Economists See Malaysia’s New Economic Blueprint to Strengthen Economy Amid Challenges

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Economists said on Friday that Malaysia’s new economic blueprint “Ekonomi Madani”, which was revealed by Prime Minister Anwar Ibrahim on Thursday, will strengthen the country’s economy amid challenging outlook.

UOB Global Economics & Markets Research said in a note that it sees the blueprint as a good start for the government to strengthen the economy at a sustainable and resilient pace amid increasing external headwinds and domestic challenges post-pandemic.

Despite the commendable progress made through the decades, it said the government acknowledges that the country faces risks of stagnating growth, decline in investments, a loss of international presence, rising inequality and poverty, low wages and labor share of income, deterioration in governance, accelerated accumulation of national debt, among others.

At the same time, it said Malaysia also faces multiple external challenges such as stiff competition from regional peers to attract quality investments and rising downside risks from geopolitical tensions, geoeconomic fragmentation and climate change, among others.

“These challenges require economic restructuring and embracing different ways of doing things,” said the research house.

Malaysian Rating Corporation Berhad (MARC) also said in a note that the blueprint has the potential to drive positive change for Malaysia by embracing a strategic and value-based approach.

It said the blueprint unites economic goals with social and environmental responsibility and developing human capital will further reinforce Malaysian government’s goal to improve the social safety net.

Hong Leong Investment Bank Research said that in the long-term, the success of the measures would depend on close monitoring and strong implementation to drive the agenda.

As the blueprint eyes to expand regional trade diplomacy and strategic agreements to support regional expansion of Malaysian firms, it said this would be instrumental to support Malaysia’s economic growth prospects as trade accounts for 141 percent of Malaysia’s GDP.

As the blueprint also aims to increase Malaysia’s economic complexity, it believes prospective investments would also focus on characteristics that could raise Malaysia’s overall economic complexity, which would in turn create high value-added jobs with high wages.

According to TA Securities, this undertaking entails implementing enhancements and modifications to the existing economic and social frameworks, with the explicit purpose of augmenting efficiency, fostering inclusivity, and propelling sustainable growth.

Given the targeted outcome to be achieved within a decade, it said Malaysia’s targeted fiscal deficit of 3 percent appears to be promising.

CGS CIMB, on the other hand, said in a note that the blueprint will provide a clearer view of the government’s policy direction.

If received well, it opined that it could be a catalyst for better Malaysian ringgit performance.

The research house, however, noted that the seven objectives announced seem highly ambitious in the absence of clear policy guidance.