KUALA LUMPUR – The government is mulling the possibility of introducing a stimulus programme to spur economic growth, Second Finance Minister Datuk Johari Abdul Ghani said.
He said such action, however, is still in the preliminary phase as the government is going through the engagement process with some focus groups.
“We also have to be very mindful that in anything we want to do, there is a need to look at our capacity, (which is) the government’s ability to ensure the revenue needed.
“We can’t simply do something that continues the borrowing game. There is a need to strike a balance,” he told reporters after officiating the 31st National Economic Briefing of the Malaysian Institute of Economic Research (MIER) here today.
Johari, is however, optimistic over the nation’s economy, with the steady and consistent growth in the first quarter of 2016, of a moderate 4.2 per cent.
“It mainly reflected the external shocks to the economy and cautious spending by the private sector,” he said.
He cited the private sector as a key driver of growth, with consumption expanding by 5.3 per cent, supported by continued wage and employment growth.
“Private investment grew at a slower rate of 2.2 per cent, mainly attributable to the cautious business sentiment and lower investments in the upstream mining sector.
“The current resilience is a testament to the earlier reforms and structural adjustments undertaken by the government over the last few decades, enabling the Malaysian economy to weather multiple external and domestic shocks,” Johari said.
He said comprehensive fiscal reforms, particularly implementation of the Goods and Services Tax (GST), removal of fuel subsidies and enhancing efficiency of the public sector delivery, have also contributed positively to the country’s resilience against externally-driven shocks.
Johari said beyond the current challenges, the global and domestic megatrends are expected to create a more challenging and competitive landscape for Malaysia in the longer term.
He said these include the current low productivity structure hindering innovation as well as demographic changes which may pose challenges in terms of socio-economic pressures.
“The later, coupled with the rising cost of living, may pose a risk to our growth sustainability,” he added.
However, Johari said despite the challenging operating environment, the authorities remained vigilant and focused on strengthening future resilience to accelerate Malaysia’s transition into a higher value-added and high income economy.
He said private sector participation would remain a key driver to ensure this aspiration is progressively realised to benefit the country.
“Candid and continued dialogue among policymakers, think-tanks and industry captains, could be among steps to strengthen the building blocks, for effective cooperation and collaboration in the future,” he added.
Meanwhile, MIER Executive Director Prof Emeritus Dr Zakariah Abdul Rashid said there is limited space for the government to implement a stimulus programme due to the tight public spending budget to meet the fiscal deficit target of 3.1 per cent this year.
“If they want to spend, they have to borrow and this will increase the fiscal deficit. The fiscal space is very limited,” Johari said. – BERNAMA