By Lee Wei Lian
The Malaysian Insider
Oct 10, 2011
KUALA LUMPUR, Oct 10 — Economists said today that the 2012 Budget risks committing Malaysia to the path of unsustainable spending at a time when the global economic outlook remains uncertain.
Bank of America director of global research Chua Hak Bin noted that both Malaysia’s public and household debt levels were at worrying levels, and said the government appeared to be kicking the debt can further down the road by not addressing it in the Budget.
“Will debt dynamics increase and will Malaysia face a year of reckoning?” he asked at the post-Budget dialogue organised by the Malaysian Economic Association and University of Malaya here.
Chua said there was a chance government revenues would be hit by a recession, which would make it harder to meet the commitment to trim the deficit to 4.7 per cent next year from 5.4 per cent now.
“The deficit is extremely sensitive to the state of the economy,” he pointed out.
The economist also said that despite plans by the Najib administration for the private sector to drive the economy, his analysis showed that the bulk of investment so far has been from the government, government-linked corporations (GLCs) and Petronas.
“The private sector has not kicked in [meaningfully],” he said.
Marie-Aimee Tourres, a senior research fellow at the faculty of economics and administration at the University of Malaya, said that the Budget’s “goodie strategy” was not linked to any productivity commitment.
“A lot of tax collection (projections) is based on optimistic growth, which may not have taken into account the deteriorating global situation,” she said.
Tourres said that the Budget was good in a way that it was a “socialist type budget” where “a lot is given but little is asked”, but added that the sustainability of such an approach was a concern.
“I can only worry about the end cost,” she said. “It is common that what is supposed to be a one-off (handout) becomes permanent and long term.”
She added that the allocation of RM2.1 billion by Amanah Ikhtiar Malaysia according to race appeared to contradict the 1 Malaysia concept.
The 2012 Budget was supposedly formulated to address rising cost of living, with salary hikes for civil servants and cash grants to select groups, including RM500 payments to those earning below RM3,000, as well as billions in blanket subsidies.
The structural issue of distortions and inefficiencies in the economy that result in lack of competition and subsequently high prices was left largely unaddressed.
As a percentage of gross domestic product (GDP), Malaysia’s household debt increased from 66.7 per cent in 2004 to 76 per cent in 2009, which is uncomfortably close to the levels seen in the US prior to the 2008 financial crisis.
It is also the second-highest level of household debt in Asia, after South Korea.
Malaysia’s public debt, meanwhile, stood at about 54 per cent of GDP in 2010.
#1 by waterfrontcoolie on Monday, 10 October 2011 - 11:12 pm
I thought the Koreans are rather good savers! For the time being, the Gomen is relying on the black gold which the PIGS in EU do not have! At this rate, come 2020, we could be in the same position as the PIGS in EU. With such a large civil service whose contribution has been questioned for years, we keep expanding them, especially those in uniforms, to create more inefficiency through road-blocks in busy roads. When we talk of University parade, we have the Minister saying that we are very young, just off the cuff to be contradicted that Hong Kong a number of Us much ‘younger than ores! It just shows that they know even know their ignorance! So on this topic, we can hardly expect the deliverer to know what he is talking about!
#2 by yhsiew on Tuesday, 11 October 2011 - 12:11 am
Idris’ prediction that Malaysia will become bankrupt in year 2019 is not far-fetched judging from the way the government spends money.
It seems that the inept finance minister does not know what he is doing. Perhaps we need a more competent and skillful finance minister to handle the country’s finance.
#3 by Bigjoe on Tuesday, 11 October 2011 - 8:00 am
What we are doing is no different than what the US and EU had been doing. Their development allow them to kick the ball down the road for a long time but we cannot. Our problem will show up much more quickly. All the problems that are seeing before our eyes in US and EU, we will see it soon enough.
#4 by dagen on Tuesday, 11 October 2011 - 8:30 am
First, umno dripped designer’s drug called NEP into the malays; and in the event the drug made the malays lose their minds and limbs and got them badly hooked on to it. Now, umno is hell bent on spiking the sugar level in the bodies of all malaysians. So isnt it clear people. Jibby the jib and the big bad guy called umno are putting great efforts into making the wish of crushing bodies and causing the loss of lives a reality? I say jibby the jib is in fact a decepticon in disguise. And he is out to destroy the beautiful country called malaysia. He and his gang, umno, must be stopped!
#5 by k1980 on Tuesday, 11 October 2011 - 8:33 am
Former PKA general manager OC Phang told the High Court here today she had no clue what bonds were or how they worked.
“I don’t understand bonds. I remember asking my project accountant what is this bonds thing. He also didn’t know,”
Phang might as well add that she does not know the difference between cash and cheques, and that money grows on trees. Also she does not know how to phang-pui so much so that Long Sick has to show her how to do so.
#6 by boh-liao on Tuesday, 11 October 2011 - 9:23 am
NR wants 2 win d hearts of rakyat by giving $$ away, thinking dat his team of civil servants will work efficiently n competently 2 rake in hugh incomes 2 offset d expenses
But if OC Phang represents d kind of bodoh operators we hv (who think dat James Bond, bondage, d seksual n kinky kind, n bonds r same same), then we r certainly down d slippery slope of bankruptcy
#7 by sheriff singh on Tuesday, 11 October 2011 - 9:24 am
Najib knows best. He has all the medicines, snake oil, hocus-pocus and all, to cure everything. Don’t they all trust him?
Do they need to subpoena him to testify on his budget and to show them how it all adds up?
#8 by Godfather on Tuesday, 11 October 2011 - 9:24 am
All it takes is for growth to slow to 4 pct (which is the likely outcome given the slowdown in US and Europe), then our tax revenues and export revenues will drop, and our deficit spending will become 5 – 6 pct of GDP. Then the rating agencies will downgrade Bolehland, as they have downgraded Spain and Italy, and then Najib and friends will have nowhere to hide.
Of course we will inherit this mess, but unless this mess materialises, how can change ever happen in this country ?
#9 by SENGLANG on Tuesday, 11 October 2011 - 9:28 am
MAny commentaries on TVs and Local Newspapers just sign along the praises and say thing that please the Government of the day.
The above article was the most trueful and sincere so far among the commentaries.
2012 budget was the worst. It was just like a parent has just take the quick way to stop his child crying by putting a sweet into his mouth without taking the trouble to look for the course of the reason why the child was crying. That was easy way out but the cry next time will be louder and may be too late to address the issue.
The BN Government has fail to address the increasing the living costs and the lowering of the purchasing power of the people on the streets. Instead of addressing this issue they give an excuse that the costs rising was all over the world and it was not only in Malaysia. So was the excuse.
We all know we will running of the sweet if there is any left anyway one day.
There is no effort to increase the competitiveness of our economy, there is no effort in training the best brain though this is long term but there vision or just simply ignore it.
Capture the next GE and retain the power is the most concern to BN so they opt for sweetener instead.
This will only short term remedy by the shortsightedness of the leaders who crave for power.
The so call fairer allocation of education fund to non national type of schools was another sweeteners though it should the duty regardless who is the government of the day to take care of the basis right to education thus contributing to the nation building. This is just to fool the people that BN government is satu Malaysia though this should the case all this long but not only make it an issue while GE is coming. People will not be fool again and again, it will only made them wiser each time to make a fool of them
The people also would not wish to have a PM to have breakfast each morning and hoping on the passersby to shank hand with him or her just to create the impression that the people are thankful and staff like that.
The people want a PM who has the gut to make real changes and he must have the balls to do it once and for all.
No more put your heads down in deny but owned all your mistakes like many many incidents such as Tung Shih tear gas gate. Do not deny any more your mistake but make correction that is the only way out.
The sweets can not just fall from the sky, they can only come from the people of other group and go to the other group. One day the sweet will be empty.
Those wiser and those who have the sweets have also lossing thier faiths as it can be shown in the capital freight out of the country.
So what the solution. The only solution is give another party a chance to form the government and that will be the only choice.
#10 by sheriff singh on Tuesday, 11 October 2011 - 9:43 am
Too much sugar will give you diabetes and heart problems. Even Liow Tiong Lai knows it. Take less sugar.
#11 by SENGLANG on Tuesday, 11 October 2011 - 9:50 am
We have the money so say the PM. Agree.
But……..the money has long gone just like what has happened in PKFZ…………
Anyone believe in her saying that she did not understand why is bond………..
fair enough not every dick tom and harry not his financial jargon.. but doe this absolve a gm the duty and responsibility………..
that was the billion RM question…………
#12 by Cinapek on Tuesday, 11 October 2011 - 10:47 pm
Right now Najib and Co. don’t give a damn about any sustainability in the economy in his budget. He is only focused on one thing and that is to win GE13.
Najib also know that the Malay vote bank in the civil service and the heartland unfortunately also would not understand the perils that this Najib budget will subject the country to. All they can see is that extra few hundred ringgit coming to them. Furthermore they have been so brainwashed that UMNO will always take care of them that the huge debts the country will incur leading to a Greece-like bankruptcy does not enter their psyche one bit. They are blissfully unaware that Najib has sold their children’s future. They are unable to see that far.