KUCHING: Sarawak United People’s Party (SUPP) Stakan branch chairman, Datuk Sim Kiang Chiok, said the second increase in bank interest rates, from 1.75% to 2% and now 2.25% will affect the state’s economy, especially businesses.
“The world economy is facing challenges as we are just coming out of the pandemic and the economy is on the recovery path,” he said in a press statement here today.
He added that the state is also being heavily affected by disruption to the supply chain due to COVID-19 restrictions, the Ukraine/Russia war which also increased the price of oil /gas and food, and China’s regional COVID 19 pandemic lockdowns on its major cities.
“All these are causing the rise in prices that affects our cost of living.
“In Malaysia, we are faced with similar problems, but our inflation is still manageable at two to three per cent compared to other major countries whose inflation rates are six to nine per cent,” he said.
Sim said the inflation here is manageable because the government is subsidizing the oil and gas industry and essential food items.
“We have also imposed price control on essential items so that profiteering will be kept to the minimum.
“However, we have a minimum wage is increased from RM1,200 to RM1,500 on 1st June for the bigger companies and from next year for all companies.
“This will have some wage-price effect that will cause inflation to rise,” he added.
On the rise of interest rates by Bank Negara today by another 25 points, Sim said it will slow down the demand for goods which will help slow down inflation.
“But the quick rise of the rates might hurt the economy which is still on the recovery path following pandemic lockdowns.
“However, it will stabilise our ringgit against other major currencies so that our imported inflation can be reduced,” he said.
Sim said the present rise in interest rates might still be manageable for most borrowers but any further increase might dampen the economic growth prospects.
“The rise in interest rates is good for savers, however, for those who are in business, their cost of capital will rise and might be reflected in their selling price of goods.
“The demand for houses will still be strong as the new interest rates are still comparatively low, which was about 3.5%,” he said.
Sim added that the construction cost of houses is rising due to material price rise and labour shortage which will affect new launches prices, expected to be increased.
“So it’s good time to buy completed or near completion houses as the cost are alright set in, or secondary market houses.
“The bank is still supportive in giving end financing for house purchase for those with stable employment on a steady income,” he added.
