Professor Geoffrey Williams
A leading economist highlights the widening gap between macroeconomic performance and household realities as income challenges persist
BY TENGKU NOOR SHAMSIAH TENGKU ABDULLAH
KUALA LUMPUR, Dec 26 – Malaysia heads into 2026 facing a familiar but increasingly pronounced paradox. Key macroeconomic indicators point to resilience, solid GDP growth, low inflation and a stabilising fiscal position, yet many households continue to experience financial strain.
In a year-end interview with TNS News, As 2026 approaches, the test for Malaysia is clear: can the country bridge the widening gap between its macro success story and its micro struggles? Can strong GDP growth coexist with genuine household prosperity? Or will Malaysia continue to demonstrate that economic expansion and social progress are not, as once assumed, natural partners?
Williams’ analysis suggests the answer depends not on maintaining current policies, but on fundamentally reimagining them. economist and Founder & Director of Williams Business Consultancy Sdn Bhd, offers a measured assessment of this disconnect, stressing that economic stability alone does not automatically translate into improved living standards.
“Malaysia has exceeded growth expectations in 2025,” Prof Williams told TNS News. “But we continue to fail in our most fundamental task: delivering meaningful income security to ordinary Malaysians.”
His central thesis: economic stability without income growth is not prosperity—it’s stagnation with better optics.
2025: Better Than Expected, But Not Good Enough
Assessing the year that’s ending, Williams acknowledged that Malaysia performed better than most observers anticipated at the start of 2025.
“Despite global headwinds and widespread concern over trade disruption, growth has remained strong, with GDP likely to reach around 4.7 percent, broadly in line with both earlier and revised official forecasts,” he said. “This outcome exceeds expectations and challenges the prevailing pessimism that surrounded Malaysia’s outlook.”
Trade performance proved particularly resilient. “Overall trade volumes and exports increased and the trade balance improved after a prolonged period of decline,” Prof Williams noted. “This ran counter to expectations that tariff volatility and external uncertainty would deliver a negative shock.”
Inflation also came in below projections. “Inflation has been very low and lower than expected,” he confirmed.
Yet Prof Williams was quick to separate aggregate economic performance from lived household experience.
“While the numbers look good on paper, households continue to struggle with day-to-day expenses,” he emphasized. “Malaysia’s core economic problem is not price instability but structural low income this is the country’s biggest challenge.”
He dismissed limited government assistance programs as insufficient. “Mechanisms such as STR-SARA provide only marginal relief when underlying wage levels remain weak,” Prof Williams said.
2026 Outlook: Growth Without Relief
Looking ahead to 2026, Prof Williams projects continued economic expansion but warns against confusing macro stability with household security.
“I expect strong underlying growth of between 4.0 and 4.5 percent, with inflation remaining low and interest rates broadly stable,” he told TNS News.
He praised the government’s fiscal management. “Budget 2026 is very well designed and fiscally responsible. The fiscal position is sound,” Williams said.
However, he cautioned that structural labour market weaknesses will continue to undermine household prosperity.
“While headline unemployment is expected to remain low, underemployment continues to constrain wage growth, preventing workers from translating economic expansion into higher real incomes,” he explained.
This dynamic, Williams argued, lies at the heart of Malaysia’s cost-of-living crisis—a crisis he believes policymakers fundamentally misunderstand.
The Real Cost-of-Living Problem: Income, Not Inflation
Prof Williams challenged the prevailing framing of Malaysia’s cost-of-living debate.
“Policy discussions often misdiagnose the problem by focusing excessively on inflation rather than income generation,” he told TNS News. “The central policy objective must be to raise incomes.”
He proposed two pathways: direct intervention and market liberalization.
“We need either direct measures such as a higher minimum wage and a broader progressive wage framework, or we need to free up the labour market to allow greater participation in gig-economy and supplementary income activities,” Williams said.
“Without such measures, households will remain financially strained even in a low-inflation environment,” he warned.
Subsidy Reform: Savings Yes, Targeting No
On the government’s subsidy rationalization efforts, Prof Williams offered qualified praise tempered by sharp criticism.
He acknowledged fiscal benefits achieved. “The government has realized savings of RM15.5 billion that help strengthen the budgetary position,” he noted.
However, he identified a fundamental flaw in Malaysia’s fuel subsidy system.
“While fuel prices, particularly RON95, have declined, this has come at the cost of reform savings,” Williams said. “And more importantly, the benefits remain poorly targeted.”
He argued the current system is inherently regressive.
“The existing system advantages higher-income groups disproportionately. Universal subsidies allow the wealthy to benefit more than the poor,” Prof Williams explained. “Better targeting would not harm low-income households; rather, the failure to target subsidies properly is itself regressive.”
GST Rejected, E-Payment Tax Proposed
Williams firmly rejected calls to reintroduce the Goods and Services Tax.
“GST is regressive and unnecessary under current conditions,” he told TNS News, pointing to Budget 2026 as evidence that “higher revenue can be generated through SST adjustments and improved collection from higher-income earners and consumption, without imposing broad-based new taxes.”
Should additional revenue be required in the future, Prof Williams proposed an alternative approach.
“A modest e-payments tax—a one percent levy—could raise as much as RM28.8 billion while spreading the burden more evenly across the economy,” he suggested.
Ringgit: Too Strong, Not Too Weak
On currency dynamics, Williams challenged popular narratives of ringgit weakness.
“The ringgit is currently strong, perhaps even excessively so,” he said. “The greater risk for 2026 lies in the possibility of a sharp correction rather than gradual depreciation.”
This perspective reframes currency risk as cyclical and market-driven, rather than symptomatic of fundamental economic fragility.
Investment: High FDI, Low Impact
While foreign direct investment remains elevated, Prof Williams questioned its economic value.
“FDI remains high, but it’s concentrated in sectors such as data centres that offer limited spillovers to the wider economy,” he said, also cautioning that developments like the Johor-Singapore Economic Zone “may produce largely localised and property-driven effects.”
More concerning, he noted, is the weakness of domestic investment.
“Domestic direct investment remains weak,” Prof Williams pointed, attributing this to “poor returns in Malaysian equities and government securities.”
The numbers support his concern. “Year-to-date returns on Bursa Malaysia have been negligible and five-year returns negative, especially when compared with the significantly stronger performance of overseas markets such as the S&P 500,” he said.
“Capital is responding rationally to relative returns. Malaysia must address this competitiveness gap if it hopes to retain domestic savings and investment,” Pro Williams emphasized.
Competitiveness Challenges: Regulation, Perception, Regional Competition
Asked about broader competitiveness issues, Williams identified three critical constraints.
“Over-regulation, persistent perceptions of corruption, and the increasing attractiveness of regional competitors such as Vietnam” are undermining Malaysia’s position, he said. “These factors constrain productivity and discourage both domestic and foreign investors, regardless of Malaysia’s underlying economic strengths.”
Trump Tariffs: Disruption or Opportunity?
On global trade realignment and the impact of potential Trump administration tariffs, Prof Williams again departed from conventional anxiety.
“Tariff disruption has, on balance, been positive for Malaysia,” he said. “Nearly 3,000 tariffs have been abolished or zero-rated on both sides, shifting attention toward non-tariff barriers.”
However, he stressed that Malaysia must reform its own trade policies to fully capitalize on this opportunity.
“Malaysia must prioritize the removal of its own non-tariff protectionist policies if it wishes to fully benefit from evolving trade patterns,” Prof Williams said. “Abandoning protectionism is essential to making Malaysian exporters more competitive, agile and innovative in international markets.”
The Government Dependency Myth
One of Prof Williams’ most provocative arguments concerns what he describes as a damaging Malaysian mindset.
“There is a pervasive economic myth among Malaysians: the belief that the government should be expected to solve most economic problems,” he told TNS News.
“The government’s role is inherently limited. Markets and individuals are often more effective at solving business and household challenges,” Williams argued.
He challenged Malaysians to critically assess government impact.
“What has government policy tangibly done for you over the past year?” Prof Williams asked. “Beyond modest cash transfers and poorly targeted fuel subsidies, many households are not materially better off.”
The Overlooked Crisis: Pension Security
Prof Williams identified pension reform as “the most overlooked yet potentially transformative opportunity for Malaysia.”
He proposed creating “a Malaysian Superfund capable of delivering a universal basic pension,” warning that “failure to address the pension crisis will condemn many Malaysians to work throughout their lives without the prospect of a secure retirement.”
This issue, he argued, deserves far more political and public attention than it currently receives.
Two Messages: One for Leaders, One for Citizens
Williams concluded with distinct messages for policymakers and ordinary Malaysians.
To policymakers: “Without significant improvements in income levels, political consequences are likely,” he warned.
To citizens: “Sustain pressure on political leaders to confront the pension issue seriously. Long-term economic security depends not on short-term subsidies, but on structural reform and personal empowerment.”
The 2026 Challenge: From Growth to Dignity
In Prof Williams’ assessment, Malaysia has moved beyond the challenge of achieving economic growth. The GDP numbers prove the country can expand. Inflation is controlled. Fiscal discipline has been restored.
The question now is whether that growth will translate into something more fundamental: dignity, security, and opportunity for ordinary Malaysians.
“Malaysia’s challenge in 2026 is no longer about achieving growth,” Prof Williams explained. “It’s about deciding whether that growth will finally translate into meaningful improvement in people’s lives.”
Without structural reforms to wages, labour markets, and social protection systems, he warned, economic stability will remain a hollow achievement—impressive in aggregate statistics, invisible in household budgets.
As 2026 approaches, the test for Malaysia is clear: can the country bridge the widening gap between its macro success story and its micro struggles? Can strong GDP growth coexist with genuine household prosperity? Or will Malaysia continue to demonstrate that economic expansion and social progress are not, as once assumed, natural partners?
Williams’ analysis suggests the answer depends not on maintaining current policies, but on fundamentally reimagining them.
- TNS NEWS
About the Expert: Professor Geoffrey Williams is an economist and Founder & Director of Williams Business Consultancy Sdn Bhd. He specializes in macroeconomic policy, labour markets, public finance, and development economics, with extensive experience advising governments and international organizations across Southeast Asia.
Disclaimer: The views expressed are those of Professor Geoffrey Williams and do not necessarily reflect the editorial position of TNS News. This analysis is for informational purposes only and does not constitute financial or policy advice.