The policy could help reinvigorate the exports sector and raise domestic food production

pic by MUHD AMIN NAHARUL

THE soft fourth quarter (4Q) 2019 GDP growth figure of 3.6% caught many economists by surprise with the consensus estimate forecasting a growth rate of about 4.1%.

The Malaysian economy’s growth momentum lost more inertia in the quarter due to weaker exports as the trade war between China and America hit global growth and the tech cycle. Then there was a drop in commodities production as a result of lower yields and disruptions.

The weak 4Q figure has raised expectations of fresh fiscal and monetary policy support with Prime Minister Tun Dr Mahathir Mohamad quoted to be preparing to announce some fiscal stimulus measures next month.

Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus (picture) indicated on Wednesday there’s room for further monetary policy easing should the need arise.

The central bank cut its Overnight Policy Rate by 25 basis points to 2.75% last month and is expecting economic growth to remain under pressure in the 1Q of 2020 due to the disruptions to trade and investments caused by the Covid-19 outbreak in China.

Amid that, the PM at a Malaysian French Chamber of Commerce and Industry event in Cyberjaya recently said the Malaysia Inc policy will be revived to enhance engagement between the government and the private sector to enable a stable and business-friendly environment and attract foreign investments.

The 4Q weak growth figure and developments abroad suggest the revival of the Malaysia Inc policy is timely. If executed well, it can fundamentally be more important than the short-term stimulus measures.

How much of a role the state will have in the economy is the question many will ask? Investors and companies would welcome a far more conducive environment with the role of the state being the provider of good governance at a time of significant disruption brought about by technology and US-China rivalry.

The policy could help reinvigorate the export sector and raise domestic food production, agriculture and the manufacturing sector in general.

The Covid-19 outbreak in China and the US-China rivalry offer some opportunity to gain from the relocation of global supply chains.

Despite the “Phase 1” trade deal inked by China and the US, the two countries remain on track to intensify competition for resources, markets and technology.

The improved government/private sector relations underlined by the Malaysia Inc policy could be a help as the country struggles to compete against the likes of Vietnam based on cost structures.

If the PM can get the buy-in from all stakeholders, the policy move could help attract more investments and build a more dynamic economy.

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Bhupinder Singh is the corporate desk editor of The Malaysian Reserve.