DESPITE its flaws, the Malaysian economy managed to rise from the onslaught of the pandemic-induced crisis.
Our fundamentals recovered quickly and are now on a stronger footing. Gross domestic product (GDP) data for this year will surpass the official forecast, unemployment — already at its lowest rate since the pandemic — and inflation are at manageable levels.
Of late, there have been positive analyses and assessments on the state of the global economy.
The United States Federal Reserve might pivot its monetary tightening in the near future, the Chinese government appears to be softening its strict zero-covid-policy stance, the global supply chain is showing signs of improvement, stabilising inflationary pressures that triggered a global cost of living crisis, and commodity prices have shown signs of stabilising.
Some analysts argue that even if a global economic recession were to occur next year, it would be a brief one. Even the World Bank and the International Monetary Fund expect the global economy to slow down next year as opposed to full-blown recession like in 2020.
As a result, it seems that the outlook of the global economy for 2023 would not be as bad as what was forecast initially.
There are positive impacts felt on the Malaysian economy due to these developments. The ringgit has strengthened against the greenback, the FBM KLCI has improved and inflation seems to have peaked.
Nonetheless, things are still very uncertain globally. Russia's invasion of Ukraine is ongoing, tensions between the US and China are far from over, and the climate agenda seems to have taken a back seat, among other unsettling issues.
At best, a cautiously optimistic attitude should apply. Back home, the just concluded 15th General Election gave rise to a unity government in Malaysia.
As far as setting economic priorities is concerned, the unity government seems to have made the right moves so far.
It has focused on issues that matter, like cost of living, middle-income trap, investment and trade, and food security concerns, like the price of eggs and chicken.
But, how the unity government finds ways to address and solve these issues remains to be seen.
There are also other structural issues which need to be reformed urgently and holistically, such as the labour market structure, industrialisation model and the education system.
Take the high cost of living issue, for instance. It is not merely a matter of reducing prices. It is about improving productivity, enhancing government revenue, reforming the social safety net, and, more importantly, introducing a Universal Basic Income.
To address the high cost of living, the people's purchasing power, efficiency and production capacity in the economy, and many more, must be improved.
If the unity government can come up with a new economic strategy that can tackle all of these concerns, I believe the outlook for the Malaysian economy in 2023 will be bright.
A similar approach must be taken in tackling the middle-income trap. According to Michael P. Todaro and Stephen C. Smith in their book Economic Development, the middle-income trap occurs when an economy begins to reach middle-income status but is chronically unable to progress to high-income status.
Often, this is related to low capacity for innovation or absorption of advanced technology, and may be compounded by high levels of inequality in the economy.
Thus, game-changer policies are needed for our economy to get out from the middle-income trap and become a high-income one. It has been 30 years since our economy transitioned to middle-income status, back in 1992.
Becoming a high-income nation must mean high-income for Malaysians, where prosperity can be shared equally and no one is left behind.
Essentially, better prospects for the Malaysian economy in 2023 are there.
But, they are contingent upon global developments as well as possible new economic strategies, economic planning, and perhaps a new national vision launched by the unity government which are tailored to address our economic priorities.
The writer is an associate professor at the School of Economics, Finance and Banking, Universiti Utara Malaysia
