GDP and inflation to grow in 2014

There's always good news and bad news in the world of money. The Asian Development Bank has predicted that our GDP will grow in 2014, but so will inflation.

The Asian Development Bank (ADB) has predicted a good year for Malaysia and most of Southeast Asia in terms of the economy in 2014. Despite Fitch Ratings hitting negative, the ADB says Malaysia's Gross Domestic Product will grow by 5%  whilst the region will see an average 5.3% increase next year. 

The pace of growth is expected to quicken in 2014 on the back of improved economic performances in the US and Europe and a gradual acceleration in global trade, but partly offset by the dampening impact fiscal consolidation will have on domestic demand,” the bank said in a report released earlier this week."

But before you don your sunnies and head to the tropics to celebrate, you might want to think about a decent lifestyle cut-back first. The ADB also predicts that inflation in the country will increase by 2.2% in 2014. The rise is linked to the recent fuel subsidy cuts and other subsidy reductions which are expected to be revealed in the Budget 2014.
Domestic Trade and Consumer Affairs Minister, Datuk Hasan Malek had this to say about the possible reductions.

“The government’s intention is to strengthen the economy. We do not want to be like the United States, where its economy has been shut down, he was quoted as saying by the newspaper.

“Sometimes certain actions need to be carried out. For me, the country’s interest is paramount."

Whilst the rationalisation is aimed at reducing the government's liability and thus strengthening the country's economic footing, this means a lot more pressure on everyday folk struggling to just get by. In the country, wages are still stagnating, for many, basic costs of living prevent them from making ends meet. This will create a new problem where domestic demand overall for goods and services decrease with rippling effects throughout the economy.

PAS research centre director, Dzulkefly Ahmad argues that goods and services taxes ( GST) is not suitable for Malaysia because its economy is driven by domestic demands.

If GST is implemented, the former Member of Parliament said Malaysians’ spending power would decrease with rising inflation, thus affecting the country’s economy and revenue stream.

It looks like the tropical holiday for most of Klang Valley-ites may be resigned to an RM3 (price increase!) can of Coke at Taman Jaya. Sorry, you may not be able to afford those Petaling Street sunglasses either.


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