Depth report

　　

After three years of strong growth, Malaysia's economic prospects may deteriorate significantly in the next two years. In addition to the sharp drop in international oil prices, the sharp depreciation of the currency and the introduction of Goods and Services Tax (GST) will most likely drag the growth rate of Malaysia's gross national product (GDP) to less than 5% in 2015.

　　 United Overseas Bank predicts that Malaysia’s GDP growth will be 4.8% in 2015 and 2016. Data show that the country's GDP in the third quarter grew by 4.7% year-on-year, which was slower than the 4.9% growth in the second quarter.

　　 On the other hand, the Malaysian currency ringgit continued to weaken. The uncertainty of the domestic political situation and the drop in the price of LNG have further weakened Malaysia's energy investment, resulting in a reduction in government expenditures and a certain degree of restraint on domestic demand.

　　 Due to the shortage of funds from the Ministry of Finance, the Malaysian government will continue to adopt the subsidy rationalization mechanism in 2016-government subsidies will be cut again or even cancelled. It is expected that in 2016, Malaysia's low- and middle-income groups will bear heavier financial pressure.

In recent months, goods and services have become more expensive, and even the fares of buses and taxis have increased significantly. The fares and service fees of electric trains (Komuter), light rail (LRT) and monorails have increased even more. .

According to the Consumer Confidence Index and Consumer Willingness Survey Report for the third quarter of 2015 released by the world’s leading market research organization Nielsen, one-third of Malaysian consumers surveyed are worried about the country’s economic prospects, political stability and job security. The economy is in decline. Although economic issues are still the primary concern of Malaysian consumers, about 34% of respondents are still worried about political instability caused by increasingly tense ethnic relations, and 18% of respondents are worried about job security and rising food prices.

　　 The survey results show that 89% of consumers believe that the national economy is currently in recession, and 78% are not sure whether the national economy can get out of the recession in the next 12 months.

Bank of America Merrill Lynch, one of the world’s largest financial institutions, also stated in the “Asian Economic Weekly” that the Malaysian economy has shown weakness in the second half of 2015. With the slowdown of external demand and domestic economic activities, it is expected that the economic weakness will continue until The first half of 2016. On the other hand, economists in China, the United States, the European Union, and Japan have all lowered their GDP forecasts. These external demand, which accounts for 41% of Malaysia’s exports, show no signs of improvement, which means that the next time global trade activities will stagnate. The level effect will also drag down Malaysia’s economic performance. Merrill Lynch stated that although the Malaysian government has continuously strengthened its fiscal and monetary policy support, the results have been limited. In the face of challenging prospects, it still maintains its 2015 economic growth forecast of 4.6%, but lowers its 2016 economic growth forecast by 0.2 Percentage points, down from the original 4.5% to 4.3%.

　　Considering the good economic fundamentals of Malaysia, the prime minister and his cabinet seem to be optimistic about the economic prospects. They are not worried about the negative effects of reducing subsidies, raising taxes, and currency devaluation. However, many experts believe that if the country continues to face such strong economic pressure, the above situation may become "the last straw to crush the camel."

　　At present, the government has incorporated part of the tax reduction and exemption policy into the 2016 budget. However, the effect will only be reflected in the 2017 income tax report. In other words, these measures still cannot alleviate the current financial pressure in Malaysia.