PETALING JAYA: An economist says a debt-driven recovery is unsustainable, stating a recovery strategy that isn’t contingent on persistent borrowing is needed to avoid flat growth post-pandemic.
In a statement, Carmelo Ferlito, CEO of The Center for Market Education (CME), said continuing to rely on debt would “create inflation and force future governments to increase taxation, diminishing the strength of the Malaysian economy”.
He added that while the passing of the national budget was a positive step, attention must now be turned to the country’s broader strategy to revive an economy that has been weakened by the Covid-19 pandemic and the numerous movement restrictions it necessitated.
He said current growth projections for next year are “too optimistic”, and said a “reverse square root trajectory” is possible, whereby growth flattens after an initial boost driven by the reopening of the economy.
“The length and flatness of such a stage will depend not only on the reliability and distribution chain of the (Covid-19) vaccine but also on the economic strategy that is implemented now,” he added.
CME recommended a number of measures, such as facilitating business travel to encourage partnerships, making the country more business-friendly for foreign companies and expatriates, and presenting Malaysia as a regional manufacturing hub.
It also called for tax reforms in the shape of lower income tax and corporate tax, targeted goods and services tax, and a strengthened enforcement system to ensure compliance.
“These points demonstrate that we can build a recovery strategy without further increasing government spending,” it said.