KUALA LUMPUR: A think tank today predicted cuts in the budget for 2020 when it is tabled in Parliament next month, following the forecast by Moody’s Investors Service of a slowdown in economic growth for the next two years.
The international rating agency in April reduced its 2019 gross domestic product (GDP) growth forecast for Malaysia from 4.7% to 4.4% and Malaysia’s real GDP growth for 2020 from 4.5% to 4.3%.
“This would mean that we can anticipate a budget cut in different sectors,” Ti Lian Ker, chairman of the Institute for Strategic Analysis and Policy Research (Insap), said in his opening speech at a Budget 2020 roundtable dialogue here.
The programme was organised by Insap and Johor Umno’s think tank and knowledge institute Bait Al Amanah, whose chairman, Umno stalwart and former federal minister Shahrir Abdul Samad, was present as well.
Ti, who is also MCA vice-president, said budget cuts would cause trouble for stakeholders including small and medium businesses, farmers, fishermen and smallholders in plantation industries.
“In fact, we can expect the general quality of life of everyday Malaysians, especially the middle 40 and bottom 40 income groups, to be affected,” he said.
“Quite likely, the unemployment rate among youths – both graduates and non-graduates – will continue to increase.”
Ti said external factors, such as the ongoing trade war between the US and China, would also affect the country’s standing as Beijing and Washington are both crucial trade partners with Malaysia.
“As noted by the chief economist of Bank Islam Malaysia, while trade diversion can be beneficial to Malaysia, the potential increase in trade surplus balance with the US could be a cause for concern.
“This is because the US could make Malaysia its next target.”
He added that although Malaysia is part of the One Belt One Road initiative and would likely increase trade and investments with China, it would need to be cautious to avoid getting caught in the crossfire between the US and China.
“As if the bad news is not enough, in early June the World Bank even estimated that the world economy would only expand by 2.6%.
“The International Monetary Fund has also warned that trade wars could wipe US$455 billion off the world’s GDP in 2020.
“As a member of the international community, Malaysia will not be exempted from these impacts.”
Ti, who is also a senator, questioned the country’s ability to “weather the coming storms” and asked what would be done to protect its economic interests and those of its citizens.
“All these numerical and professional analyses aside, our daily grocery shopping and the little indulgences here and there are sufficient indicators of whether the economy is doing well or not.
“We do not need an economist to tell us that the value of the ringgit is decreasing. And it does not look like it is growing back in strength any time soon… So what can we expect from the government (when Budget 2020 is tabled)?”
Ti also accused the government of not doing its best to manage the economy.
“The simple fact that we are still quibbling about the national poverty line is a case in point that many Malaysians have still yet to achieve a decent quality of life,” he said.
Budget 2020 will be tabled on Oct 11 when the Dewan Rakyat convenes.