Shanker Chelliah, an associate professor at Universiti Sains Malaysia, said the Malaysian middle class shrank in metropolitan centres across the country and that most of its members would end the year almost 40% poorer than they were in 2015.
He said this would be due to the withdrawal of cooking oil and sugar subsidies, the depreciation of the ringgit, the decrease in foreign inflows and the increase in outflows, among other factors.
Chelliah said the withdrawal of subsidies had triggered a chain reaction. “The prices of food are going up and people are feeling the pinch.”
The upper class was unaffected and so were many sections of the rural poor, he said.
“The rich will end the year happy as the withdrawal of subsides have had no impact on them.”
The rural poor, such as farmers, fishermen and Orang Asli living in their traditional areas, were quite self sufficient and unaffected by rising food costs because they produced their own food, he said.
He said the 1Malaysia People’s Aid (BR1M) handouts did not help to improve the living standards of the urban poor because the cost of living continued to rise. “To urban folk, the handouts have little value. They do not feel any positive impact from it.”
However, he said, BR1M was “a bonus” to the self-sufficient rural folk.
Under Budget 2017, BR1M aid will be increased to RM1,200 from RM1,000. BR1M was introduced as a one-off payment to help low-income households cope with the rising cost of living, but has since become an annual and increasing stipend.
Chelliah said Malaysians used to find it advantageous to shop in southern Thailand, but not anymore because the ringgit’s depreciation had been worse than the Thai baht’s.
He said the ringgit’s fall was caused mainly by the drop in oil prices, which had in turn destabilised Malaysia’s oil-exporting economy and government policies.
He predicted it would take a long time for Malaysia to regain investors’ trust and, hence, for the ringgit to recover.
He also predicted that more Malaysians would lose their jobs.
So far, 73,000 people are reported to have lost their jobs this year after several factories – particularly in Penang and Seremban – closed down to move to other parts of Southeast Asia. Meanwhile, many companies in Kuala Lumpur have stopped hiring.
Chelliah said he expected the urban middle class to continue to feel the economic squeeze if the government did not make some positive policy changes.
“The first quarter of 2017 will be gloomy,” he said. “The mood may pick up after that. But no one knows what will happen after GE14. It is a game of wait and see.”