SHAH ALAM – The government must provide clear and detailed explanations to the public regarding the current global economic situation, which is facing the risk of stagflation and could potentially affect domestic growth.
Institute of Malaysian and International Studies (MINDA-UKM) director Professor Tan Sri Dr Noor Azlan Ghazali said stagflation refers to a situation where economic growth is slow, while at the same time the prices of goods and services continue to rise.
He said based on the latest report by the International Monetary Fund (IMF), projections indicate that global economic growth is slowing to around 3.1 per cent.
“More concerning, worst-case and severe global impact scenarios show low economic growth occurring simultaneously with rising global inflation.
“This situation is greatly feared by economists as it can restrict or limit the effectiveness of economic policies,” he told Sinar on Friday.
According to Azlan, economic slowdown is usually addressed through expansionary fiscal policies such as government stimulus measures, as well as interest rate cuts by Bank Negara Malaysia (BNM).
However, he explained that stagflation makes such approaches more challenging as persistent inflation limits the room to implement these policies aggressively.
“This means the government must be more cautious in addressing the issue. We hope the impact on inflation in the country can be contained.
“We have not yet seen the full impact. There is a slight increase at the moment, but it is expected to rise further in the near term,” he said.
Azlan added that Malaysia’s key export destinations should also not be severely affected by the global slowdown, in order to support national economic growth.
“In the context of an economic slowdown, we must ensure domestic economic activity continues, especially domestic spending.
“I believe the Finance Ministry and BNM have already conducted scenario planning on this issue, but clearer communication must be delivered to the public so that everyone understands the situation and can take appropriate action,” he said.