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New Straits Times
2 days ago
- Business
- New Straits Times
'Alarming' birth rate decline threatens Malaysia's economic future
KUALA LUMPUR: Malaysia's labour market is set to face "severe challenges" in 20 years if the downward trend in birth rates continues in an already ageing population, said an economist. Universiti Malaya's Faculty of Business and Economics Associate Professor Dr Tey Nai Peng said the country could begin to feel the impact of this imbalance within 10 to 15 years. By then, there will be more people aged 60 and above than those aged 18 to 59, a situation the associate professor in business and economics described as "alarming". Birth rates have been on a consistent downward trajectory since the 1960s, falling below replacement level in 2013. Between 2000 and 2023, live births dropped from 537,853 to 455,761. This year, the number of live births per quarter hit a record low — well below the 100,000 mark. According to Statistics Department data, there were only 93,500 live births in the first quarter of this year, compared with the 105,613 in the corresponding period a year ago. "With a shrinking working-age population, the demand for workers in critical sectors such as healthcare, eldercare, manufacturing and agriculture will intensify, leading to an even greater reliance on foreign labour. "This demographic imbalance will further weaken inter-generational support structures, placing an escalating burden on the shrinking working population. This burden includes healthcare and pension costs skyrocketing amid a shrinking taxbase. "While extending the retirement age from 60 to 65 may offer a temporary reprieve, the fundamental issue remains: fewer working-age individuals will be available to support a burgeoning older population." CONTRIBUTING FACTORS Tey said starting a family can be daunting due to the escalating cost of living, combined with stagnant wages. "This is compounded by the income insecurity due to job precarity for employees and irregular income for the self-employed. "Beyond costs, there is the growing embrace of individualism and changing lifestyle preferences." He said the dwindling birthrate was more pronounced in urban areas, where housing costs consumed a disproportionately large share of household income, leaving little for essential childcare, education and other child-related expenditures. "Societal pressure for quality education, including private tuition and enrichment activities, further exacerbates financial strain. "While the government offers a tax rebate of up to RM3,000 per child per year for childcare fees, and companies provide subsidies or workplace childcare, these measures are often insufficient to offset the overall burden." THE WAY FORWARD To help reverse the situation, Tey said government policies must support young adults to have more children. He pointed out that existing initiatives such as Bantuan Warga Emas (elderly assistance), healthcare subsidies, as well as various preferential discounts, were predominantly targeted at older adults. "In stark contrast, family support policies remain fragmented and often modest in their scope and impact. While housing affordability programmes, childcare support and family-friendly employment policies exist, they receive considerably less attention and investment relative to the magnitude of the fertility challenge." However, Tey said, money alone would not solve the issue. While countries like Singapore, South Korea and Japan invest billions in pro-natalist polices, they persistently have low fertility rates. This is because of deeply entrenched gender norms, intense work pressures and highly competitive educational environments that undermine efforts to encourage larger families. In contrast, France and Sweden have achieved relatively higher fertility rates thanks to comprehensive and long-standing family support systems, deeply ingrained gender-equal policies and robust work-life balance initiatives. He said Malaysia could take a leaf out of the book of European countries by increasing parental leave, providing childcare subsidies, encouraging flexible work arrangements and providing tax relief for families. Universiti Putra Malaysia Associate Professor in economics Dr Ida Md Yasin echoed Tey's concern. "For example, South Korea and Japan are among those ageing nations. In Japan, their productivity is impacted because fewer young people are working. "If you go to a fast-food restaurant there, the one serving you is an elderly person because there is a lack of young people," she said, adding that those nations had implemented immigrant-friendly policies due to a lack of talent. "If we are not careful, then we will end up like Japan at the end of the day."
Malaysiakini
23-07-2025
- Business
- Malaysiakini
National Debt Under Control Amid Reforms, Say Economists
Malaysia's sizable national debt does not pose a threat to the country's long-term prosperity, thanks to its strong economic fundamentals and prudent fiscal management, according to economists. Dr. Goh Lim Thye, senior lecturer at Universiti Malaya's Faculty of Business and Economics, said the national debt — recorded at RM1.22 trillion or 63% of GDP as of April 2024 — needs careful oversight but does not inherently pose a risk. 'In assessing debt sustainability, the focus isn't on the absolute size of debt, but rather on the country's ability to service it without hampering economic growth or triggering instability,' Goh told FMT. He noted that Malaysia maintains a diversified economy, solid fiscal capacity, and consistent access to both local and global capital markets. Moreover, international confidence in the country's financial stability remains high. 'All three major credit rating agencies — S&P, Moody's, and Fitch — reaffirmed Malaysia's investment-grade ratings in 2024,' said Goh, who also serves as deputy dean of development at the faculty. 'These affirmations reflect investor confidence that Malaysia is managing its fiscal position responsibly and advancing key reforms.' IMF Endorses Reform Measures Malaysia's reform efforts have also received praise from the International Monetary Fund (IMF), which welcomed the government's fiscal consolidation agenda and the enactment of the Public Finance and Fiscal Responsibility Act (FRA) in its March report. The IMF noted that current policies are aimed at rebuilding fiscal buffers, supporting economic growth, and enhancing social protection, while maintaining macroeconomic and financial stability. The FRA, passed in 2023, is seen as a cornerstone for improving fiscal governance and long-term sustainability. The IMF also highlighted that Malaysia's economic conditions provide a strategic opportunity to advance structural reforms. Under the Madani Economy framework, the government has laid out policy objectives focused on income growth, digitalisation, climate change mitigation, and good governance. Reforms Strengthening Fiscal Outlook MIDF Amanah Investment Bank's head of research, Imran Yusof, echoed the positive sentiment, stating that the government's fiscal and structural reforms are creating a stronger foundation to manage debt effectively. 'We believe the government is moving in the right direction — aiming for higher surpluses and reduced deficits,' he said. The unity government's consolidation measures are already showing results. The fiscal deficit narrowed from 5% of GDP in 2023 to 4.1% in 2024, outperforming its 4.3% target. The 2025 deficit is projected to decline further to 3.8%. Malaysia has also reduced new borrowings — RM75 billion in 2024, down from RM93 billion in 2023 and RM100 billion in 2022. Imran said the focus should be on the debt-to-GDP ratio rather than the total debt amount. Since the deficit stems primarily from development spending, which is considered long-term investment, it can be justified if GDP continues to grow. 'As long as Malaysia maintains a balanced operating budget and nominal GDP keeps rising, the national debt remains manageable,' he said. A Legacy of Crisis and Mismanagement Goh emphasised that the current debt level is largely inherited and not a result of the current administration's policies. 'The elevated debt stems from legacy issues and extraordinary crisis-related spending,' he explained, pointing to massive outlays during the Covid-19 pandemic and the long shadow of the 1MDB scandal. Between 2020 and 2022, the Perikatan Nasional-led government rolled out over RM530 billion in stimulus measures, including over RM100 billion in direct fiscal injections. While these moves helped preserve jobs and prevent economic collapse, they significantly increased public debt. The 1MDB scandal also saddled the government with long-term obligations and dented investor trust, said Goh. 'While some of these liabilities have been addressed, the broader fiscal impact and opportunity costs remain,' he said. 'The challenge now is to rebuild resilience — and encouragingly, the government appears to be taking solid steps in that direction.' Source: FMT The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini. Interested in having your press releases, exclusive interviews, or branded content articles on Malaysiakini? For more information, contact [email protected] or [email protected]
