via NST: KUALA LUMPUR: Malaysia is a resilient economy with the ability to bounce back due to strong economic fundamentals backed by a sound financial system, said former Bank Negara Malaysia governor Tan Sri Zeti Akhtar Aziz.
Speaking from her experience as the Central Bank head for 16 years, Zeti said Malaysia has demonstrated its resilience on several occasions when it underwent economic crises in the past by making unpopular but effective decisions.
“We can survive in the current economic environment. Definitely, we have demonstrated it (our ability to rebound) again, and again and again. That is our economy is resilient.
“We will have setbacks, but we have always had the ability to bounce back because we have the elements of resilience in our economy and our financial system.
“So yes, we may be affected by all these developments externally, and even on the domestic front, but we have demonstrated it before and we will demonstrate it again,” Zeti said when asked on whether Malaysia can survive the current volatile and economic uncertainty on the local and global front.
In an interview recently, Zeti, when asked on whether this is the worst economic crisis Malaysia is experiencing, Zeti responded with a definite “No”.
“No, not at all. This is not at all the worst that we have seen. We have seen worse. I have seen it,” she said earnestly.
On whether the current political landscape is affecting the investor sentiment, Zeti, after a pause, said the central bank has no control on political landscape.
“When I was in Central Bank for 35 years, I have always told my staff to take the political developments as a given as we have no control over it.
“What we need to do, always, is to take the external developments as given because it is not within our means to influence it but to build up our resilience.
“In our system, we have to build up our strength and resilience, which means we have to build up strong institutions, buffers and internal capabilities not only in the public sector but also in businesses.
“This is the only way we will survive, by building our resilience,” she added.
Historically, one of the most significant events in the history of the Malaysian economy was the the Asian Financial Crisis, which caused Malaysia’s gross domestic product (GDP) to shrink from US$100.8 billion in 1996 to US$72.2 billion in 1998.
The GDP numbers did not recover to 1996 level until 2003.
However, the domestic economy recovered from the 1997 Asian Financial Crisis sooner than its neighbouring countries.
In addition, 1997 also saw drastic changes in Malaysia.
Malaysia refused economic aid packages from the International Monetary Fund (IMF) and the World Bank unlike the other countries affected by the crisis.
By refusing aid and conditions attached thereof from the IMF, Malaysia was not affected to the same degree in the Asian Financial Crisis as Indonesia, Thailand, and the Philippines.
Regardless, the GDP suffered a sharp 7.5 per cent contraction in 1998 and rebounded to 5.6 per cent in 1999.
Some measures was taken by the government in response to the Asian crisis, such as the ban on short selling which was then swiftly adopted by countries that had previously been critical of Malaysia’s response.
In March 2006, Malaysia removed the ban on short selling.
GDP per capita in Malaysia averaged US$5158.48 from 1960 until 2017, reaching an all time high of US$11521.45 in 2017 and a record low of US$1408.60 in 1960.
The GDP per capita for Malaysia recorded in 2017 was equivalent to 91 percent of the world’s average.
While the pace of development today is not as rapid, it is seen to be more sustainable.