KUALA LUMPUR: Malaysia must take necessary measures to enhance its economic resilience in the face of global uncertainties, says Prof Dr Yeah Kim Leng.
Prof Yeah, a member of the policy advisory committee to the Prime Minister, highlighted the need for the country to adopt strategic measures to safeguard against volatile financial markets and external shocks.
"From a macroeconomic perspective, Malaysia needs both 'sword and shield' strategies.
"Building resilience means we cannot be overly reliant on external financial flows.
"We must strengthen our savings and surplus to protect against the volatility of global financial markets," he said during the "Economic Politics Forum 2024: Reality of Political and Economic Challenges in the 21st Century" held at the International Youth Centre here on Wednesday (Sept 18).
He also emphasised the importance of reserve buffers for an open economy like Malaysia, stating that irrational global capital flows and sudden stops can pose significant risks.
He further cautioned against excessive borrowing at all levels – government, corporate, and personal.
"Borrowing is beneficial up to a certain level of gearing but beyond that, it increases financial vulnerability.
"Leverage is important but we must avoid over-indebtedness, which leaves us prone to financial crises," he said.
Despite Malaysia's commendable economic progress as an upper-middle-income nation with modern infrastructure and a well-educated workforce, Yeah stressed the need for a shift in focus.
"We need to move away from an overemphasis on growth and redirect our efforts towards inclusive growth, with increased attention on income distribution for the low-income group," he said.
This approach, he added, is vital for social stability, reducing income shocks and ensuring that government resources are allocated effectively to build social safety nets for the country.
"It's particularly important as we prepare for an ageing population, ensuring we don't face an old-age crisis in the future," he said.
Addressing Malaysia's high debt levels and fiscal deficit, Yeah commended the government's efforts to ensure sustainable fiscal policies.
However, he urged further action to create fiscal buffers, so the nation can withstand another major economic shock without resorting to excessive borrowing or unsustainable investments.
"We need to maintain economic efficiency through sound resource allocation, which will help increase public confidence and trust in the government," he said.
