Donald Trump’s surprise victory in the US presidential election has caused some jitters. The ringgit has weakened significantly against the US dollar, and there are fears that a protectionist attitude will determine Washington’s policies under the real estate mogul.
But our fears may largely be unfounded, according to several economists who spoke at a forum on Budgeting Priorities in a Challenging Environment in Penang recently.
The forum was moderated by Penang Institute chief executive officer Dr Lim Kim-Hwa. On the panel of speakers were Affin-Hwang Capital Research chief economist Alan Tan, northern region lead partner at KPMG Ooi Kok Seng, Federation of Malaysian Manufacturers (FMM) northern region chairman Datuk Ooi Eng Hock and Mohd Hassan Ahmad, who is section head of the Fiscal Policy Office at the Fiscal and Economic Division of the Finance Ministry.
According KPMG’s Ooi, Trump’s tough talk on the economy is more a political spiel than serious policy proposals.
For instance, he says, sitting President Barack Obama made similar proposals, such as raising taxes on overseas profits earned by US conglomerates, but these policies could not be implemented because of the global economic conditions.
“Furthermore, it will be too costly for US companies to take their operations home because it is more expensive to operate there,” he says.
Ooi says the significant decline in the value of the ringgit since Trump’s unexpected win was a reaction to his campaign rhetoric, and he expects this to be temporary.
He believes the ringgit is undervalued. “The real threshold would be about RM3.80 to the dollar,” he says.
He points out that since the goods and services tax (GST) was implemented last year, a total of RM51 bil has been collected, indicating that domestic consumption has remained steady. About 400,000 companies are GST compliant.
In echoing Ooi’s views, Tan says the decline in the value of the ringgit is caused by uncertainties brought on by Trump’s impending presidency. He says the people should wait and see what policies Trump adopts when he moves into the Oval Office on Jan 20 next year.
Our economic fundamentals remain largely intact, so there is no reason to worry, he adds.
On solid ground
Hassan expects India and China to record strong economic growth next year. He says India is likely to see its GDP expanding by 7.6% while China will see a 6.2% growth.
He says our GDP growth has been projected to reach 4.6% - while lower than India and China, is still strong. He says private investment, which is expected to spur domestic demand, is likely to record an 8% growth.
"This is a sign of confidence," he says. expected to continue powering the economy. He expects activity within the construction industry to lead economic growth, together with an increase in productivity in the manufacturing and services sectors.
Another impetus for growth is the move towords the digital economy - chiefly online transactions.
He says monetary incentives, such as the allocation of RM3 bill for government-linked companies to invest in the top 300 listed companies are likely to help in economic growth.
Another incentives is the RM4.3 bil worth of schorships which has been allocated to boost human capital.
"Such factors, when combined, can become the catalyst to boost domestic comsumption and to sustain growth," Hassan adds.
However, some adjustments are necessary, according to Kluang MP Liew Chin Tong." The US will be more inward looking under Trump, so we must adjust to the new reality," he says in a separate interview with Focusweek.
Liew says our economy is too export oriented, with China, Singapore and the United States being out major trading partners. Our exports include commodities, electronics, furniture, pharmaceuticals and high-grade fossil fuels.
"If the Us adopts a more protectionist policy and reduces its imports, Malaysia will be affected. Such a prospect has led to the current uncertainty in the global marketplace," he says.
Liew wants to see a revision of the current economic model. He says the country will benefits from a boost in domestic consumption as well as higher levels of innocation and greater transparency in its economy.
"A new global economic pattern may emerge under Trump," he says. Malaysians need to be able to face the new challenges it will pose.
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