This is the postulation of Prof Danny Quah of the LSE.
He opines that Malaysia could find itself in the same fiscal mess currently facing several European countries such as Greece if planned economic reforms are not undertaken.
So what gave us away?
Let us look at what is happening in the Eurozone these last few weeks.
"Portugal, Ireland, Greece and Spain, the so-called PIGS, are under international scrutiny and have roiled global markets due to their level of national debt. Greece, whose government bonds were downgraded to junk status this week, has a debt to Gross Domestic Product (GDP) ratio of about 115 per cent which could hit 150 per cent by 2012.
Quah, who is also a member of the National Economic Advisory Council (NEAC), said that while Malaysia’s debt to GDP ratio is below that of the PIGS, it isn’t far off either.[He is sounding warning bells!]
“It won’t be too long before we push into PIGS type territory,” said the Prof at a dinner lecture organised by LSE alumni last night where he spoke in his capacity as an LSE economist.
He said that Malaysia needs to take out its stimulus spending, implement the New Economic Model (NEM) reforms and ensure that growth takes place in order to stabilise the nation’s debt to GDP ratio.
Quah also cautioned that Malaysia is expected to become a net oil importer by 2014 and that the country is one of the most sensitive to oil price volatility.[We will be in trouble now that we have supposedly lost RM320 billion to Brunei. Wonder whether there is any truth in this?]
He added however that “it is not all doom and gloom” as Malaysia’s financial sector is relatively robust and Malaysia’s debt consists largely of medium and long term instruments. [Saving grace,at last!]
He said the NEAC, which drafted the NEM, is studying the possibility of reducing corporate and income tax by one per cent per year for several years in tandem with tightening public finances via measures such as the goods and services tax (GST).
The council is also studying a proposal of a “1 Malaysia Supply Chain” to make business promotion efforts more integrated and streamlined.[We have talked about this close to 30 years or more)
Asked by the audience if he thinks the government has the political will to see through economic reforms, Quah replied that while he acknowledged widespread scepticism, his reading of the situation is that the government is serious as it has continued to stress the importance of change. [PM needs to balance off political pressure for level-headed action!]
“I have been impressed over and over again that the leadership doesn’t want to take the easy way out,” said Quah. “I feel even more optimistic, energised and enthusiastic and that we (the NEAC) are not wasting our time. We’re not paid anything at all. Some of us fly halfway around the world.” [Junkets?]"
After having read this article, I think the Prof may possibly be an unintended alarmist.
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