Malaysia’s political upheaval is jeopardizing the economy’s outlook at a time of heightened global risks and brewing discontent among locals about rising living costs.
The ruling coalition collapsed on Monday amid a power struggle between 94-year-old Malaysian Prime Minister Mahathir Mohamad and his planned successor. The political uncertainty is stalling economic policy, including a stimulus package that was due to be unveiled by Mahathir tomorrow to counter an outbreak of COVID-19 in China.
Now, that set of incentives would not be announced in time, as it had not been approved by the previous Cabinet, former Malaysian deputy minister of international trade and industry Ong Kian Ming (王建民) said.
“The consequence is that the help that many of the most affected industries would have gotten under the stimulus package now would be indefinitely delayed,” he said yesterday.
Even before the virus began disrupting trade and tourism flows, and the current political crisis broke out, economic discontent had been slowly growing in Malaysia.
Locals routinely complain about the rising cost of living, defying official data that shows inflation at its lowest level in a decade.
Several studies have shown that Malaysians are struggling to make ends meet.
“There are a lot of issues that are bugging a lot of people, especially the cost of living, unemployment, inflation,” said Ahmad Martadha Mohamed, a professor of government at Universiti Utara Malaysia in northern Kedah state. “These are the issues that are currently not being given enough attention by the government.”
Many people “see that whenever they go to the market, the prices of goods are going up, purchasing power is becoming less and younger people that graduated from university couldn’t find proper jobs and are complaining about being unemployed,” he said.
Consumer sentiment was last year in recessionary mode, despite Mahathir raising minimum wages, rolling out blanket fuel subsidies and abolishing a goods and services tax. A weakening in consumer spending could further undermine economic growth — already at a decade low — and erode public support for an incoming government.
The cost of basic needs, unaffordable homes and a lack of job opportunities were Malaysians’ biggest concerns, replacing corruption and power abuse that were top of mind before the 2018 election, a survey conducted from Sept. 5 to Oct. 10 last year by EMIR Research, an independent think tank based in Kuala Lumpur.
In a survey published by Elsevier Inc in November last year, 82.3 percent of respondents said that living costs were rising, with the poorest 40 percent — who typically spend more of their monthly income on food compared with wealthier households — feeling it most acutely.
The actual cost of living can vary by almost 70 percent depending on where a person lives, the World Bank said in a report.
Based on its calculations, a household in rural Sabah has to earn about 4,300 ringgit (US$1,016) each month to reach the same standard of living that 3,000 ringgit would buy in rural Kelantan.
Homes remain unaffordable for many Malaysians, with the World Bank estimating that cumulative salaries and wages increased 59 percent from 2010 to 2018, while house prices surged 87 percent.
A new government would need to respond to these pressures, as well as address more immediate threats from the coronavirus.
Economists have been downgrading this year’s growth forecasts for Malaysia, with Fitch Solutions predicting a 3.7 percent expansion, down from an earlier projection of 4.5 percent.
Bank Negara Malaysia last month cut its benchmark rate and signaled more easing to come.
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