Don’t be too confident, economist tells govt


Ramon Navaratnam dampens the optimism Najib tries to project by pointing out that several issues remain to be addressed.

(Free Malaysia Today) – A prominent economist and former senior civil servant has welcomed Prime Minister Najib Abdul Razak’s attempt at instilling confidence in the Malaysian economy, but has cautioned against too much optimism.

Commenting on the address that Najib delivered in Putrajaya yesterday, Ramon Navaratnam said one of the big unknowns was how much lower oil prices and the value of the ringgit would go.

He said the PM’s assessment that “there is no economic crisis in Malaysia” was arguable. “The pertinent question,” he said, would be: “How long will we remain free from crisis?” He said the answer would depend on how far oil prices would decline.

He said oil prices would also determine whether Najib could maintain his assurance that the budget current account would not be in deficit.

“If oil prices keep going down, revenues will decline and there is nothing much that can be done in the short term, except to cut expenditures further. Of course, we could borrow more, but that would be dangerous deficit financing, with all its undesirable effects on confidence, inflation, et cetera.”

However, he welcomed the PM’s assurance that the government would keep reviewing the situation and add more measures to the ones he announced yesterday if new challenges were to emerge.

He also welcomed the decision to cut operating expenditure by RM5 billion, but added: “This could be very difficult to achieve from my experience. It involves cuts in salaries and allowances, a slowdown in staff recruitment and a reduction in supplies to run the government.”

While describing the 4.5%-to-5% growth target as a “good target”, Navaratnam cautioned that it might have to be revised if oil prices were to fall further. “But I hope the PM is right and we will actually attain this high target.”

Commenting on the decision to maintain the development expenditure announced in Budget 2015, he said, “Perhaps some projects can be phased out and some prestige projects postponed.”

He said the decision to promote exports and encourage import substitution was “another good move”, but cautioned that restricting imports during the implementation process could be disruptive “unless it is done very carefully”.