KUALA LUMPUR, Jan 11 - The government is working to revise downwards its earlier economic forecast of 3.5 per cent growth this year.
Several economists and government officials told The Malaysian Insider that the buffet of worse-than-expected trade numbers from Malaysia’s main trading partners as well the slumping industrial production and export figures indicate that the Abdullah administration will have little choice but to hope for growth to be between 1 per cent and 2 per cent.
The more pessimistic private sector economists do not discount the possibility of Malaysia entering into a technical recession. A country is deemed to be in technical recession when it suffers two consecutive quarters of negative growth.
The Malaysian Insider understands that the government’s high-level Economic Council during a meeting last Tuesday was told that risks to the Malaysian had increased substantially in the past month as a result of sharp dive of the US economy and other major economies.
World Bank reports estimate that the US growth will be -0.5 per cent; the European Community will be -0.3 per cent and Japan will hover around –0.1 per cent. And this may not be the end of the bad news.
The scale of the US downturn continues to surprise with the nation losing 1.5 million jobs in the last three months of 2008 and economic output during October, November and December shrinking by 6 per cent compared with the same period in 2007.
Also, government officials also concede that the economies of China and India – despite their growth forecast this year – will not be able to provide the markets needed for Malaysia exports as both have recorded worse than expected industrial output figures.
Not surprisingly, Malaysian exports contracted in October, as indicated by a sharp 12.6 per cent decline in the shipments of electrical and electronic products. Two consecutive monthly declines in industrial production index further underscored the country's vulnerable macroeconomic fundamentals in the final quarter of 2008.
A government official said: “Malaysia will still be better off than most countries but we will not be able to export our way out like in 1998. This time, both developed and developing countries are in trouble.’’
During the Asian Financial Crisis, Malaysia was able to ramp up its manufacturing sector and push its exports to the US, Europe, China.
Compounding matters is the low commodity and oil prices, both big contributors to the government’s revenue.
Still, government officials believe that Malaysia will not be in recession. They note that a quick rollout of the RM7 billion stimulus package will boost economic growth by 1 per cent and are already planning to unveil another package of economic measures aimed at reducing the cost of doing business.
Privately, they concede that they are in unfamiliar territory. They are not alone.
The New York Times reported that there is skepticism whether the stimulus package being pushed by President-elect Barack Obama will be big enough to end or, at least, limit the recession.
Last night, Second Finance Minister Tan Sri Nor Mohamed Yakcop said the economy will not plunge into a recession though it too feels the ripple effects of the global economic turmoil.
He said the Malaysian economic stability was also supported by the high banking liquidity and private sector confidence but if private sector confidence trended downward, the government would inject more funds into the market.
Two crucial elements to be attended to in tackling the effects of the economic turmoil were the credit level and job opportunities, he said.
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We all know it. The rest of the world has pretty much come to terms about it. Malaysia is not an island in the sea of economic upheaval. Singapore is already in recession. Thailand is as well. Haven't really checked on Indonesia, Phillipines, etc. but would assume that they would be or are close to it.
We are an export driven economy. How can we be growing if there are no markets that are increasing their purchases of our goods? We do not consume enough to "grow" our GDP when exports are falling in the high single or low double digits.
It's not rocket science. 1 + 1 = 2. Then again, with the degration of our education system, no wonder our ministers can't figure out our economic growth / fall.
Yakcop alludes to private sector confidence. What private sector confidence? I'm sorry, but I've not heard of the average man on the street, or for that matter chieftains of private companies coming out and declaring that they are investing big $$$ or expanding their operations. Most are either in a hiring freeze, a "wait and see" period or downsizing and slashing costs. These are not attributes of CONFIDENCE!
The more we ignore or delude ourselves, the worse it will be when reality sets in. Yakcop, do the right thing and level up with the nation. Tell us it's time to be thrifty, to be prepared for that rainy day that is just over the horizon. Prepare the nation for the worst, and if it's not as bad, then that's cherry on the cake. Otherwise, telling people that everything is OK when they don't have food on their table (maybe an exaggeration, maybe not) and they will lynch you when reality sets in.
Then again, maybe if you try to "con" the nation, there will be a change of government sooner rather than later (that's the only silver lining I can see from this fiasco we call the BN government).