By LIM SUE GOAN
Translated by SOONG PHUI JEE
Sin Chew Daily
Prime Minister Datuk Seri Najib Razak pointed out that the country's economy might face risks this year and next year due to global economic instability and therefore, the national capacity of response must be strengthened.
However, we have no idea how to strengthen the capacity of response as we are having limited resources.
The worsening European debt crisis, the unstable US recovery and the slowdown of China's economy have led to the doubt of another global economic recession. World Bank president Robert Zoellick warned that the summer of 2012 offers an eerie echo of the Great Panic 2008.
The northern hemisphere has now entered summer and even if Zoellick's prophecy is not accurate, it is still certain that the euro will continue to cause troubles.
First of all, the Greek Parliament will have a re-election in the middle of this month and if the Greek people decide to leave the eurozone, it would cause the market to lose confidence in the euro and accelerate the flight of capital. The eurozone financial system might also collapse.
Secondly, Spain is facing a financial crisis and it might need the assistance of international join forces. The Spain economy is too huge to be saved and it might need RM1.8 trillion to save it.
Thirdly, social unrest would intensify. Unemployment in the eurozone was 11% in April, with a seasonally adjusted total of 17.4 million people unemployed, up from 17.3 million, and Spain had the highest rate at 24.3%. Euro member states pursue the Germany Austerity Policies that aggravates the suffering of the unemployed and low-income earners. Therefore, public demonstrations might turn into riots at any time.
In addition, the situation of the world's top two economic powers do not look good, too. Unemployment in the US had risen to 8.2% in May, showing that it had affected by the European debt crisis and its pace of recovery was bounded. As for China, the signs of its slowing economic growth are also very obvious and its economic growth of the first quarter was almost the lowest in three years.
In such an economic situation, Malaysia must get prepared early, particularly in strengthening domestic demand and investment to offset the reduction in exports and foreign investment. A sharp drop in exports might lead to a layoff in the manufacturing industry.
However, the country has been facing a fiscal deficit for 15 consecutive years and the deficit has increased to 54% of the gross domestic product (GDP). It is afraid that the government might be unable to inject capital into the market and the Economic Transformation Programme (ETP) might also be affected.
It is a bad news to hear the drop in prices of oil and palm oil. The government has been too dependent on oil revenues and the national revenue drops following the fall of oil prices. The fall of palm oil prices to below RM3,000 also affects the people's spending power.
Moreover, Bank Negara tightens its lending to prevent high household debts from going out of control. Reduction in loans and the shut down of the economic growth engine would lead to the burst of real estate bubble.
All in all, the deterioration of consumer sentiment would affect the commercial industry, causing the private sector to reduce expenditure. The vicious circle would lead to a chain reaction.
Under the shadow of possible global recession, Najib should cut the Gordian knot and schedule the general election in July. However, there is still no sign of election so far, probably due to the worries about the impacts caused by the Bersih 3.0 rally.
If the election is delayed to September or next year, the Europe debt crisis might have detonated. Also, the government would not dare to implement a massive tax reform before the election, and the consequences would be difficult to predict.
The BN is facing the challenge of political and external economic crisis risk, and the general public must get prepared for the unknown future.