Malaysia’s exports rose by 32.5% in May, marking seventh consecutive month of double-digit growth and the biggest increase in seven years.
This is both a good news and a bad one. Why?
Well, exceptional export growth shows that the external environment has indeed been improving while the low ringgit boosts the trade expansion.
If exports keep rising, manufacturers will continue to purchase raw materials, expand their production lines and hire more workers or increase production shifts to keep the economy moving.
The bad thing is, the trade figures are so impressive that government and political leaders will tend to absorb only such positive messages at the expense of chronic problems in other economic aspects.
For example, True Fitness and several other chain stores including Tous Les Jours, Tim Ho Wan and Bulgogi Brothers have all wound up their operations in this country, while some other financial, insurance, electronic and tobacco companies have pulled out of the Malaysian market.
The departure of renowned F&B chains shows that the spending power of Malaysians is really on the slide. Following the implementation of GST and the depreciation of ringgit, the local market has been declining, forcing some high-cost businesses to bow out.
The government has extracted some RM40 billion in GST from the pockets of consumers, and this is enough to send a chill down the market. With the authorities now stepping up efforts to pursue defaulted tax payments and raids on illegal foreign workers, the overall business environment is set to come under more serious beating.
In addition, with MACC now going after corrupt government officials and money game bosses, those who used to spend generously will no longer be able to do so today.
The impressive 32.5% export growth has not been established upon the exceptional quality of Malaysian products but rather our depressed currency that makes Malaysian products more competitively priced than our competitors.
Meanwhile, trade surplus has not seen much improvement over the years with the May figure contracting 36.5% month-on-month to RM5.5 billion.
At the same time, other economic figures show that there are still risks with the country’s economy. For instance, June PMI (Purchasing Managers’ Index) fell to a record low of 46.9, down from 48.7 in May and 50.7 in April. These numbers reflect dwindling orders over the months.
The government’s total expenditure was at a five-quarter high of RM66.9 billion during the first quarter of 2017, thanks to payrises for civil servants which rose 8% y-o-y to RM1.9 billion.
Tax revenue also dipped 5.3% to RM46.6 billion. Notably, GST revenue plunged 9.5%, sending the government’s budgetary deficit to a high of RM20.2 billion or 6.2% of GDP, vis-à-vis 6.1% previously.
Nevertheless, the government settled RM21.9 billion of debts during the first quarter. As a result, debts-to-GDP ratio moderated from 52.7% to 50.2%.
The effects of expanding exports have yet to be manifested, but with government expenditure on the rise, it may have to think of ways of boosting revenue while cutting back on development expenditure.
As a matter of fact, the government should mobilize more resources to lift the spending power of the people while relieving the rising operating cost of local businesses so as to avert risks of liquidation, instead of thinking of ways to fatten the national coffers.
FOCUS ON POLITICS COMES AT EXPENSE OF ECONOMY
However, as economic risks are rising, we begin to see more commotion in politics, including the second wave of actions by the US Department of Justice against 1MDB, which will invariably hamper the continued recovery of the Malaysian ringgit.
Next, Umno is making use of Bank Negara’s forex losses to attack Mahathir, who is also under assault for a reversal of his attitude in endorsing Anwar Ibrahim as prime minister.
In the meantime, the RoS decision to force DAP to hold fresh CEC elections will also be a source of trouble for some time.
The appointment of Md Raus Sharif and Zulkefli Ahmad Makinudin as additional judges in the Federal Court is said to be unconstitutional, and the follow-up moves by the Malaysian Bar are poised to divert the government’s attention.
With our politicians devoting all their time to politicking, for sure they won’t have any time left to fix the economy. If this were to go on, people will get increasingly disgusted at politics and much less confident in the national economy.