PETALING JAYA: PKR’s Wong Chen says Malaysia’s second quarter (Q2) gross domestic product (GDP) figures paint a “rosy” picture of the economy which is not reflective of the “massive” cash flow crunch Putrajaya is facing.
Wong said that the “impressive” Q2 GDP figures announced by Prime Minister Najib Razak yesterday were clearly driven by consumer spending which rose by 7.1% and investments which also increased by 7.4%.
“A country’s GDP is calculated on the formula of adding consumption, investments, government investments as well as export and import numbers. It’s clear that consumer spending and investments have driven the Q2 GDP results which Najib announced.
Wong, who is Kelana Jaya MP, said that increased consumer spending can be explained by people adjusting to the 6% GST.
“It is likely that people are finally buying mid-range goods like electronics which they’ve been putting off since the pre-GST days or replacing the ones they bought before that period.
“But clearly, consumer confidence is still lagging in big ticket items, such as the purchase of homes and cars,” he said.
As for investments, Wong said foreigners, particularly investors from China, are picking up equities due to the weaker ringgit.
“It remains to be seen if these investments are hot money tickets or longer term in outlook.”
Wong claimed that Putrajaya was banking on China for a bailout and a prime example of this was the RM55 billion East Coast Rail Link (ECRL).
“The ECRL is touted as an investment, but in reality, it is an overpriced loan which our future generations will have to pay for later.”
On government investments, Wong said the Q2 results speak of a “darker story” which is consistent with what is happening in Parliament.
“The government is facing a massive cash flow crunch, so it has passed laws to raise revenues in the form of new taxes, such as the much-criticised tourism tax,” he said, noting that government expenditure has dropped from 6.8% last year to just 0.2% this year.
Wong said however, that on a positive note, imports were outpacing exports at 10.7% to 9.6%, and that this indicated the resilience of local businesses, particularly SMEs, despite the “political mess” in the country as a result of the 1MDB scandal.
Wong also said that the Q2 GDP figures hinted that the next general election (GE14) would only take place next year.
“It takes about six months to a year for the people to really feel the effects of GDP numbers.
“Strategically speaking, I believe Najib will only call for GE14 around the first quarter or even the second quarter of 2018,” Wong said, agreeing with the views expressed by his party colleague, Rafizi Ramli, earlier this week (see below).
Yesterday, in announcing Malaysia’s Q2 GDP figures, Najib said that the International Monetary Fund (IMF) and the World Bank’s move to raise their projections for Malaysia’s growth was an endorsement that the country was on the right track to achieve high growth.
The IMF raised Malaysia’s gross domestic product (GDP) growth projection for this year to 4.8% from 4.5% previously, while the World Bank revised it to 4.9% from 4.3%.
Malaysia registered a GDP of 5.6% for the first quarter of 2017 and beat expectations for the second quarter with a growth of 5.8%, the prime minister said.
Najib, who is also finance minister, then urged the people not to listen to those who spread “fake news” about Malaysia’s economy.