KUALA LUMPUR – Alternative measures must be considered by the government to curb inflation and ensure economic recovery, said economists during the Malaysia Economic Summit 2022.
Datuk K. Yogeesvaran, the former deputy director general (Macro), Economic Planning Unit, Prime Minister’s Department, stated that the presently precarious scenario has led to higher inflation that is disproportionately affecting individuals with lower incomes.
He said that subsidies are just short-term solutions that would only temporarily resolve the issue and other constructive strategies must be taken in order to combat inflation.
“When we talk about subsidies and targeted groups, we are already working on targeted subsidies, and there are different options on the table,” he continued.
Additionally, he also said that despite the rosy economic data, the majority of Malaysians are struggling to overcome their daily challenges.
“We should not just consider self-sufficiency data alone. We need to review the aspects of affordability and quality too,” he explained.
Furthermore, he also said that there is a glaring dissonance between the country’s macroeconomic and microeconomic data.
On June 10, the United States had reported a hike in their consumer prices by 8.6% in May. Meanwhile, China’s consumer price index (CPI) saw an increase of 2.1% in April.
Singapore’s Monetary Authority had also projected that the republic’s annual headline inflation would be around 5% for 2022.
Inflation in Malaysia, however, as measured by the CPI, is predicted to rise although remain relatively manageable at the level of between 2.5% and 3.5% for the year. This is compared to last year’s 2.5%.
Putra Business School associate professor Dr Ahmed Razman Abdul Latiff, who was also at the summit, also concurs and suggests that the government should consider alternative measures which may include voucher systems or even virtual currencies that would help to address inflation in Malaysia. He suggested these be implemented in addition to price caps and the subsidies.
He said that presently, Malaysia is facing multiple issues simultaneously. This includes labour shortages and food issues.
“Despite taking the usual measures like raising interest rates, subsidies and so on, maybe it is time for us to consider alternatives,” he added.
He even quoted Albert Einstein where he said ‘Insanity is doing the same thing over and over again and expecting different results..’
Ahmed Razman stressed that Malaysia’s CPI basket components must be reevaluated as the CPI does not reflect the true cost of living.
Last year saw Bank Negara Malaysia marking the country’s food price index at over 4%, and he added that the current CPI data may not reflect the real situation.
Meanwhile, former Alliance Bank Malaysia Bhd chief economist Manokaran Mottain, stated that policymakers need to be resolute when implementing policies and programmes.
He suggested reintroducing the ‘Buku Hijau’ policy to help alleviate current food shortages.
The policy was first introduced in December 1974 by the prime minister then, Tun Abdul Razak Hussein. The ‘Buku Hijau’ is an initiative that was introduced to encourage all Malaysians to take up short-term gardening or farming activities.
RAM Ratings Bhd had previously predicted that Bank Negara Malaysia would increase the Overnight Policy Rate (OPR) 2.25% by the end of 2022 as secondary inflation risks are at present time limited.
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