Malaysia likely to face recession, govt may end up borrowing more, says expert

SHAH ALAM - An economist has warned Malaysia will likely be hit by recession with slower economic growth and fewer job opportunities, and advised companies and individuals to reduce debts as soon as possible.

Nazari Ismail of Universiti Malaya said Malaysia is a trading nation.

"Economy is likely to slow down, imports may become expensive, inflation will go up, fewer job opportunities, and people will have lesser spending power.

"Businesses and individuals may end up bankrupt." he said to Sinar Daily.

Recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in gross domestic product (GDP) in two successive quarters.

Due to that, Nazari said the government might have to borrow more in order to spend more on the public.

"But government debt plus guarantees are now more than RM1 trillion. So this will add more additional burden on the government, forcing it to possible introduce goods and services tax (GST), which will add more problems to the people." he said when asked if the government has enough to dish out to public.

Adding on, Nazari said some companies with lower debt burden are likely to survive.

"Some companies with lower debt burden and operating cost in certain sectors that are recession-proof such as the food and vegetable sectors will survive.

"Those with high debt burdens will find it difficult to survive such as travel, tourism, and luxury goods sectors.

"My advice to companies and individuals is to get rid of your debt burdens now before it is too late. If you are debt-free, then the pain from a recession will be less, even though you cannot completely isolate yourself from the effects." he said.

Meanwhile economist Barjoyai Bardai of Universiti Tun Abdul Razak said Malaysia's market is affected by the financial war.

"Right now we are in financial war initiated by the US after imposing economic and financial sanctions on Russia which would affect Malaysian economy.

But Barjoyai said the Asean region is a power house with a population of over 700 million.

Recently, Singapore Prime Minister Lee Hsien Loong said his country must be ready for more economic challenges as inflation will remain high and central banks are tightening policies, warning that the world may face a recession within the next two years.