25/03/2025

TUESDAY | MAR 25, 2025

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Volatility impacting global economy A S the global economy progresses through 2025, it is being reshaped by a fresh wave of uncertainty, driven by policy shifts in the US, escalating trade tensions and shifting geopolitical alliances. allowing Malaysia to diversify its trade dependencies. At the same time, Malaysia should accelerate investments in high-value industries such as digital technology, renewable energy and financial services. By doing so, the country can reduce its dependence on commodity exports and traditional manufacturing, which are more vulnerable to global trade shifts. COMMENT By Dr Goh Lim Thye

Policy responses for resilience To navigate the evolving landscape, Malaysia must implement proactive measures: 0 Diversify trade partnerships: Strengthening economic ties with emerging markets can mitigate overdependence on the US or China. 0 Enhance currency resilience: Encouraging the use of local currencies in trade and increasing foreign currency reserves can help manage dollar volatility. 0 Invest in innovation and sustainability: Green technology and digital transformation should be prioritised to position Malaysia as a competitive player in the new global economy. 0 Monitor inflation and fiscal policy: Ensuring a balanced fiscal approach will allow Malaysia to respond effectively to external shocks. Road ahead The global economy is at a crossroads, with rising protectionism, currency shifts and geopolitical realignments shaping the future. Malaysia, positioned at the heart of Southeast Asia, has the potential to not only weather these storms but to emerge stronger by adapting strategically. By fostering trade diversification, embracing innovation and strengthening regional partnerships, Malaysia can transform uncertainties into opportunities – ensuring economic stability and growth in an unpredictable world. Dr Goh Lim Thye is a senior lecturer at the Department of Economics, Faculty of Business and Economics, Universiti Malaya. Comments: letters@thesundaily.com exercising our critical faculties, we are allowing ourselves to be given a silap minda , a trick on our mind. It is akin to the magician’s sleight of hand or silap mata , except that it is our minds, not our eyes, being deceived. In a magic show or silap mata , our eyes are momentarily diverted. In silap minda , however, we are distracted by what psychologists call information pollution – a glut of erroneous and misleading data that lulls us into thinking we are making the right decisions based on “facts”. Critical thinking helps guide us from blindly following others, as Madoff’s later clients did with his earlier ones. Madoff’s later clients bring to mind the fable of the two donkeys – one loaded with bags of salt, the other with cotton. As they were crossing a creek, the salt-carrying donkey slipped. When it got up, the load felt lighter because some of the salt had leached out. This prompted the donkey to continue slipping, as with every slip, its load became lighter. This in turn led the donkey carrying the cotton to do likewise, only to find its load heavier with each fall as the cotton had absorbed the water. So, beware. Things may not seem to be what you expect or desire. Comments: letters@thesundaily.com

As a trade-dependent nation, Malaysia finds itself at a critical juncture where strategic adaptation is crucial to sustaining stability and growth. Trump’s return to protectionism The inauguration of Donald Trump on Jan 20, 2025, marked a renewed focus on economic nationalism, with policies that could upend global trade. His administration has wasted no time in implementing new tariffs, heightening tensions with key trading partners. The reintroduction of a 25% tariff on Canadian and Mexican imports in early March, alongside a 20% tariff on Chinese goods, signals a return to protectionist policies. China, in response, has levied tariffs on US agricultural exports, leading to fears of a full fledged trade war. Adding to the complexity, the US has imposed a 25% global tariff on steel and aluminium, triggering protests from European allies and concerns of retaliatory actions. These policies, reminiscent of Trump’s first term, could disrupt supply chains and force businesses to reassess sourcing strategies. Impact of shifting US dollar on global trade While the US remains the world’s largest economy, the dominance of the US dollar in global trade is facing new challenges. The aggressive stance on tariffs has contributed to a weakening of the dollar, leading some nations to explore alternative currency arrangements. The BRICS bloc, particularly China and Russia, has accelerated its push for dedollarisation, with increasing trade IT is amazing how often our decisions are made through faulty analysis or without much thought. In many instances, these may be excusable, especially if the potential consequences are self-limiting or carry a low cost. For example, deciding which restaurant to patronise falls into this category. Similarly, if we were to fall for a snake oil salesman’s slick pitch, we could lose a few ringgit, unless, of course, his products were laced with arsenic or some other dangerous substances, which could prove fatal. However, when there is a raging pandemic or a deadly race riot, what can be simple decisions can have life-or death consequences. For example, the first surge of Covid 19 in Malaysia was triggered by the mass Tablighi Jamaat gathering in a mosque at Kuala Lumpur in late February 2020. And during the May 1969 riot, an otherwise inconsequential decision to go for an afternoon movie downtown cost a schoolgirl her best friend, and for herself, endless nightmares – both literal and figurative – as Hanna Alkaf related in her riveting autobiographical novel, The By M. Bakri Musa

The aggressive stance on tariffs by the US has contributed to a weakening of the dollar, leading some nations to explore alternative currency arrangements. – REUTERSPIC

settlements in yuan and rubles. For Malaysia, this shift poses both risks and opportunities. On one hand, a weaker US dollar could make Malaysian exports more competitive. On the other, it introduces volatility in currency markets, complicating foreign exchange risk management for businesses engaged in global trade. Despite external headwinds, Malaysia’s economy has remained resilient. Economic growth in 2024 reached 5.1%, fuelled by strong domestic consumption and recovering exports. However, with the external environment growing more volatile, policymakers are on high alert. The ringgit has experienced fluctuations due to capital outflows triggered by rising US interest rates. Investors seeking higher returns have moved capital back into the US markets, pressuring emerging economies like Malaysia.

Inflation, while relatively contained at 1.7% in early 2025, remains a key concern, particularly as import costs rise amid a shifting currency landscape. Navigating new trade order Malaysia now faces critical policy decisions. With the US and China increasingly at odds, the risk of economic decoupling has never been higher. If global trade splits into two competing blocs – one led by the US and another by China – Malaysia will need to walk a fine line to avoid over-reliance on either power. To mitigate risks, Malaysia must strengthen economic ties within Asean and expand partnerships with India, the Middle East and Africa. The Regional Comprehensive Economic Partnership offers a strategic advantage,

COMMENT Importance of critical thinking in shaping decisions can trust their skills and smartness or the integrity of those they are dealing with based on nothing more than the nebulous notions of reputation, expertise or familiarity can often prove to be misplaced. “One must be circumspect in

Weight of Our Sky . One must be circumspect in making even the simplest and seemingly inconsequential decisions. What may seem like a routine choice, done countless times before, could have changed circumstances that you are unaware of – just as it did on that fateful day in May for the innocent schoolgirls in that novel. Yet, during the Covid-19 pandemic, there were those who claimed that we should fear God more than this sub microscopic virus. Sadly, more than a few paid with their lives for their failure to critically assess the veracity as well as wisdom behind their faith leaders’ advice. This reluctance to think critically is not an affliction peculiar only to the poor, uninformed, uneducated or those in the Third World. Being smart is no assurance that you would not be taken in. Being smart in one area does not necessarily always translate to another, and you may find yourself in an entirely new environment where your previous assumptions no longer apply. Tourists are easy prey precisely because they lack awareness of their new environment or assume that their old assumptions still apply. Even the wise and prudent can fall victim. The implicit assumption that they

making even the simplest

In 2008 Bernie Madoff, a prominent Wall Street money manager, was arrested for running what later was proven to be but an elaborate Ponzi scheme. His clients were all smart and otherwise successful. He knew that they would ask tough questions. To discourage that, he gained their confidence the old-fashioned way. He “guaranteed” his early investors a steady stream of great returns. Except that they were not true returns, rather cash from new investors lured by the promise of generous profits. He blunted their critical faculties with cash, the old tried-and-true way. We are familiar with magic shows, or as they are called in Malay, silap mata , literally meaning “a slip of the eye”. The magician would distract you and, in that split second, would pull a pigeon from beneath his long, baggy sleeve, and the audience would gasp in amazement. Silap mata is a more accurate and evocative description of the trick than the English term “sleight of hand.” The trick is in the eye, not the hand. When we accept an assertion without

and seemingly inconsequential decisions. What may seem like a routine choice, done countless times before, could have changed circumstances

that you are unaware of.