Govt cautioned of possible inflation; T20 and M40 groups will be affected by subsidy cuts

KUALA LUMPUR: The MCA has cautioned the government over possible inflation following its plan to implement targeted subsidies for essential commodities.

Its Economic Affairs Committee in a statement said subsidy cuts will affect both the T20 and M40 groups, leading them to reduce their spending, ultimately impacting business activities and the economy.

“This (subsidy cuts) has the potential to trigger inflation once again, putting pressure on the domestic economy, especially affecting the prices of goods and services for the T20 and M30 groups.

“This sudden increase may stem from supply shortages or reduced demand, directly impacting overall price increases,” the committee’s chairman Datuk Lawrence Low said, in a meeting with MCA Small and Medium Enterprise on Nov 29.

Low said, even though the Economy Minister stressed that economic structural diversity was in place to reduce the impact of inflation, it is a weak justification.

Economic structural diversity refers to having a variety of sectors and industries within an economy, rather than relying heavily on a single sector or industry.

“Although the Economy Minister has emphasised economic structural diversity to reduce the impact of inflation, this is seen as a weak justification.

“This policy will directly affect the cost of living for the people, regardless of economic structural diversity. It is important not to neglect basic economic principles,” he said.

Low again reiterated MCA stands for the government to reintroduce the Service and Goods Tax (GST) to address current economic challenges.

“In this scenario, increasing SST rates may trigger inflation; therefore, the best option is the implementation of a more standard, transparent, and fair tax system like GST,” he said.

Regarding the proposed “reverse investment” by the Agriculture and Food Security ministry to produce foreign livestock feed and address food supply shortages, Low highlighted the need for Malaysia to prioritise domestic improvements, given its abundant idle land.

Meanwhile, the committee deputy chairman Datuk Wong Tat Chee stressed the importance of maintaining a stable political scene to foster economic growth.

Source: New Straits Times


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