While the US economic recovery struggles to build momentum with an end to quantitative easing and with falling commodity prices, the Malaysian economy is undoubtedly affected. With household debts increasing, what steps can we take to put our fiscal position in order?
Quantitative easing (QE) unleashed a flood of cheap money throughout the world in the past few years, and many emerging markets benefitted from this added liquidity. When QE came to an end in the US in October, jitters understandably spread throughout the world – just like what happened during the “taper tantrum” in 2013.
The Malaysian federal government’s fiscal deficit, which is structural in nature, has certainly benefitted from the QE. Approximately 30% of Malaysian Government Securities are owned by foreigners, and ample liquidity has kept the yield low at around four per cent.
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