A World Bank reports states that the country’s export oriented economy likely to be affected by global recession.
KUALA
LUMPUR: Slow economic reform is stalling the Najib administration’s aim
to transform Malaysia into a high-income country by 2020, the World
Bank said in its biannual East Asia and Pacific economic update.
Malaysia was told to hasten several key initiatives
including dismantling its hefty subsidy regime and widen its tax base if
Putrajaya is earnest in achieving its goal but noted politics was a
major hurdle.
Prime Minister Najib Tun Razak was forced to delay spending
cuts amid soaring cost of living as his ruling coalition faces its
toughest election yet, but the bank pointed that Putrajaya must go
beyond “quick wins” if it is to flesh out its 2020 ambition.
The bank also warned that Malaysia’s export-oriented
economy will likely be affected by the global recession, predicting a
4.6% growth and 5.1% next year.
Combined this with the snail-paced reform, the country’s required
target of a consistent annual 7.5% growth to reach a high-income nation
status in eight years’ time is in jeopardy.
The report also echoed the views of various opposition leaders who
called on Najib to focus and precipitate key structural reforms needed
to boost the economy.
ETP progress
But while detractors claim the premier’s reform was heading nowhere,
the bank said Najib’s Economic Transformation Programme (ETP) has
“registered notable progress”.
“The challenge now is to go beyond quick wins and accelerate the
implementation of more difficult – but critical – structural reforms
that lie at the core of boosting the economy into high-income levels,”
it said, adding that putting reform in place could easily be
accelerated.
Fear of a potential voter backlash stalled Najib’s plan to implement
the goods and services tax (GST). Analysts say the new tax scheme was
key to broaden Malaysia’s tight revenue stream. The unpopular plan for
subsidy cuts was also delayed.
Political observers say the prime minister will first need a stronger
mandate in the upcoming polls to carry on with the stringent economic
measures.
Yesterday, Second Finance Minister Husni Hanadzlah conceded that it
will be tough to meet the 5% to 6% growth projection from Budget 2012.
He said China’s cooling growth, weak economic recovery from the US
and a prolonged eurozone crisis dragged Malaysia’s export sharply, while
the World Bank said the ongoing risks to the global recovery constitute
risks for Malaysian growth.
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