Bhd (MARC) today.
It said the long-term plans should include measures such as appropriate strategies to unwind the current cash handout programmes, addressing contingent liabilities and elevated government operating expenditure.
“The focus of Budget 2015 is expected to be on the key issues of fiscal consolidation, economic growth and addressing the rising cost of living.
“Further fiscal consolidation efforts will be needed to ease concerns of a possible downgrade in Malaysia’s sovereign rating,” said chief economist Nor Zahidi Alias in the rating agency’s pre-budget note yesterday.
He added that challenges that arose from waning global economic momentum and slowing domestic demand would continue to pose headwinds to the Malaysian economy despite the faster-than-expected recovery of the external sector.
“MARC is of the view that Budget 2015 is likely to include measures to mitigate the effects of the Goods and Services Tax (GST) on the cost of living.
“The initial impact of GST on inflation cannot be underestimated, with a spike in demand expected ahead of its implementation as well as a possible rise in profiteering activities,” said Nor Zahidi.
The rating agency also expected the government to increase direct cash handouts via the 1Malaysia People’s Aid (BR1M) temporarily for one to two years to help the rakyat deal with the expected inflationary effects of the GST.
In addition, a one-off handout was also likely to be given to ensure the low-income population would not be burdened, said Nor Zahidi.
“There is also a possibility that residential properties priced below RM400,000, which are currently on the GST-exempt list, would be classified as zero-rated,” he added.