9 hours Ago By Asila Jalil
KUALA LUMPUR: The possibility of a recession in the US will be the driving force for Malaysia to be self-sufficient and improve its domestic economy.Economists said Malaysia needs to prepare for the impacts of recession in the US which will affect all of its trading partners, dragging down the former as well.Universiti Kuala Lumpur Business School economic analyst associate professor Aimi Zulhazmi Abdul Rashid said consumers will shift their focus on the domestic economy to boost the country's gross domestic product (GDP).
"Our monetary system must be looked at first, whereby our interest rates must be reduced to encourage businesses to borrow and make available more liquidity into our financial system."Tax reliefs and incentives must be combined with the monetary policy, to encourage investment and spending in the local economy," he told Business Times.Global stock markets tumbled yesterday as recession fears mounted after President Donald Trump said the US is undergoing a period of transition.
Asian equities saw a decline, in line with the slowdown in the US market.Aimi Zulhazmi said the "transition period" that is taking place in the world's largest economy will affect Malaysia's international trade due to decline in demand."Many of our exports were positioned as part of the global supply chain.
For example, our semiconductors are part of the global electric and electronic industry which we are higher dependable on," he added.He added that Malaysia should also work with alternative trade blocs that are not directly related with the US, such as BRICS. This will reduce the country's reliance on the dollar as its value as a reserve currency will decline.
Nusantara Academy for Strategic Research senior fellow Dr Azmi Hassan Trump would need to implement a policy that will curtail the impending recession. This may include stopping the tariff wars that he implemented."We export a lot to the US and have a trade surplus.
With the recession, consumers will be spending less and they will not spend much in their own country, and this includes the product that we export to the US. Recession in the US will not be good for us," he said.Singapore Institute of International Affairs senior fellow Oh Ei Sun opined that there has yet to be a definitive view for the impacts of the recession onto Malaysia's economy.
"While it is plausible that the US may experience recession in the short run, as market sentiment cannot adapt to Trump's macroeconomics, it is too early to say whether the recession will be a long running one."If manufacturing does return to American shores, the American economy may boom again," he said.He added that with China being Malaysia's largest trading partner, further diversification of Malaysia's international economic interaction is not likely to be helpful.
"What Malaysia needs to improve is its self sufficiency or resilience in especially food and energy," said Oh.© New Straits Times Press (M) Bhd.
