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Election Fever Pushes Up Domestic Demand
Malaysia Perspective | 21 May 2013

By Yang Ming Wan

The general election is finally over. As the two camps slug it out, the people stand to benefit, whatever the outcome. More importantly, this hotly-contested election has undoubtedly pushed up domestic demand, especially during the period between the dissolution of parliament and the eve of polling day. Apart from the massive amount of publicity materials needed by each and every political party during the campaigning period, the candidates and their supporters were also traveling around canvassing and handing out various forms of assistance and cash to voters. Many constituencies even held banquets every night. This flurry of activities would definitely push up domestic demand.

This boost in domestic demand during this period would have a definite stabilising effect to counteract the lack-lustre performance of the economy at the end of the first quarter and the start of the second quarter.

Maintaining 12% Double-Digit Growth
As we wait for the release of the figures and indicators for domestic demand in April and May, the home loan situation in March as announced by Bank Negara before the election demonstrated that domestic demand is already heating up during the run-up to the campaign trail.

While commercial loans have fallen as businesses fret over the uncertainty of election outcomes, home loans have bucked the trend on the back of deal sweeteners dished out by the campaigning parties. March home loans have remained above the 12% double-digit growth level achieved in February, which goes to stabilise the overall total loan growth at more than 10% without being bogged down by the slowdown in commercial loans.

Even though Bank Negara laid a gentle hand last year to rein in home loans somewhat, home loans has been trending upwards this year, maintaining a steady 12% growth rate for three consecutive months from January to date. Residential property loans have maintained a growth rate of more than 12% with no signs of a slackening in momentum, even though overall property loans have slowed to 14.5%.

Although the pace of growth in other loans such as credit has slowed, they are still growing strongly, reflecting the euphoria effect of the general election. Consumption has since strengthened, and auto loans are also growing healthily.

Future Indicators Rise Across The Board
With disparaging expectations of the general election, consumer-led home loans have risen, with consumer confidence buoyed by the silver bullet tactic adopted by both the ruling and opposition parties. This is evidenced from the rise across the board in all the home loans future indicators, which contrasts starkly with the decline in all the commercial loans indicators across the board.

Home loan applications in March rebounded from the contraction in excess of 9% in the previous month to a robust 7.2% growth, while the growth in loan amount approved has also perked up from 6.6% in February to 8.7%. Growth rate of home loans disbursed has also picked up pace, from 8.6% in February to 9.2%.

As the saying goes, it takes only a spark to ignite a prairie fire. Once there is something to stimulate consumer confidence, that is all that is needed to create a swell in credit consumption. More than just delivering the proverbial silver bullet, both the ruling and opposition parties have also made a whole range of promises that carry a great deal of weight and have stimulated more credit consumption among the people.

Campaign Promises Stimulating Domestic Demands  
As the election dust settles, the fact that the ruling Barisan Nasional has been returned to power by a marginally comfortable 60% majority of parliamentary seats, indicates that the Government is bound to pay more attention to measures that will directly affect the people’s livelihood and not delay on delivering the various sweetener deals that they have committed to. These sustained cash disbursing policies are bound to create a spending spree among the low-income group, thereby pushing up domestic consumption and, in turn, domestic demand.

Naturally, the series of sweetener deals put forward by the Government involve large sums of money. It is estimated that the additional amount promised in this election came up to no less than RM 20 billion. Since the Government has also promised to limit federal liabilities to below 55% of the gross national product as set by the Parliament, and bring down the fiscal deficit from 4.5% of GNP to 4%, this means that it will eventually take active measures to improve revenue collection and reduce overheads during its current term of office.

Despite the tough challenges ahead, the Government has learnt its lessons from past elections to make good its promises made in its election manifesto. For this, we can expect that, in the short- to medium-term, domestic demand will continue to be bolstered by the various incentives promised during the election.

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