Analyst: GST, property bubble point to recession by 2016

Radzi Razak
1:52PM Dec 16, 2013

The economy is ailing and the government’s Subsidies Rationalisation Plan and imposition of the Goods and Services Tax will bring about a recession in the next three years.

NONEIn making this prediction, economic analyst Azrul Azwar Ahmad Tajudin (left) believes that it is closely linked to the bursting of the property bubble phenomenon.

He said this will happen when people are unable to purchase properties due to high burden of household debts.

“I do not like to be the messenger of bad news but in my opinion, there is a high probability of an economic recession taking place by 2016.

“And the main factor for this will be the bursting of the property bubble. Therefore, the implementation of the GST must be deferred,” he told a forum in Kuala Lumpur last night.

In 2008, the subprime crisis in the US led to the collapse of numerous financial institutions there.

Azrul , who is also attached with the Selangor Menteri Besar’s Office, said the implementation of the GST will also have a negative impact on the GDP.

He also noted that while the inflation estimates stood at only four percent on paper, the purchasing power of the people is worsening in reality.

This in turn, he added, will lead people to reduce their buying activities and therefore weakening and subsequently collapsing economic transactions.

"Cutting back on subsidies will serve as an excuse for the price of goods and services to be raised. Although Malaysia has a law to protect consumers, it however lacks bite,” he said.

Azrul also warned that household debt compared to income is already at 140 percent, higher than the 123 percent in the US.

Prime Minister Najib Abdul Razak had announced that the GST will be implemented in April 2015.

Source: Malaysiakini

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