KUALA LUMPUR • Malaysian Prime Minister Mahathir Mohamad marked his 100 days in office yesterday with risks mounting against the economy.
Gross domestic product in the second quarter grew at 4.5 per cent, its slowest pace in over a year, the current-account surplus narrowed sharply and the currency is facing pressure as an emerging-market rout worsens.
After a shock election win in May, Tun Dr Mahathir has moved quickly to deliver on promises to fight corruption, review large projects and cut consumption taxes.
In a speech broadcast nationwide yesterday, Dr Mahathir said his government had realised over a third of its 60 election promises "to unshackle Malaysia from the issue of corruption and ensure good governance". These measures included policies on declaring assets, bolstering anti-corruption institutions and protecting media freedom.
The political transition had an impact on the economy last quarter, with public sector investment contracting 9.8 per cent from last year.
Noting in his speech that the national debt was RM1 trillion (S$334 billion), Dr Mahathir listed infrastructure projects that have been put on hold, including the Singapore-Kuala Lumpur High-Speed Rail, the third phase of the Mass Rapid Transit and the China-backed East Coast Rail Link.
Domestic demand remained strong and was buoyed by the scrapping of a 6 per cent goods and services tax in June, another election pledge.
Private consumption climbed 8 per cent last quarter from a year ago, while investment surged 6.1 per cent.
"The bigger picture we see going forward, private consumption will be modest as many Malaysians probably front-loaded their purchases ahead of the sales tax coming in September, so it's hard to see how that's sustained," said Mr Brian Tan, an economist at Nomura Holdings in Singapore.
Central bank governor Nor Shamsiah Mohd Yunus said the economy will probably expand about 5 per cent this year, lower than the previous government's projection of 5.5 per cent to 6 per cent.