Optimistic BNM goes for optics rather than dose of reality
BNM governor Nor Shamsiah Mohd Yunus says Malaysia will not enter a recession in 2023, but an economist says it is too early for her to make that call.
PETALING JAYA: Last Friday, Bank Negara Malaysia governor Nor Shamsiah Mohd Yunus and her officials were in a positive mood when unveiling the fourth quarter gross domestic product (GDP) and key economic data to the media.
The figures, at the end of an economically challenging year, were better than the consensus of most economists. The economy grew 8.7% in 2022, the highest recorded in 22 years, while the fourth quarter (Q4 2022) GDP registered a 7% growth.
In a year where inflationary pressures were at their highest in decades, BNM said headline inflation stood at 3.3% while core inflation was just 3%.
Nor Shamsiah also stressed that Malaysia will not enter a recession in 2023, adding that income was growing and investment numbers remained strong.
Monash University Malaysia economics professor Niaz Asadullah told FMT Business her optimism is a signal to local and foreign investors that the government will continue its expansionary fiscal policy.
“Such a bullish and bold statement can help boost confidence. She’s steadying the ship by managing expectations in the business community even if it means disregarding official data,” he said.
However, Niaz opined this “communication strategy” comes with a risk. “Over-optimism at a time of uncertainty may increase borrowings that may even lead to a debt trap,” he said.
“BNM would need to exercise caution, monitor developments in the world economy, and avoid over expansion given our already sizable debt-to-GDP ratio.
“International Monetary Fund (IMF) forecasts on the state of the world economy remains conservative, and the fact is that all trade and export-oriented economies remain vulnerable to external shocks, and we are no exception.
“The reality is that it’s a precarious time for emerging economies that have in the past benefited from trade-driven growth. There is genuine fear of ‘slowbalisation’.”
Avoiding euphoria and panic
The Center for Market Education (CME) said the public needs to read BNM’s latest economic data with prudence, and in light of the peculiar years in which Malaysia experienced the “Great Lockdown” (2020-2021).
“If GDP 2019 = 100, at the end of 2021 the size of the Malaysian economy was still below the pre-pandemic level. At the end of 2022 it was equal to 105.91, or 5.91% bigger than it was before the Great Lockdown,” said its CEO, Carmelo Ferlito.
“This means that, over the past three years combined, the Malaysian economy grew at a rate just slightly higher than what was used to be the normal annual growth rate before the pandemic,” he said, adding that the average yearly growth rate between 2020 and 2022 was 1.97%.
“We have to avoid euphoria for the ‘stellar performance’, but also restrain from panic about the contraction which is about to come.”
Ferlito also said it is too early for the BNM governor to say Malaysia will not go into recession in 2023.
He noted that there was a worrying trend of a gradual slowdown of the economy during 2022, with quarterly growth rates gradually decreasing, and culminating with a 2.6% contraction in the last quarter (Q4).
“This means that economic growth is already showing signs of cooling down, and this comes mainly from a slowdown in private consumption, while investments seem to decelerate at a slower pace.”
With the prospect of economic contraction ahead, he said, this is the time to build sustainable economic growth models centred around savings and investments over private consumption and government spending.
Policy options
So, if things go sour for the economy and a recession happens, what are the policy options available?
FMT Business posed this question to deputy governor Jessica Chew. In response, she reaffirmed that BNM is “not expecting a recession in 2023, despite headwinds from uncertainties and challenges affecting the global economy”.
She attributed her optimism to the sustained improvements in incomes, job prospects, and realisation of multi-year investment projects – both private and public – and higher tourism activity from the reopening of China.
“Our economy is growing and domestic demand will sustain our growth,” she added.
Pacific Research Center principal adviser Oh Ei Sun says it is usual for national economic or financial regulators to make such periodic predictions throughout the year, and revise them as time goes by. However, such statements should be taken with “a grain of salt”, he said.
An updated forecast for growth this year will be announced after Budget 2023 is retabled on Feb 24.
PETALING JAYA: Last Friday, Bank Negara Malaysia governor Nor Shamsiah Mohd Yunus and her officials were in a positive mood when unveiling the fourth quarter gross domestic product (GDP) and key economic data to the media.
The figures, at the end of an economically challenging year, were better than the consensus of most economists. The economy grew 8.7% in 2022, the highest recorded in 22 years, while the fourth quarter (Q4 2022) GDP registered a 7% growth.
In a year where inflationary pressures were at their highest in decades, BNM said headline inflation stood at 3.3% while core inflation was just 3%.
Nor Shamsiah also stressed that Malaysia will not enter a recession in 2023, adding that income was growing and investment numbers remained strong.
Monash University Malaysia economics professor Niaz Asadullah told FMT Business her optimism is a signal to local and foreign investors that the government will continue its expansionary fiscal policy.
“Such a bullish and bold statement can help boost confidence. She’s steadying the ship by managing expectations in the business community even if it means disregarding official data,” he said.
However, Niaz opined this “communication strategy” comes with a risk. “Over-optimism at a time of uncertainty may increase borrowings that may even lead to a debt trap,” he said.
“BNM would need to exercise caution, monitor developments in the world economy, and avoid over expansion given our already sizable debt-to-GDP ratio.
“International Monetary Fund (IMF) forecasts on the state of the world economy remains conservative, and the fact is that all trade and export-oriented economies remain vulnerable to external shocks, and we are no exception.
“The reality is that it’s a precarious time for emerging economies that have in the past benefited from trade-driven growth. There is genuine fear of ‘slowbalisation’.”
Avoiding euphoria and panic
The Center for Market Education (CME) said the public needs to read BNM’s latest economic data with prudence, and in light of the peculiar years in which Malaysia experienced the “Great Lockdown” (2020-2021).
“If GDP 2019 = 100, at the end of 2021 the size of the Malaysian economy was still below the pre-pandemic level. At the end of 2022 it was equal to 105.91, or 5.91% bigger than it was before the Great Lockdown,” said its CEO, Carmelo Ferlito.
“This means that, over the past three years combined, the Malaysian economy grew at a rate just slightly higher than what was used to be the normal annual growth rate before the pandemic,” he said, adding that the average yearly growth rate between 2020 and 2022 was 1.97%.
“We have to avoid euphoria for the ‘stellar performance’, but also restrain from panic about the contraction which is about to come.”
Ferlito also said it is too early for the BNM governor to say Malaysia will not go into recession in 2023.
He noted that there was a worrying trend of a gradual slowdown of the economy during 2022, with quarterly growth rates gradually decreasing, and culminating with a 2.6% contraction in the last quarter (Q4).
“This means that economic growth is already showing signs of cooling down, and this comes mainly from a slowdown in private consumption, while investments seem to decelerate at a slower pace.”
With the prospect of economic contraction ahead, he said, this is the time to build sustainable economic growth models centred around savings and investments over private consumption and government spending.
Policy options
So, if things go sour for the economy and a recession happens, what are the policy options available?
FMT Business posed this question to deputy governor Jessica Chew. In response, she reaffirmed that BNM is “not expecting a recession in 2023, despite headwinds from uncertainties and challenges affecting the global economy”.
She attributed her optimism to the sustained improvements in incomes, job prospects, and realisation of multi-year investment projects – both private and public – and higher tourism activity from the reopening of China.
“Our economy is growing and domestic demand will sustain our growth,” she added.
Pacific Research Center principal adviser Oh Ei Sun says it is usual for national economic or financial regulators to make such periodic predictions throughout the year, and revise them as time goes by. However, such statements should be taken with “a grain of salt”, he said.
An updated forecast for growth this year will be announced after Budget 2023 is retabled on Feb 24.
It is sensible to be cautious and prudent in the current environment with all its uncertainties and concerns.
ReplyDeleteIt is important for the Government, as well as Bank Negara to communicate the real current situation - the global economy is slowing, there will be economic pain, but Malaysia is actually well positioned in sectors of the global economy that remain strong. Energy, edible oils, higher value electronics.
However, people who spend too much time on YouTube and Social media, often without any background knowledge of economics and current affairs - are being exposed 24/7 to an avalanche of doom and gloom ,
THE COLLAPSE IS COMING.
THE DOLLAR WILL BE WORTHLESS IN SIX MONTHS.
Mfer, check pinoy's sopo developments under the new president before u fart!
DeleteMany a time what's been shown in YouTube and Social media r a much better reflection of the actual situation - yet must follow with cautions as these mediums have been fully puppeteered by the Western demoNcratic forces.
The other truths from that opposing political spectrum have no chance to counteract these twisted propagandas.
Mist of these mediums r masqueraded western mouthpieces in reinforcing the official demoNcratic announcemens.