Early polls better for economy, says MIER

By Yow Hong Chieh
The Malaysian Insider
Jan 19, 2012

KUALA LUMPUR, Jan 19 — It would be better for the government to hold the general election as soon as possible since lingering uncertainty over the nation’s political future will hurt the economy, the Malaysian Institute of Economic Research (MIER) said today.

MIER executive director Dr Zakariah Abdul Rashid said private investors were currently holding back investments on concerns that government policies will change should the incumbent Barisan Nasional (BN) fail to hold on to power.

He said private investment was the key component to propping up the economy this year as external demand slows, and urged the government to call for early polls to dispel investors’ wait-and-see attitude.

“If you ask me as an economist, I would rather see the problem solved once and for all. The earlier they settle the political problem, the better, so we can focus on the economy.

“Right now everything is still hanging. People are postponing because of the election so if they settle it once and for all and immediately, it would be better,” he told reporters here after presenting MIER’s economic outlook for 2011 and 2012.

Business sentiment has steadily worsened from the second quarter of last year, according to the MIER’s Business Conditions Index (BCI).

The BCI score fell to 96.6 in the fourth quarter of 2011, the first time it has dipped below the 100 threshold since the fourth quarter of 2010.

Sales, new local and foreign orders as well as capacity utilisation were significantly lower in the fourth quarter of 2011, with companies expected to scale back production over the next three months as inventory builds up.

Consumer sentiment similarly fell to a two-year low of 106.3 on the Consumer Sentiments Index as household incomes lose momentum, and finances and job become a growing concern.

MIER expects GDP growth for the full year of 2011 to clock in at 4.9 per cent and only 3.7 per cent next year, pulled down by the euro zone crisis as well as cooling in China’s economy.

The World Bank warned yesterday that developing economies in Asia-Pacific, including Malaysia, will slow for a second straight year in 2012 as Europe’s debt woes and weaker global trade drag down growth prospects.

The US-based lender said in its Global Economic Prospects 2012 report that the health of Europe’s economy, bogged down by a sovereign debt crisis, represented the “strongest risk” for most of the countries in the region at this time.

It also noted that the economies of Malaysia, Indonesia, Thailand and the Philippines slowed sharply to 4.6 per cent in 2011 from 6.9 per cent in 2012, and predicted that growth in these countries would be mixed this year.

However, the World Bank said the expected strengthening in domestic demand in the ASEAN-4 countries would help offset the dampening effects of any decline in global trade.