Uncertain economic outlook on price hike concerns


THE outlook for the local economy remains uncertain, while consumers are bracing for smaller, or no, income growth at the onset of year 2022, Malaysian Institute of Economic Research (MIER) said.

In its economic outlook report released yesterday, MIER said the economy could be underperforming especially in the first quarter of the year (1Q22).

“Even with a somewhat optimistic 3.7% real GDP growth estimated for all of 2021, the growth of the economy would still be below its potential output growth of approximately 5.5% per year,” the research house said.

There is also a potential downgrade for Malaysia’s sovereign debt, which is currently rated at “BBB+” by Fitch Ratings Inc, it added.

Still, notwithstanding these areas of concern, MIER said there are clear indicators of continued economic recovery.

However, it said rising inflation, with its attending impact on consumers’ purchasing power, is a growing worry for consumers, especially when the bank moratorium on their loans expires at the end-December 2021.

In its Consumer Sentiments quarterly report, MIER found that consumers are less positive about their near-term financial outlook.

In 4Q21, up to 21% of the respondents are hoping to see an improvement in their finances soon, down from 24% in 3Q21.

“Another 22% may lose sleep over financial inadequacies which they believe will plague them in the coming months, up 8 percentage points from a quarter ago,” it said.

Neutral responses totalled 37% this time, down from 3Q21’s 48%, with those in the high-income bracket, urban areas and north contributing the most votes.

“There is also growing fears of higher prices of goods this time, with 88% of the respondents envisaging an increase in prices soon, this is the largest proportion of responses received in seven years,” the report stated.

It added that by income, higher price expectations are predominantly observed among those earning high incomes, while the urban folks are as worried as their rural counterparts this time.

The Malaysian Reserve (TMR) reported on Monday that Malaysians should brace for a 15% price hike in basic goods, while a study reveals that basic food sufficient to meet the minimum nutrient requirements is worth 35.3% of the minimum wage.

A study by Picodi.com said a year ago, these products were worth 34.5% of last year’s minimum wage.

“This means that the prices have risen faster than the minimum wage,” it said in the study.

Meanwhile, Prime Minister (PM) Datuk Seri Ismail Sabri had said that he will chair the meeting of the National Action Council on Cost of Living soon to get a clearer picture of the price hike issues from the relevant ministries.

“The government is committed to ensuring that price hikes of consumer goods to be dealt with quickly for the benefit and wellbeing of the Malaysian families,” he said on his official Twitter.

Separately, almost half of Chinese businesses in Malaysia (41.4%) are positive on the economy in the second half of 2022 (2H22) compared to the same period last year with only 33.2%

According to the Malaysia’s Business and Economic Conditions Survey by the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), 35.9% of the respondents are confident of an economic recovery this year despite the emergence of the Omicron variant, and domestic and external headwinds.

Most of the respondents remain optimistic (42.1%) with the economic prospects while only 17.8% were not. However, this number has improved from 24.2% in the corresponding period of 2021.

ACCCIM president Datuk Low Kian Chuan (picture) said the respondents’ positive expectations are supported by the reopening of most economic and social sectors in 4Q21 under the National Recovery Plan.

“With high levels of vaccination, consumer and business sentiments have improved. Nevertheless, the recovery pace remains uneven for some sectors, especially the construction, tourism-related services and aviation sectors,” he said in the statement.

The survey indicated that “increase in prices of raw materials”, “high operating cost and cashflow problem” and “shortage of workers” were among the top five sectors that impacted business performance in 2H21.

Businesses have suffered substantial increases in cost of both local and imported raw materials in 2H21. Input costs are expected to remain elevated in 1H22 and these businesses have planned to increase their prices.

“We have raised the issues of operating costs and supply bottlenecks as well as financial facilities in our recent meeting with the PM.

“ACCCIM is looking forward to smooth as well as fast processing of online applications and approvals of foreign workers for sectors in urgent need of workers,” Low added.