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The global economic scenario shows a slight recovery and could achieve a soft landing in 2023. The world's three largest economies, such as the United States, China, and the Euro area, are stalling, adding more consequences for the global outlook. Although the stubborn inflation is slowing down as central banks have raised interest rates and food and energy prices have come down, the addressed price pressure is proven rigidity, with tight labour markets in several economies. The complicacy of unfriendly policy rates is becoming apparent as banking sector vulnerabilities have come into focus and fears of economic damage have risen across the border financial sectors, which include bank and nonbank financial institutions—the need for global economies to take forceful actions to stabilise the system. The International Monetary Fund (IMF) predicts that the baseline forecast for growth will fall from 3.4 per cent in 2022 to 2.8 per cent in 2023. The downward trend continues specifically for advanced economies and is expected to pronounced a growth slowdown from 2.7 per cent in 2022 to 1.3 per cent in 2023. In parallel, this study predicted a one-year lagged effect of the pronounced growth slowdown to reach Sabah. This study projected that three of Sabah’s significant economic contributors will potentially have stagnant growth in 2024.
Deep analysis of this study signalling that three of Sabah’s critical economic contributors, such as agriculture (0.38 per cent), mining and quarrying (0.49 per cent), and manufacturing (0.03 per cent) sectors, will potentially have stagnant growth in 2024. Sabah GDP at purchasers' price is expected to grow around 2.92 per cent in 2024. The pronounced growth slowdown fuels more persistent unemployment and under-employment, as well as an economy generally performing below its potential, resulting in the stagnation of the growth of Sabah's GDP for 2023 and 2024. The economic shock, such as the post-pandemic, Russia-Ukraine conflict, US-China trade war, and global food security and energy crisis, fuelled and potentially prolonged the stagnant growth in Sabah's GDP. Most concerning with the potential of prolonged stagnant GDP witnesses fewer gains in the stock market and mutual funds in investment activity. The standard of living is expected to decline in certain Sabah's socio-economic classes or geographic areas, resulting from higher unemployment and falling wages, making it difficult for individual workers to compete for jobs and wages.
Despite experiencing stubborn inflation, Sabah’s households are facing the complicacy of an unfriendly policy rate, burdening one of Malaysia's lowest median monthly household gross income states. This study revealed strong positive correlations between the overnight policy rate (OPR) and core inflation. The side effect of the policy of harmonizing the OPR to all of Malaysia’s divergence is apparent, as it burdens the Sabah’s household income and standard of living. In defiance of the limited funds perception, the state government has a surplus budget of 26%. There is a possibility to utilise these surplus funds for various projects and initiatives. The efficiency of utilizing the funds is one of the efforts to tackle the persistent unemployment and poverty issues in Sabah. The study sees the manufacturing sector as a key to dealing with the persistent unemployment in Sabah. Expanding the manufacturing sector by transforming the intermediate to final goods from the agriculture, mining, and quarrying sectors will attract more foreign direct investment, which is vital to cushion the expected pronounced growth slowdown in 2024 for Sabah. The need for Sabah to implement a robust policy to rejuvenate the state's economy is expected to create more economic spin-offs. A higher implementation efficiency would mean more planned projects and policies are successfully executed and the yield desired.

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Published by DR ABDUL AZIZ KARIA, 2023-11-29 03:20:06

Sabah Economic Outlook 2024-2025

The global economic scenario shows a slight recovery and could achieve a soft landing in 2023. The world's three largest economies, such as the United States, China, and the Euro area, are stalling, adding more consequences for the global outlook. Although the stubborn inflation is slowing down as central banks have raised interest rates and food and energy prices have come down, the addressed price pressure is proven rigidity, with tight labour markets in several economies. The complicacy of unfriendly policy rates is becoming apparent as banking sector vulnerabilities have come into focus and fears of economic damage have risen across the border financial sectors, which include bank and nonbank financial institutions—the need for global economies to take forceful actions to stabilise the system. The International Monetary Fund (IMF) predicts that the baseline forecast for growth will fall from 3.4 per cent in 2022 to 2.8 per cent in 2023. The downward trend continues specifically for advanced economies and is expected to pronounced a growth slowdown from 2.7 per cent in 2022 to 1.3 per cent in 2023. In parallel, this study predicted a one-year lagged effect of the pronounced growth slowdown to reach Sabah. This study projected that three of Sabah’s significant economic contributors will potentially have stagnant growth in 2024.
Deep analysis of this study signalling that three of Sabah’s critical economic contributors, such as agriculture (0.38 per cent), mining and quarrying (0.49 per cent), and manufacturing (0.03 per cent) sectors, will potentially have stagnant growth in 2024. Sabah GDP at purchasers' price is expected to grow around 2.92 per cent in 2024. The pronounced growth slowdown fuels more persistent unemployment and under-employment, as well as an economy generally performing below its potential, resulting in the stagnation of the growth of Sabah's GDP for 2023 and 2024. The economic shock, such as the post-pandemic, Russia-Ukraine conflict, US-China trade war, and global food security and energy crisis, fuelled and potentially prolonged the stagnant growth in Sabah's GDP. Most concerning with the potential of prolonged stagnant GDP witnesses fewer gains in the stock market and mutual funds in investment activity. The standard of living is expected to decline in certain Sabah's socio-economic classes or geographic areas, resulting from higher unemployment and falling wages, making it difficult for individual workers to compete for jobs and wages.
Despite experiencing stubborn inflation, Sabah’s households are facing the complicacy of an unfriendly policy rate, burdening one of Malaysia's lowest median monthly household gross income states. This study revealed strong positive correlations between the overnight policy rate (OPR) and core inflation. The side effect of the policy of harmonizing the OPR to all of Malaysia’s divergence is apparent, as it burdens the Sabah’s household income and standard of living. In defiance of the limited funds perception, the state government has a surplus budget of 26%. There is a possibility to utilise these surplus funds for various projects and initiatives. The efficiency of utilizing the funds is one of the efforts to tackle the persistent unemployment and poverty issues in Sabah. The study sees the manufacturing sector as a key to dealing with the persistent unemployment in Sabah. Expanding the manufacturing sector by transforming the intermediate to final goods from the agriculture, mining, and quarrying sectors will attract more foreign direct investment, which is vital to cushion the expected pronounced growth slowdown in 2024 for Sabah. The need for Sabah to implement a robust policy to rejuvenate the state's economy is expected to create more economic spin-offs. A higher implementation efficiency would mean more planned projects and policies are successfully executed and the yield desired.

Keywords: Economy; CPI; Poverty; Outlook; Inflation; GDP; Export; Import; Producer Price Index; Unemployment; Agriculture; Manufacturing; Services; Construction

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123 MEMORANDUM OF AGREEMENT (MOA) INSTITUTE FOR DEVELOPMENT STUDIES (IDS) & UNIVERSITI TEKNOLOGI MARA (UiTM) CAWANGAN SABAH SIGNED for and on behalf of Institute for Development Studies (Sabah) in the presence of: Professor Datuk Dr Ramzah Bin Dambul Chief Executive Officer Richard Koh Vui Kheong Chief Research Officer SIGNED for and on behalf of Universiti Teknologi MARA (UiTM) Sabah in the presence of: Professor Dr Mohamad Hariri Haji Abdullah Deputy Vice-Chancellor Industry, Community and Alumni Network UiTM Associate Professor Dr Rozita @ Uji Binti Mohammed Rector Universiti Teknologi MARA (UiTM) Sabah


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125 COLLABORATION INSTITUTE FOR DEVELOPMENT STUDIES (IDS) & UNIVERSITI TEKNOLOGI MARA (UiTM) CAWANGAN SABAH


126


STUDY TEAM


127


128 STUDY TEAM (CONTINUED) Team Leader Abdul Aziz Karia is an Associate Fellow at the Accounting Research Institute, HICoE, Universiti Teknologi MARA. He received his PhD in Economic Forecast from the Universiti Teknologi MARA. He actively participates in the policy paper and decision-making at the state level. His research interest is economic forecast in statistical and artificial intelligence reasoning. Taufik Abd Hakim is a senior lecturer at Universiti Teknologi MARA (UiTM), Faculty of Business and Management. He holds a Doctor of Philosophy (PhD) in Business Management (Economics) from UiTM. His research interests include taxation, macroeconomics and panel data econometrics. Hylmee Matahir is a senior lecturer at Universiti Teknologi MARA (UiTM) Sabah Branch. He has received his PhD in the field of educational tourism in Malaysia. He has been the Head of the Faculty of Business and Management (UiTM) Sabah from 2000- the present. His area of expertise is economic development and tourism economics. He has presented papers at various conferences and published articles in reputable scholarly journals. Herniza Roxanne Marcus is a Universiti Teknologi MARA (UiTM) Sabah Branch lecturer. She holds a master of economics from Universiti Malaysia Sabah, specifically in energy economics. She is actively involved with the state financial budget and online newspaper writing and discussion.


129 REFERENCES Asian Development Bank. (2022). Asian Development Outlook 2022: Supplement. Bank Negara Malaysia (2005). The Malaysian economy in 2005. https://www.bnm.gov.my/documents/20124/830659/cp01.pdf Bank Negara Malaysia (2008). Economic developments in 2008. https://www.bnm.gov.my/documents/20124/830490/cp01.pdf Department of Mineral and Geoscience Malaysia. Kompendium 2021. https://www.jmg.gov.my/en/berita/102-pengumuman/972-muat-turunkompendium-jmg-2021 Department of Statistics Malaysia. (2023). Statistics Data Warehouse 2023. Dettling, M. (2015). Applied time series analysis, Institute for Data Analysis and Process Design, Zurich University of Applied Sciences. Habibullah, M.S. & Dayang-Afizzah, A.M. (2008). Borders and economic growth: The case of Sabah and her neighbours, MPRA Paper 12104, University Library of Munich, Germany. https://mpra.ub.uni-muenchen.de/id/eprint/12104 Idris, R. & Mansur, K. (2020). Sabah economic model: A general overview. International Journal of Academic Research in Accounting Finance and Management Sciences 10(3), 475 – 484. https://doi.org/10.6007/IJARAFMS/v10-i3/8156 International Monetary Fund (2023). World economic outlook: Inflation peaking amid low growth, January 2023. Ismail, M. and Yusoff, M. (2022). Anti-federal sentiment in sabah and its impact on Malaysian politics. Akademika, 92(3), 237-249. https://doi.org/10.17576/akad2022-9203-18 Kadir, N. (2022). Nasionalisme dan perubahan polisi tuntutan Filipina ke atas sabah daripada irredentisme kepada tuntutan dorman, 1962–1998. Kajian Malaysia, 40(2), 197-226. https://doi.org/10.21315/km2022.40.2.9 Mahadi, S.A.R.S. (2015). The transformation in economic and workforce development in Sabah: An analysis. Journal of Borneo Social Transformation Studies, 1(1), 99 – 121. Ministry of Economy, Department of Statistics Malaysia (2023). Malaysian Economic Statistics Review, Vol. 1. Ministry of Finance Malaysia (2023). Economic Outlook 2023. Mulok, D. (2015). The Sabah development corridor (SDC), Prosiding Persidangan Kebangsaan Ekonomi Malaysia ke-10 (PERKEM 10), 406 – 413. Parker, M. (2017). Working Paper Series: Global Inflation: The roles of food, housing, and energy prices, February 2017. Sabah Socioeconomic Report. (2022). Sabah Socioeconomic Report 2022. Government Report. Sabah State Government. World Bank. (2022). Global economic prospects, January 2022. The World Bank. World Bank. (2023). Global economic prospects, June 2023. The World Bank.


130 Yang, E. C. L., Sharif, S. P., & Khoo-Lattimore, C. (2015). Tourists’ risk perception of risky destinations: The case of Sabah’s eastern coast. Tourism and Hospitality Research, 15(3), 206-221. https://doi.org/10.1177/1467358415576085 Zulkeffeli, Z. & Morhalim, A.M. (2022). Exploring Sabah’s economic pearls, Malaysian Industrial Development Finance (MIDF) Research.


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