Don't just trim spending, govt told on economic measures

Economists have urged the government to consider approaches other than cutting down on expenditure in preparing for any economic challenges in the year ahead. 

Prime Minister Anwar Ibrahim had said that he would focus on restoring investor confidence in order to boost the economy, adding that the country could not survive with a high deficit. 

Speaking to MalaysiaNow, Adilah Zafirah Mohd Suberi said that reducing government expenditure was a difficult decision as much of the spending goes to emoluments and to cover the cost of debts. 

"Not much is left for development," Adilah, a researcher at think tank IRIS Institute, said. 

"Focusing on increasing our income instead can help reduce our deficit."

She said broadening the tax base by implementing wealth and carbon taxes would help as well. 

"The move to reform international tax for multinational companies is good and hopefully will be implemented well." 

Anwar, who holds the finance portfolio in addition to the top office, also said in a recent interview with news agency Bloomberg that his government was in no rush to reinstate the goods and services tax as this would affect the poor. 

He also said that he would prioritise gradual debt reduction. 

Malaysia's debt and liabilities stand at RM1.5 trillion, or 80% of the GDP. 

The statutory debt ceiling was raised to 65% of the GDP in 2021, with then finance minister Tengku Zafrul Aziz saying it would finance the government's budget deficit in the long run. 

Research analyst Adriana Asmaa cautioned against reducing expenditure at the expense of the daily life of the people. 

"If the government cuts spending when the economy is already facing difficulties, we will experience a significant fall in real GDP," she said. 

"But if the government cuts spending when the economy is booming, these spending cuts help to reduce inflation, causing only a small fall in real GDP."

Analysts and forecasters from the World Bank to the International Monetary Fund have largely agreed that Malaysia is unlikely to suffer a recession. Instead, they said the country would likely experience moderate growth. 

Adriana, of Institut Masa Depan Malaysia, agreed that Malaysia would benefit from more sustainable spending. 

However, she said that the government also needs to generate new revenue. 

Adilah meanwhile said that nothing would change as long as the country remained in the same economic framework. 

"Doing things the same way gives the same results," she said. 

"It has always been about increasing investments and slogans for reducing inequality for the benefit of certain groups."