Emir Research asked a searching question - is Malaysia experiencing symptoms of a recession or worse, stagflation?
Globally, there is an inflationary trend:
With two consecutive quarters of declining real GDP growth rate, the US is in a technical recession. On the other hand, is Malaysia facing a stagflation situation because there is stagnant economic growth, with an accelerating inflation, and an eminent high unemployment.
1] Firstly, we are in a stagnated economic growth path since 2000:
By 1990, coupled with the Asian Financial Crisis (AFC1998) , the country has had de-industrialised prematurely, (Rajah Rasiah, 2011). That decline in growth of industrial goods’ productions tally with the fall in the contribution of the manufacturing sector to overall GDP. Thus sector peaked just after the AFC1998 at over 30%, and has since been on a declining trend, reaching around 21% by 2019:
2] Secondly, Malaysia risks a recession by year end because we are importing 35.7% of goods from trading partners (US, EU, China) that are experiencing inflationary trends:
Further, US Federal Reserves’ approval of the first interest rate hike on 16th. March, 2022 has already seen the depreciated ringgit to a lowest: 0.22208 USD (US$1 = RM$4.502 on 06 Sep 2022)
Owing to the fact that Malaysia relies heavily on food imports (in 2020: RM$55.5 billion, majority paid in US dollars), leaving a RM$21.7 billion deficit, there is a continuing pressure on the ringgit.
Indeed, there's an expectation that food inflation shall go as high as 8% by August/September. This means a lower real growth GDP rate as Malaysians reduce food consumption. Indeed, Bank Negara Malaysia Q2 2022 Quarterly Bulletin states that higher inflation trend is expected till year end.
Remembering, too, that the (KRI) Khazanah Research Institute 2008 Report revealed that lower income households spent 90% of their income on household expenses (with food constituting 17.3% of household expenditure) whereas the higher income households spent only 45% of their income on same essential items. The income threshold for the B40 in 2019 was tagged at RM$4,849, below the RM$5K basic.
Not only are cost-of-living increases are outstripping incomes, but the UNICEF 2020 REPORT stated that low income female-headed households are exceptionally vulnerable.
This is concerning because the women workforce participation only makes up of two-fifths; according to KRI, in the 2017 Global Gender Gap report published by the World Economic Forum (WEF), Malaysia ranked 87 out of 144 countries in terms of Economic Participation Opportunity - well below Laos at 22nd, Singapore 27th, Vietnam 33rd. and Brunei 61st.
3] The third component in stagflation is in the labour unemployment situation. In Malaysia, the high incidence of those underemployed or even working under zero-hour conditions (how many of the 4 million in the gig-economy are in these categories?).
[This comes also at a time when about 2.5 billion people – more than 60% of the world’s workforce – are informal workers, leaving them particularly at risk of being underpaid, overworked and abused, the International Trade Union Confederation (ITUC) revealed].
The unemployment rate in Malaysia averaged 3.45 percent from 1998 until 2022, reaching an all time high of 5.30 percent in May of 2020:
The Ministry of Education Malaysia’s (MOE) Graduate Tracer Study 2018 states that one out of five graduates are unemployed; and, acquiring digital skills are only part of the solution. See also Syed Hussein Alatas, “Erring Modernization: The Dilemma of Developing Societies”, paper presented at the Symposium on the Developmental Aims 1996, pp 70-71.
World Bank Group senior economist Achim Schmillen, had pointed out the wider issue of underemployment where workers are forced to work less hours or do work that does not maximise their human capital productive potential has to be addressed, too.
[ read: WORKERS & BRAIN DRAIN ]
Always reminded that Malaysia is part of the Global South entwined to the monopoly-capital of Global North, and entrapped within the financialization capitalism of the dominant financial centres in the rich economies, John Smith, Imperialism in the Twenty-First Century (New York: Monthly Review Press, 2016); see also: STORM, Monopoly Capital: Debt and Stagnation under Financialization Capitalism.
4] Therefore, it is too optimistic for the incidental Premier and an unrealistic finance minister to utter that Malaysia's projected economic growth would likely be between 5.3% to 6.3% growth in 2022 - when data were based on comparison with last year’s depressed economy under a lockdown environment; (see also Cassey Lee, Uncertainties in Malaysia’s Economic Recovery, ISEAS Perspective, 2022/53, 19 May 2022).
The World Bank assessment is that of an imminent capitalism crisis when Stagflation Risk Rises Amid Sharp Slowdown in Growth.
5] Therefore, to save the country, there is a definitive need on the recovery of capital accumulation by an introduction of capital gains tax, raising the tax rate for those in the top individual tax bracket and imposing a tax on retirement savings above a certain threshold. These suite should be among critical priorities on how to enhance revenue as expounded even by the World Bank Report, 2021, for the common wealth, and prosperity, of a nation.
It is only appropriate to evaluate past 65-year of neoliberalism-is-neoimperialism-regime on economic development, and to re-image clarity of charting a progressively-enhanced politico-economic manifesto based on an ideal socialist economy agenda.