KUALA LUMPUR: Economists believe that while the removal of a number of subsidies this year may be hard to take at first, it is necessary for economic reform.
The challenge, they say, is on the government to explain to the people the necessity of such a move.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said people should understand its reasons and long-term benefits.
"The government is set to implement economic reforms such as subsidy rationalisation on fuel-related products."
One example is the electricity tariff which will be adjusted for the Jan 1 to June 30 period.
"So, ordinary people would need to understand the rationale for the economic reform and how it can benefit them in the medium- to long-term," he said.
He explained how the introduction of new policies like targeted RON95 subsidies would affect the people.
"The inflation rate could be higher but this will hinge upon the quantum of adjustment in RON95 prices. But I believe it will be gradual.
"Higher RON95 prices can have a profound impact on inflation given its sizeable share in the consumer price index (CPI). Perhaps, consumers and businesses will be cautious in their spending plans," he said.
Malaysia, he said, could expect a 4.3 per cent gross domestic product (GDP) growth in 2023, up from an estimated 3.8 per cent driven by domestic demand, especially consumer and government spending, and a recovery in external demand.
He noted the importance of business owners staying vigilant in their strategy, being mindful of consumer behaviour, and leveraging government incentives for business advantage.
Economist Professor Emeritus Dr Barjoyai Bardai did not rule out that a segment of the public might have to take on second jobs as an extra income source to navigate the expected economic challenges.
He said 2024 was set to be challenging due to the anticipated increased difficulty in the global economy.
Malaysia, he said, had experienced a consistent decline in exports, and its heavy reliance on imported food might prove costly due to factors such as war, scarce resources, and logistical issues.
Barjoyai also warned of the looming challenge of imported inflation, as Malaysia imported RM80 billion worth of food every year.
"Every family should think of starting a small business from home so that they can supplement their income. Try to start as small as possible, a product or service to the public.
"Do it as a hobby first, and then make it a substantial source of extra income."
Barjoyai said the challenging future for businesses might also impact workers.
"When demand for goods and services abroad are softened, export and production will be cut. This may also affect some workers because their service may not be needed. A rational businessman will try to cut costs as much as they can so that their business can stay viable," he said.