Guan Eng upbeat on economy after January CPI data, more jobs created

Finance Minister Lim Guan Eng said the model and scope of the proposed tax would be implemented based on the Service Tax Act 1975. Bernama file pic

KUALA LUMPUR: Finance Minister Lim Guan Eng expects the country to grow a further 4.9%  this year amid a decline in inflationary pressure while an additional 41,000 quality manufacturing jobs are expected to be created in the next two years.

In a statement released on Sunday, he said the January 2019 Consumer Price Index (CPI) – which fell to the lowest in nearly 10 years -- did not arise from any weakening of demand or economic growth.

“Instead, the price decline was largely caused by supply factors in the form of cheaper input cost, specifically cheaper fuel prices,” he said.

The price decline should improve the purchasing power of Malaysian consumers  and add to  economic  growth, he added.  

 “Despite the 0.7%  drop in the CPI,  the  government  understands  there is  much to be done in  bringing the  living costs  of  ordinary  Malaysians  to a more  manageable level, especially  for  those  belonging  to the  B40 group.  

“The government  is  working to ensure that  the benefits  from  the  reduction in CPI  can be  channeled  downwards  to a wider  segment  of  Malaysians,” he said.

Underpinning the decline in CPI, he said was the abolishment of the Goods  &  Services  Tax  (GST)  and replacing it  by  the Sales  & Services  Tax  (SST) while stabilising fuel  prices  with a ceiling  price mechanism expanded the economic  pie to benefit  both businesses  and the  rakyat. 

He added the fall  in  prices was  due to cheaper  input  prices.  Price of  RON95 petrol  for  instance was  approximately  13%  cheaper  in January  2019 compared to  a year  ago  and this has  positively  affected the prices  of  goods  and services  that  are free from  GST.  

The fuel  price stabilisation policy  in  particular  passes  the savings  from  cheaper  fuel prices  directly  to  consumers  immediately  while the ceiling price  mechanism  protects them  from  high and soaring petrol  prices. 

As for approved FDI, he said they jumped 249% to RM48.8bil for January to September 2018 -- when compared to the previous corresponding period --  would create an additional 41,000 quality manufacturing jobs and  help improve local wages.
 
Lim also said the decline in prices should improve  the purchasing power  of  Malaysian consumers  and add to  economic  growth.  

“The economy  is  going strong and the  Government  projects  the  2019 GDP  to  expand a further  4.9%  after  expanding 4.7%  last  year.  Certainty,  clarity  and consistency  in government  policy  have  engendered growing  confidence in the business  community, capital  markets  and investors,” he said.  

He also pointed out Fitch Ratings  had on Thursday reaffirmed  Malaysia’s  A-  rating with  a stable outlook  based not  only  on the  country’s  healthy  GDP  growth,  but  also due to progress  on fiscal  reforms  to increase transparency  and curb corruption,  fiscal  consolidation to reduce the fiscal deficit, and due to Malaysia registering a positive 2018 current account balance of 2.3% to GDP.