KUALA LUMPUR: The Malaysian Institute of Economic Research (MIER) has urged the government to arm itself with all available measures to deal with the looming difficult times.
Executive director Dr Zakariah Abdul Rashid said the measures should include an effective implementation of supply-side structural reforms and removing further barriers to trade and investment.
“These measures are necessary to improve total factor productivity, raise the potential output of the economy, enhance economic resilience to withstand adverse commodity terms of trade and foreign interest rate shocks on the Malaysian economy,” he told reporters at a media conference on the MIER 4th Quarter 2014 Economic Outlook.
Zakariah also said that Bank Negara Malaysia needs to examine strong co-movements between crude oil prices, exchange rates, foreign reserves and its monetary policy actions.
This, he added, calls for serious economic modelling and forecasting to examine an excessive undershooting of the ringgit exchange rate and continued decline in foreign reserves.
He said while a gradual interest rate adjustment process is okay in normal times, tough action is needed, when taking into consideration anticipated as well as unanticipated shocks to the economy.
“The macroeconomic policies need to be coordinated to ensure an upward growth trajectory and the goals of Vision 2020 are attained.
“As monetary policy is still active in managing short-term business cycle dynamics, fiscal policy needs to focus more on medium and long-term goals,” Zakariah said.
He said these efforts will undoubtedly help in enhancing long-term investor confidence and strengthen the belief function of the citizenry about good management of the macro economy.
“While there are unavoidably short-term pains, overall benefits will far outweigh the cost in the medium and long-term.
“There are clearly more opportunities than risks, associated with the lower oil prices.
But the only problem is that, we are seen as an oil-dependent economy, and the ringgit exchange rate has taken a severe beating,” he added. — Bernama