The International Monetary Fund has cut its global growth projection for 2022 to 3.2 per cent before slowing even further to 2.9 per cent in 2023; view IMF: Debate on the Global Economy (50-minute). Meanwhile, UNCTAD is expecting the world economy to worsen, with global growth in 2023 expected to decelerate to 2.2%.
What are the economic indicators on Malaysia’s imminent downturn?
1 The S&P Global Malaysia Manufacturing PMI declined to 49.1 in September 2022 from 50.3 in the prior month. It was the first contraction in the manufacturing sector since March.
The latest reading also was the lowest for a year, as demand showed signs of waning and firms scaled back their production and purchasing activity accordingly.
At the same time, new orders moderated, new export orders slowed amid weakness in international demand conditions. Purchasing activity has moderated for the first time in four months as firms responded to a lack of customer demand.
Employment, on the other hand, rose for the first time in ten months, with the rate of job creation being the fastest since April 2019. It needs to be stated, however, that a sizeable number is in the informal sector of the gig-economy where labour exploitation by Big Tech is extensive (read WORKERS).
Also, reading between the lines from DoSM statements and the dataset, in fact, based on the seasonally adjusted data, the number of employed persons decreased by 0.2 per cent. During the month, the employment-to-population ratio which indicates the ability of an economy to create employment only marginally rose by 0.1 percentage points to 67.0 per cent in July 2022 (June 2022: 66.9%); information as on 9th. Sept 2022.
On prices, input price inflation eased to the softest for a year, while output prices continued to rise at solid pace as firms passed on higher input costs to their customers. Lastly, sentiment weakened to a three-month low, amid concerns over the potential for a more prolonged slowdown in demand. source: Markit Economics
[ The S&P Global Malaysia Manufacturing Purchasing Managers’ Index measures the performance of the manufacturing sector and is derived from a survey of 450 manufacturing companies.
The Index is based on five individual indexes with the following weights: New Orders (30 percent), Output (25 percent), Employment (20 percent), Suppliers’ Delivery Times (15 percent) and Stock of Items Purchased (10 percent), with the Delivery Times index inverted so that it moves in a comparable direction.
A reading above 50 indicates an expansion of the manufacturing sector compared to the previous month; below 50 represents a contraction; while 50 indicates no change. ]
2 This situation comes at a time when the ringgit is under pressure. USD$/MYR$ increased 0.0100 or 0.21% to 4.7000 on Friday October 14 from 4.6900 in the previous trading session.
[ The USD-MYR spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the MYR. While the USDMYR spot exchange rate is quoted and exchanged in the same day, the USDMYR forward rate is quoted today but for delivery and payment on a specific future date. ]
3 During this period, Malaysia’s annual inflation rate increased to a 16-month high of 4.7% in August of 2022 from 4.4% in the prior month, matching market consensus.
Malaysia Inflation Rate %
Food prices rose by 7.2 percent - the steepest increase on record, following a 6.9 percent gain in the prior month, amid robust consumption following further improvement in the COVID-19 situation.
Additional upward pressures also came from cost of housing (4.1% vs 3.8%), transport (5.2% vs 5.6%), alcoholic beverages & tobacco (0.7% vs 0.6%), furnishing & household maintenance (4.3% vs 4.2%), clothing (0.3% vs 0.3%), health (0.9% vs 0.8%), recreation (2.7% vs 2.5%), education (1.2% vs 1.2%), restaurants & hotels (6.4% vs 5.8%), and miscellaneous goods & services (2.4% vs 2.1%).
Core consumer prices, which exclude volatile items of fresh food and administered prices, rose 3.8%, the steepest gain on record, after a 3.4% rise in July.
The granular upward pressures on food prices are:
food at home (6.4% vs 6.4% in July), food away from home (8.4% vs 7.8%), meat (9.9% vs 12.0%), milk, cheese & eggs (9.4% vs 9.3%), vegetables (8.9% vs 7.3%), rice, bread & other cereals (4.2% vs 5.5%), oils & fats (4.0% vs 4.4%), fish & seafood (3.7% vs 4.2%), fruits (4.1% vs 3.9%), and sugar, jam, honey, chocolate & confectionary (3.3% vs 3.0%). source: Department of Statistics, Malaysia
4 Petrol Pricing
According to a CGS-CIMB Research report, it is estimated that for every US$1 (RM$4.18) per barrel average increase in oil prices, the government stands to add some RM$370 million in revenue.
However, given that the country has a fuel subsidy mechanism in place, that same US$1 per barrel increase will set the government back by around RM$780 million in fuel subsidies, based on the price of RON 95 and diesel remaining unchanged at their ceiling price of RM$2.05 per litre and RM$2.15 per litre respectively.
Source: paultan.org
Another research indicates that the country is on track to spend RM28 billion in fuel subsidies this year if the price of crude oil remains above US$100 (RM$419) per barrel. While the government stands to gain a larger sum in oil revenue, the fuel subsidies bill this year could be five times higher than the RM$5.3 billion allocated under last year's Budget 2022, according to KAF Research, The Star reported.
“Based on the above analysis, the government will receive a higher oil revenue amounting to about RM$57 billion this year from RM$44 billion estimated under Budget 2022 at the current oil price of about US$109.20 (RM$458) per barrel, which is 65.5% higher that the Budget 2022 assumption of US$66 (RM$277) per barrel,” KAF Research said.
This however means that the government will also incur a subsidy bill of RM$28 billion, while the larger-than-expected increase in subsidies of RM22.7 billion would far surpass the RM13 billion gain in oil revenue, it said; higher oil prices may therefore pose a net negative impact on the country’s fiscal position “to the extent that every US$10 (RM42) per barrel increase in oil prices raises the fiscal deficit by 0.1% of gross domestic product (GDP),” KAF Research reported.
This is ambly reflected in consumers’ spending on transportation costs increase (5.2% to 5.6%), and more visibility in the MO money supply movement where there is a perceptible drop of notes and coins in circulation at RM$144985M on August compared to RM$14963M in April, 2022 as rakyat2 began to restrict their expenditure-spendings.
M0: circulation of notes and coins
That any hike in fuel prices will have a significant negative impact on the economy, particularly in increasing inflation as well as bringing about a reduction in disposable income and consumption growth. Therefore, any fuel subsidy often goes beyond fiscal factors, but economic, political and social implications and impact on people's wealth and effect on their healthy well-being.
Little known is that Petronas had an unequal exchange in contracts when first prospecting for oil with Big Oil Transnationals in the 1970s. Petronas also oppressed peasantry through the circuitry of capital when selling fertilisers to padi farmers and FELDA palm-oil settlers:
Circuitry of Capital in the expropriation of Surplus Value of Labour endeavour
5 The persistent weakening economic environment is also reflected in the Retail Trade where though there was increased 34.5 percent year-on-year in August 2022, it was slowing from a 37.5 percent jump a month earlier.
It was the weakest growth in retail sales since May, amid rising consumer prices.
Sales growth eased for retail trade in non-specialized stores (37.1% vs 39.1% in July), as did in specialized stores (45.7% vs 47.1%) and other household equipment (27.9% vs 28.5%).
Meanwhile, wholesale trade grew by 16.0 percent in August, easing from a 20.5 percent gain in July. At the same time, sales of motor vehicles grew by 185.3 percent after surging 597.7 percent in July. On a monthly basis, retail trade rose 0.7 percent in August, the same pace as in July. source: Department of Statistics, Malaysia
Retail Trade % sales
6 Referencing from Underdevelopment of Development - consolidation of financial monopoly-capitalism, more than likely, there shall be great Uncertainties in Malaysia’s Economic Recovery, as expressed by Cassey Lee, ISEAS, Singapore, 19/05/2022 when the proposed Budget 2023 was presented on 7th. October 2022 before the Parliament was dissolved the following week on 10th October.
That budget - if ever to be implemented by the next elected government - may have many problematic issues, DoSM, 2022 because it has not only ignored fundamental economic reform criteria, but retain existing problems in an already bloated public service, Hunter, 7/10/2022, (see also csloh, Public Sector Performance, 10/10/2022 on the civil service human resource incapability and performance inadequacy). Further, growth will likely moderate to 4 per cent next year as global headwinds continue to strengthen, Shannon Teoh. One has to ponder whether such budget can ever eradicate leakages and eliminate corruption, Emir Research, too.
7 That “economic reforms require a period longer than a year since a proper ecosystem must be established to support the measures” as uttered by the Finance Ministry, sundaily, 13/10/2022.
The World Bank has assisted the economic development of Malaysia since the first 1958 construction of a hydroelectric power station and dam in Cameron Highland.
Since then, World Bank and IMF consultancy presence in the country had attempted to restructuring the economy (IMF, 2001) or in quest of productivity growth (World Bank, 2016) and steering the national economy (World Bank, 2019), by aiming high to achieve an accelerating growth path (World Bank, 2021), and to surge ahead (World Bank 2021b), but most catastrophically, country is still mired and entrapped within capitalism crisis to crisis in a struggle to catching up, (World Bank, 2022) among ASEAN peers:
Everything that the country had done, but yet achieving low performance under capitalism.
in the SMEs that are responsible for nearly 36% of the country's GDP, 65% of the country's employment, and nearly 18% of Malaysia's exports, but are much neglected to the government-linked companies (GLCs) preference, and ethnocapital-controlled Big Capital.
8 The World Bank, and its twin entity the IMF, have always been able to impose neoliberal structural adjustment programmes across the Global South over the past 60 years. These programmes – focused on privatisation, austerity, and forced market liberalisation – have created lucrative profit opportunities for multinational companies, but have had a devastating effect on the emerging countries in the Global South. During the 1980s and 1990s, they caused incomes to decline and poverty to rise, and in some cases triggered decades of recession and stagnation.
World Bank/IMF risk ratings
World Bank's core mission is to focus on infrastructure development and to minimise spending on health, education and social development, while debt repayment and other economic policies have been made its main priority, (Anup Shah, Structural Adjustment—a Major Cause of Poverty). However, the World Bank and the IMF would not admit their policies are the problem.
If a country and its citizens resist the directives of the Bank, they will likely be cut off from both it and other sources of desperately needed assistance. The World Bank have exerted a tremendous amount of power over the policies of developing countries, such that major decisions about people’s lives are made not by their own governments but by an international financial institution like the IMF in Malaysia, for instance, that is accountable only to its wealthy patrons.
Of deep concern is that Malaysia was reported with US$57,566,000,000 of international debts in 2021, translated as two hundred fifty-three billion two hundred ninety million four hundred thousand Malaysian Rinngit Debt or RM$7,449 per rakyat owing.
In essence, the World Bank and IMF institutionalise modern financial imperialism upon states and nations.
Not surprisingly, the consequences of the World Bank’s programs have often been disastrous for powerless citizens in the developing world. As just one example, the Bank often requires countries to impose user fees for healthcare and education services.
According to Corpwatch, the World Bank awards 40,000 contracts to private firms. The United States Treasury Department calculates that for every $1 the United States contributes to international development banks, U.S. corporations receive more than $2 in bank supported contracts.
The factual reality is that rich countries have drained US$152 trillion from the Global South since 1960.
Indeed, those recommendations by the World Bank and the International Monetary Fund are no more than loan-sharking along2 preying on unfortunate victims to the benefits of vulture capitalism. These institutions were designed under colonialism, and remained neo-colonialism in character.
9 Inadvertently, the Budget 2023, instead of solving existing structural economic problems shall instead prolong the benefits to clientel ethnocapital and the corporate capital ruling class in the country, theedgemarkets.
Therefore, neoliberalism entity like the IMF’s Executive Board may praise country’s performance to elicit continuing consultation services and financial dispensing from westetn imperialism .
It is another budge in opening door to Global North domination and exploitation on national economic development – and indebting nations – than an equal exchanges for mutual shared prosperity among common wealth of nations.
10 Whether an incoming new (even in a coalition) government is able to implement fully the proposed Budget 2023 recommendations is doubtful because nearly three-quarter of the budgetary allocation of RM$372.3 billion is swallowed up by day-to-day administrative operational expenditures with minimal allocation towards economic development of a nation in crisis; read csloh.substack The Budget 2023 or STORM Oct 2022, Underdevelopment of Development.
The present politico-economic situation is mired with instability - and even uncertainty as foreign direct investments are not forthcoming and many of the small and medium enterprises (SMEs) which make up 5% of Malaysia's 920,624 business establishments are closing shops - and, undoubtedly any prevalent attempt with deepening subsidies dependency than restructuring a capital-ethos economy shall compound, and perpetuate, rakyat2 improvishment.
The non-introduction of a wealth tax but instead introducing a tax onto small informal businesses, and extending tax cuts to increment capital accumulation for the ruling class shall only prolong the continuing deprivation of rakyat-rakyat.