Latest news with #CarmeloFerlito
The Sun
3 days ago
- Business
- The Sun
RM100 aid short-term spending booster but not market mover: Economists
PETALING JAYA: Prime Minister Datuk Seri Anwar Ibrahim's announcement of a one‑off RM100 cash handout has lifted sentiment in consumer‑related stocks, but economists caution that the impact on actual spending and equity performance may be fleeting, with deeper structural challenges still weighing on the economy. The initiative, worth RM2 billion, is designed to provide relief to households and channel spending into local goods and services. However, views among analysts and economists are mixed – some highlight modest gains for low‑income groups and small businesses, while others warn the measure may do little to shift broader market fundamentals. Center for Market Education chief executive Dr Carmelo Ferlito was blunt in his assessment, describing the handout as neither transformative for household consumption patterns nor meaningful for equity markets. 'While the measure is costly at the aggregate level, it is not a needle‑mover at the micro level,' he told SunBiz. 'I struggle to see how RM100 can affect consumption patterns in any sensible way. Economically, it hardly has any logic behind it and appears to have more of a political flavour.' Ferlito also raised concerns over the potential inflationary effects of injecting cash into the economy, particularly if such policies become frequent. 'Monetary injections are the real cause of inflation, a permanent and generalised increase in prices due to the quantity of money growing faster than economic output,' he said, adding that such measures risk masking structural issues in household income and consumer demand. From a sectoral perspective, Dr Ida Yasin, economist at Universiti Putra Malaysia, said the RM100 payment is more likely to generate a temporary boost for retailers and wholesalers rather than driving sustained gains in the stock market. 'This voucher is to boost demand for goods and services in Malaysia, not so much the demand for stocks,' she said. 'Retail and wholesale demand could rise temporarily, especially in essentials like food and household goods, but most stock market movements depend on business fundamentals.' Ida stressed that the handout's impact would likely fade after its expiry in December, underscoring the short‑term nature of the initiative. 'It benefits sellers, wholesalers and producers, from vegetables to chicken, but the up‑and‑down movements in the stock market are quite normal and not directly tied to such measures,' she said. In contrast, Prof Geoffrey Williams, economist and founder of Williams Business Consultancy, sees value in the handout for low‑income households, noting its multiplier effect on domestic consumption. 'RM100 does not sound like much, but it is a 6% boost for someone on minimum wage of RM1,700. For a family of four adults in the B40 group, that's about a 6–7% rise in monthly income,' he explained. Williams estimated the RM2 billion programme could generate RM6 billion in consumption through multiplier effects, providing a small but notable stimulus to economic growth in the second half of the year. 'This will particularly help SMEs in local communities. It won't harm the fiscal deficit because it's funded by subsidy rationalisation savings,' he said. Williams also suggested the initiative could act as a pilot for a more ambitious social welfare reform. 'If this evolved into a monthly universal basic income, it could be a game‑changer for social policy. Universality reduces costs and complexity, and future versions could be made more progressive,' he added. Despite the initial rally in consumer‑linked counters on Bursa Malaysia, analysts caution that sentiment‑driven gains may not be sustainable without underlying earnings growth. Ferlito pointed to external headwinds, including global political tensions and slower economic momentum, as key drivers of investor caution. 'What emerges here is the concern about the economy slowing down due to international tensions, both political and economic,' he said, warning against overestimating the handout's role in market performance. Ida echoed this, noting that investors should watch core consumption data, such as household spending trends within GDP, to gauge any lasting effects. 'Most of the time, it depends on fundamentals rather than short‑term cash injections,' she said. With the cash handout set to conclude by year‑end, attention now turns to whether Malaysia will adopt similar measures in Budget 2026. Williams believes the government should study the current initiative's outcomes to guide future policy design. 'The most important thing is to learn lessons about the impact so that Malaysia can move to a regular monthly payment. Hopefully this can be announced in Budget 2026,' he said. For now, economists agree that while the RM100 handout provides short‑term relief and a modest consumption boost, it does little to address structural income gaps or long‑term growth prospects for consumer stocks. As markets digest the announcement, the focus will likely shift back to corporate earnings, inflation trends and global economic conditions heading into 2026.
The Sun
20-07-2025
- Business
- The Sun
Market forces, not mandates, will decide JS-SEZ's future: CME CEO
PETALING JAYA: The long-term success of the Johor–Singapore Special Economic Zone (JS-SEZ) will depend on how well it aligns with real market demand and supports entrepreneurial innovation, according to Centre for Market Education CEO Dr Carmelo Ferlito. While tax incentives and strategic planning play a role, he cautioned that lasting economic development can only be driven by deeper, structural forces. 'Incentives go in the right direction,' Ferlito said, referring to the JS-SEZ's 5% corporate tax rate and 15% personal income tax rate for knowledge workers. 'But ultimately, the economic structure needs to be strong on its own, not just a will-o'-the-wisp.' Jointly developed by Malaysia and Singapore, the SEZ aims to attract high-value investments and create between 20,000 and 100,000 skilled jobs over the next decade. But Ferlito argued that real job creation must come from entrepreneurial experimentation, not government forecasts. 'It's not about the talent base, which Malaysia already has in abundance. It's about what the market needs,' he said. 'Sustainable employment arises as a response to market signals, not planning. What the market demands can't be predicted – it's discovered through bottom-up entrepreneurial activity.' On the fiscal front, while the SEZ offers aggressive tax breaks to attract investment, Ferlito warned against creating an isolated enclave that strays from national tax coherence. 'A tax system needs to be simple and fair to be effective,' he said. 'A special economic zone cannot function in isolation. For long-term sustainability, the broader tax environment must remain consistent nationwide.' He was also critical of government attempts to steer investment into specific sectors, saying such industrial planning risks distorting the economy. 'Yes,' he replied when asked if there's a risk of inefficiency. 'Investments should be driven by market signals, not government wish lists.' Ferlito further warned against artificially inflating wages through subsidies or interventions, noting that true income growth must come from productivity and competition. 'Avoid intervention,' he advised. 'Let productivity lead.' Reflecting on previous initiatives such as Iskandar Malaysia and the Sijori Growth Triangle, Ferlito said the JS-SEZ appears more coherent and better structured, but stressed that success still depends on the broader business environment. 'It does look better designed and more organically structured,' he said. 'But as I've mentioned, an SEZ cannot succeed in isolation. It needs to be supported by ease of doing business across the country.' On the potential role of Singaporean firms in the SEZ –particularly in areas such as research and development, technology transfer and workforce development – Ferlito reiterated his core principle: let the market lead. 'Let the market decide that,' he said. 'Economic order is an emergent order.' As Malaysia seeks to integrate its economy across borders to future-proof its economy, Ferlito's message is clear: it is the market – not mandates – that must determine the path forward.
New Straits Times
30-06-2025
- Business
- New Straits Times
CME: Interest rates should reflect market forces, not Central Bank targets
KUALA LUMPUR: Interest rates should not be seen as instruments that central banks can adjust at will, but rather as a signal of society's collective time preferences and how people value present consumption versus future needs, according to a policy paper by the Center for Market Education (CME). In the paper titled "Beyond Price Stability: The Role of Monetary Policy for Sustainable Growth and Social Welfare," CME chief executive Dr Carmelo Ferlito argues that the loan market does not determine interest rates in isolation. Instead, lending rates tend to align with what he calls the "originary interest rate" — a fundamental rate that reflects society's trade-off between current and future goods. Ferlito pointed out that in many economies, interest rates are heavily influenced by government intervention, much like price controls, warning that manipulating them can lead to economic distortions. He emphasised that efforts to fine-tune interest rates ignore the fact that economies are complex, adaptive systems that cannot be precisely directed through top-down controls. To clarify the dynamics of interest, Ferlito proposed distinguishing between three types of rates: the originary rate (OR), which reflects the collective time preferences of society; the market rate (MR), which arises from the interaction of loanable funds' supply and demand; and the central bank rate (CBR), which is administratively set for policy objectives. "The central narrative of complexity science involves viewing the social system as a complex evolving system, beyond the control of government or anyone. It is more a living entity than a mechanical entity," he said. He said economic policy should facilitate the natural development of the economy based on its own internal dynamics, rather than trying to steer or correct it using pre-set instruments. "There are no automatic mechanisms in the economic system and therefore we cannot expect policy A to deliver exactly result B within a temporal framework X," he adds. The paper described sustainable growth as economic expansion that occurs with little to no fluctuations while recognising that some degree of business cycles is inevitable. Regarding employment, Ferlito cautioned against pursuing full-employment policies through monetary stimulus, noting that jobs created through artificial means are unlikely to be long-lasting. "The new unemployment level may even be higher than the pre-stimulus situation if monetary injections encouraging demand have not only increased employment but have also stimulated the creation of new economic initiatives in the sectors so stimulated. This is why the result of inflation is worse than the problem intended to be resolved," he said. Ferlito said monetary policy should not focus exclusively or primarily on maintaining price stability, pointing out that steady consumer prices do not necessarily prevent the formation of financial bubbles. "Unstable economic conditions may develop, as they did in the 1920s, while the price level remains stable," he added. He highlighted recent monetary policy errors in advanced economies, noting that many economists may have been misled by the assumption that monetary imbalances always appear as inflation. According to Ferlito, the foundation for long-term macroeconomic stability is the alignment of the MR, NR, and OR. "Business fluctuations can be moderated if MR is allowed to seek its path toward NR and if NR is a reflection of OR," he said. To re-establish monetary stability, he called for a fundamental shift in thinking, suggesting that a truly new policy direction would require removing political control over the monetary system.
Free Malaysia Today
26-06-2025
- Business
- Free Malaysia Today
Strait of Hormuz's closure will see oil prices rise, says economist
The Strait of Hormuz in Iran is a key gateway for the global supply of oil. (EPA Images pic) PETALING JAYA : The possible closure of the Strait of Hormuz by Iran will cause oil prices to rise in the short-term, though it is too soon to tell if it will have a lasting economic impact, says an economist. Center for Market Education CEO Carmelo Ferlito said the situation in the Middle East, with a ceasefire between Iran and Israel now in force, remained very fluid. 'There is always a delay between the increase or decrease in oil price and the reflection on other prices. And the delay and intensity – if the closure happens – depends on how long the crisis will persist. At the moment, I don't know if it will persist. 'To draw conclusions on eventual energy prices and other prices is premature. So at this moment, we can only say that there will be an increase in oil prices in the short run,' he told FMT. Ferlito said inflation was not expected to be among immediate concerns from the potential closure of the strait. 'Inflation is a general and persistent increase in prices that arise when the supply of money grows faster than the economy's output. 'And if the government and monetary authorities refrain from increasing the supply of money, we will only have an adjustment of relative prices, not inflation,' he said. On Sunday, Iran's parliament approved the closure of the Strait of Hormuz, a key gateway for the global supply of oil, after the US struck three of Tehran's nuclear facilities. Iran's Supreme National Security Council will, however, make the final decision on the matter. The strait, which lies between Iran and Oman, links the Persian Gulf and the Arabian Sea. Its closure is expected to force companies to take longer, less efficient routes to distribute oil, such as pipelines or alternative shipping routes. This would lead to increased freight costs, insurance premiums, and delivery times, causing price hikes. Countries starting to hoard oil is another risk factor, potentially creating artificial scarcity which would push prices even higher. The Treasury has raised the prices of RON97 nationwide and diesel in West Malaysia by 14 sen over the past two weeks, citing the rise in global oil prices. Yeah Kim Leng of Sunway University said Malaysia would be significantly affected by the closure of the strait, as about 15% to 20% of Malaysia's oil supply passes through it. He said Malaysia, as a net oil exporter, sells the more expensive sweet crude oil to other nations and imports sour crude oil for its refineries here. As Malaysia's oil exports mostly go to East Asian countries, they are not expected to be directly affected by the strait's closure. However, imports largely come from countries like Saudi Arabia, Iraq and Iran, while the closure of the strait would disrupt the operations of refineries in Malaysia.
New Straits Times
10-05-2025
- Business
- New Straits Times
Look within, say experts and industry groups
KUALA LUMPUR: Policy makers should look internally at ways to facilitate ease of doing business and investing in the country as part of a wider response to the United States' tariffs, says an economist. Centre for Market Education chief executive officer Dr Carmelo Ferlito said while it was encouraging that Malaysia had sent a delegation to Washington to discuss the issue with the US, it was also important for the country to "look within". Ferlito said that this is because while tariffs are negotiated at a government-to-government (G2G) level, business was conducted at a business-to-business (B2B) level. "There is merit for new opportunities where trade diversification and alternatives are concerned," he told the New Straits Times. "But we have to be clear that trading partners cannot be changed overnight because trade happens between businesses, not countries per se." A 10 per cent export loss to the US cannot easily or necessarily be shifted to another market like China or the European Union, he said, as it boils down to agreements between firms in two countries. "Can a US importer find an alternative supplier domestically or from another country at the same or better price after the tariff is imposed? "What are the transaction costs involved in such a search? Can the Malaysian firm find a European customer to replace the American one, in case the American one is lost? How long will it take?" Ferlito said the tariff issue should not be viewed from an aggregate perspective without considering "microfoundations" because in the economy, everything happens at a "microlevel". "The macro level exists only in the statistics books." He said each transaction is the consequence of many other micro transactions, interrelated in a way which cannot be changed overnight or as a consequence of an interstate agreement. Ferlito said there were measures that Malaysia could take beyond tariff discussions and exploring other markets, including non-tariff barriers. "We can take a leaf from Indonesian President Prabowo Subianto, who called for simplifying and streamlining regulations to make to increase competitiveness and attract investments." "Such a measure would help boost investments, not just foreign direct investments (FDI) but also domestic direct investments (DDI)." This, in turn, could help soften the blow from any impact of the tariffs once the 90-day pause on the measure ends, he said. During the special parliamentary session on May 5, Prime Minister Datuk Seri Anwar Ibrahim outlined several measures to address the US tariff situation. These include RM1.5 billion in financial aid for SMEs and the fast-tracking of infrastructure projects to stimulate domestic economic activity. In response, business groups say internal strengthening is just as critical as external support. The Federation of Malaysian Manufacturers (FMM) backed the formation of a National Supply Chain Council to address vulnerabilities across key sectors. "Private sector participation is essential to ensure that the Council's strategies are grounded in operational realities," said FMM president Tan Sri Soh Thian Lai. FMM also urged the swift rollout of the Government Procurement Act, calling it vital to "stimulating domestic demand and enhancing national production capabilities." It added that government-linked companies should be subject to "a clear mandate or strong policy encouragement to increase their procurement from local manufacturers." Small and Medium Enterprises Association (Samenta) noted that non-exporting SMEs make up the bulk of Malaysia's business landscape. "These businesses... will be equally impacted as input costs rise, supply chains tighten, and consumer spending begins to contract," said president Datuk William Ng. He called on the government to "pause all new and planned cost increases on SMEs" and freeze compliance requirements that could push more businesses into distress.
