Thursday, May 28, 2009
Shrinking Economy: What can we do about it?
The national economy is said to have shrunk by 6.2% in the first quarter of 2009. The manufacturing sector went down by 17.6%. export oriented industries by 23.1%. electrical and electronic products by 41.4%, and domestic oriented industries by 15.9%. We, however. still have a healthy trade surplus of RM32.7 billion since export continues to exceed import.
What is immediately reflected by the statistics is that our manufacturing sector is cutting down production due to decreasing demand from oversea and locally. This is as a result of the economic recession or downturn ( some say 'crisis'}, effecting the what is usually known as the affluent countries. The developing economies cannot but suffer as well from their constipation.
So what can we do? Tighten our belts and hope for the best? The PM seems to say that whether the negative growth of -1% to
-4% in the second, third and fourth quarter of 2009 can be arrested or not, depends on the recovery made by the richer countries. Our richer trading partners wil, of course,l do everything to protect their own trade and industries by reducing import.
We must, therefore, look at all possible ways of revving up our internal economic engine. If the public have more money to spend and prices of consumer goods are reduced, domestic trade and business will certainly gain greater momentum, driving our economy into higher gear. Demand for consumer goods will rise and the factories ( at least the domestic oriented ones) will roar into full capacity again. This is indeed a good opportunity for our industries to examine their cost of production, improve the quality of their products to match the goods that are imported . and offer them at lower prices. Government can look at all possible ways to stimulate local business and industries, providing incentives and tax reduction to let the engine of growth within the country go into top gear.
This will certainly reduce the recession virus from 'eating up' our internal economy.
Allow industries providing goods for domestic consumption to cut down production, allow costs to escalate (inflation), and let more people become jobless, and we will have a real economic crisis on hand. Put more money in peoples' pocket, have more and cheaper goods on the shelves, and reduce the cost of services due to excessive mark-ups, and the economy will remain healthy. In simple terms, let people be able to buy more with the money that they have in this country and everyone will be happy. Don't shrink the value of the ringgit through ecessive taxation and allowing the prices of goods and services to go sky high.
Now, let the economists think of how those things can be done.