Bloomberg reported Malaysia’s economy swung into deflation in January for the first time since the aftermath of the global financial crisis in 2009 as fuel prices dropped.
Deflation occurs when asset and consumer prices fall over time. While this may seem like a great thing for shoppers, the actual cause of widespread deflation is a long-term drop in demand and most often signals an impending recession. With a recession comes declining wages, job loss, and big hits to most investment portfolios. As a recession worsens, so does deflation. Businesses hawk ever-lower prices in desperate attempts to get consumers to buy their products.
Deflation slows economic growth. As prices fall, people put off purchases. They hope they can get a better deal later.
The news caught many worried Malaysians by surprise. Many had hoped prices to come down by removal of the Goods and Services Tax (GST) by the Pakatan Harapan government. Instead prices have been rising. The government citing the fictitious “one trillion debt” hasn’t gone down well with investors who have been steadily exiting the financial markets.
Finance Minister Lim Guan Eng who has been caught up in Pakatan Harapan’s fake degrees scandal, claimed “January 2019 Consumer Price Index (CPI) decline was not caused by recession or any kind of weak demand.”
However the public haven’t been kind when asked. Many have claimed that they are losing hope in the government who is “too busy either attacking Najib Razak or talking about 1MDB” then actually coming up with strong fiscal policies. After all, it is coming up to a year since the government took over from Barisan Nasional. Many remember just a year ago the economy was running strong but Pakatan Harapan claimed otherwise.
Simply put ordinary Malaysians aren’t simply feeling the claims made by the government that the economy is where it should be. And this worries many.