HOW time flies! Soon, we shall be ushering in the new year. It will be a time for new commitments and resolutions.
It is a time for reflection on what has gone on this year and what 2023 has in store.
Socrates, a Greek philosopher, once remarked: "An unexamined life is not worth living." Such wisdom should apply to the affairs of the nation.
Three challenges gripped the country in 2022 — economic revival, cost of living and political uncertainty.
First, after two years of the pandemic and its attendant restrictions, the economy turned the corner in 2022, posting a robust growth rate that doubles that of 2021.
Even the Omicron variant could not hold us back from chalking an estimated 8.0 per cent growth rate — the highest in Asean.
The 84 per cent vaccination rate catapulted us to the 10th most-vaccinated-country. It continues to be a bulwark against the ravages of the disease.
Three big engines fired to turbo-charge the economy: superior performance of exports, pump-priming of the economy through massive subsidies and infrastructure projects, and the release of pent-up demand accumulated over the pandemic years.
However, 2023 may not be that rosy. Malaysia stares at the prospect of half the growth rate of 2022 on account of slower world economic growth.
Being an export-driven economy — exports constitute two-thirds of the gross domestic product — our economic performance depends largely on the resilience of the global economy.
Alas, the global economy is expected to spiral downwards into a recession. Elevated inflation, tightening of financial policies, including aggressive interest-rate increases to dampen prices, and supply disruptions, following increasing protectionism and the unabated war in Ukraine, will sap consumer spending next year.
The world will, therefore, grow at a measly 1.2 per cent.
The eye-watering cost of living from inflation and sticky wages has been the bane of the populace, especially the vulnerable group — the bottom 40 per cent of household income (B40).
Inflation rocketed in advanced countries to as high as 9.0 per cent, largely due to escalating energy prices. Mercifully, at roughly 4.0 per cent, the average inflation in Malaysia is half of those heady rates in the West. Notwithstanding, it is roughly double that of 2021.
Several factors contribute to the cost of living — inflation, wages and currency appreciation.
Tapering global economic headwinds — slower consumption of fossil fuel given the steady shift to renewable energy and the impending recession — should push oil prices below US$100.
Household debt in Malaysia is projected to be a whopping 75 per cent of household income in 2023. This figure will be among the highest in Asia.
Reduced disposal income should muffle private consumption growth. All this should soften inflation to around 3.0 per cent in the coming year.
Due to a bustling economy and the increase in the minimum wage to RM1,500, wage growth kept pace with inflation in 2022. 2023 should see better real wage growth as businesses unleash a war for talent.
Ringgit appreciation, too, should moderate the cost of living as advanced countries ease interest-rate rises following success in cutting down their inflation rate to 3.0 per cent next year.
Ringgit appreciation should stanch funds outflows and lower imported inflation.
Additionally, social welfare and subsidies will continue to alleviate the misery of the B40. Combined, all these factors should stabilise, if not reduce, the cost of living next year.
2022 saw us going to the polls.The election fever has died down. We have a unity government in place. There is certainty and stability in the political sphere.
We can now refocus efforts on nation-building and national unity.
The new year would also require us to double down on efforts to achieve carbon neutrality by 2050. It would require the government to consciously reduce carbon emission with renewables.
Nuclear energy is an attractive option even as advanced countries shelf plans to mothball their nuclear reactors.
The writer is the AIMST University vice-chancellor. He wishes readers a very Happy New Year!