Manokaran: Providing sustainable income better than giving out cash

  • Business
  • Saturday, 22 Oct 2016

THE continuation of Bantuan Rakyat 1Malaysia (BR1M), which was supposed to be a short-term measure to spur private consumption, has set a dangerous precedent for Malaysia.

Alliance Bank Malaysia Bhd chief economist Manokaran Mottain told StarBiz that cash transfers through BR1M would make Malaysians “addicted to easy cash”.

“Instead of increasing allocation for BR1M every year, the Government should provide opportunities for low-income and middle-class Malaysians to generate sustainable income,” Manokaran said, adding that it is crucial for the Government to increase Malaysians’ capacity to earn.

He suggested that BR1M could be substituted with discount cards, which would allow purchases of goods and services at lower prices for low-income and middle-class Malaysians. This, he believes, would be able to stop the leakages seen from the implementation of BR1M.

The BR1M hand-out for 2017 for households earning a monthly income of less than RM3,000 would be increased from RM1,000 to RM1,200. For households earning between RM3,000 and RM4,000, BR1M would be increased from RM800 to RM900. As for single individuals who earn below RM2,000, BR1M would be raised to RM450 from RM400.

Responding to the Government’s move to contain the deficit figure, he believes that it is capable of making sure the fiscal deficit for 2017 is contained at 3%. Manokaran sees the latest budget announcement as not surprising as he expected more measures to target private consumption, which has been slowing after the commencement of the goods and services tax (GST).

“There is potential for a further slowdown in private consumption among Malaysians.

“I expect Malaysia’s gross domestic product (GDP) growth to be around 4% to 4.5%,” Manokaran said.

Despite supporting the move of subsidy rationalisation, Manokaran stressed that BR1M hand-outs are not sufficient to offset the effects from the significant subsidy cuts.

Manokaran does not foresee a budget re-calibration for the 2017 budget as the global oil price is not expected to rise sharply in the next one year.

“The oil price is anticipated to hover around US$50 per barrel and no significant increase is expected.

“Budget 2017 has been tailored based on the oil price of approximately US$45 per barrel, and thus, there will be no calibration in future,” he added.

Manokaran: ‘The Government should provide opportunities for low-income and middle-class Malaysians to generate sustainable income.

He expressed concerns on the lower productivity growth registered in 2015 at 3.3%, compared with 3.5% a year earlier.

“This budget has not taken into account the slowing productivity growth.

“We certainly need to increase our productivity level to experience a healthy growth in future,” Manokaran said.

Commenting on the balance of current account, Manokaran expects the possibility of the current account falling in the deficit zone, albeit for only a short term.

In the 2017 Economic Report, it was reported that the current account is forecast to further plunge by 10% on-year to RM14.8bil, although it would remain in surplus. This surplus would be about 0.5% to 1.5% of gross national income (GNI), which is marginally lower than the expected 1% to 1.5% of GNI in 2016.

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Business , Budget 2017


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