By Saleh Mohammed

Many a motivational speaker will tell you that it’s okay to cry sometimes, that crying can make us stronger and help us mature.

Well, considering the state the Malaysian economy is in, it is perhaps time for some people to start crying.

Less than two months ago, our Prime Minister said the “A-” grade that Fitch Ratings had given Malaysia was a reflection of the country’s strong economic fundamentals. This was despite lower growth and shrinking trade numbers.

It seemed that even suppliers of mooncakes, enjoying robust sales ahead of the mid-autumn festival, were confident of continued recovery in consumer sentiment.

However, economists said the fundamentals were still weak.

This has now been proven correct.

A few days after the PM’s comments, RHB Research Institute estimated Malaysia’s real gross domestic product (GDP) for 2016 to be at 3.9 per cent, lower than the earlier forecast of 4-4.5 per cent.

One week later, the World Economic Forum (WEF) Global Competitiveness Ranking report for 2016-2017 showed Malaysia had dropped to the 25th position. In the previous year, it ranked 18th.

The WEF looks at data on areas as varied as the soundness of banks to the sophistication of businesses in each country. Malaysia declined in eight of 12 areas of competitiveness.

More surprises came about a week ago through HSBC Global Research. In its Asian Economic Quarterly, HSBC said the government could not afford any meaningful fiscal stimulus because it had overspent and it was lagging in chasing its revenue targets. There is a deficit at a hefty 5.6 per cent of GDP for the first half of 2016 and significant expenditure cuts will have to be made in the second half of the year to achieve the 3.1 per cent deficit goal.

There is a likelihood of similar fiscal constraints in 2017.

The current account surplus has shrunk and is way below expectation and the budget deficit is under pressure. Any further drop in oil prices will expose Malaysia to twin deficits, and that is not a good sign in the current global uncertainty.

The Purchasing Manager’s Index showed contracting manufacturing activity and further reduction in employment for this sector. As of July 2016, exports fell for the 22nd consecutive month and industrial production growth was disappointing.

One of the most worrying indicators is bank lending growth, which has decelerated sharply in recent months. And there is limited scope for rate cuts that will invite currency outflows.

Our forex reserves is the thinnest in Asia. As of September 30, it is only 1.2 times the short-term external debt.

Our national debt at the end of end 2008 was RM236 billion. By the second quarter of 2016, it ballooned to RM656 billion and guarantees were at around RM180 billion. This a RM420 billion increase in debt in just over seven years.

The size of the debt is not as much an issue as the question of what the money has been spent on. The interest payments, of course, have a direct impact on the national budget.

Some people are of the view that the negativity surrounding 1MDB, including the case brought to court by the United States Department of Justice, has already been priced into the market and investors have moved beyond that. We have to be cautious since there may be other jurisdictions coming forward on this issue.

Generally, improved fundamentals mean less debt, more growth, little or no inflation, more exports and less imports.

Given the Malaysian scenario described above, can we honestly say that our fundamentals are still strong?

Crying may be good for the soul, but it won’t cause spilt milk to return to the bucket.

Motivational speakers will also tell you that it’s okay to admit it when things are not positive. But such an admission should lead to corrective action. “Biar kita menangis sekarang daripada menangis di kemudian hari.” Let’s cry now, when we can still set things right, than to cry later, when it will be useless.

Saleh Mohammed is an FMT reader.

With a firm belief in freedom of expression and without prejudice, FMT tries its best to share reliable content from third parties. Such articles are strictly the writer’s (or organisation’s) personal opinion. FMT does not necessarily endorse the views or opinions given by any third party content provider.