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“Technical recession” will be hard to avoid, ISIS

Posted on: March 27, 2009


Bernama – Friday, March 27

KUALA LUMPUR, March 26 (Bernama) — It will be a challenge for Malaysia to avoid a technical recession given the current global economic climate, the director general of the Institute of Strategic and International Studies (ISIS) Malaysia, Dr Mahani Zainal Abidin said.

“We only have published data up to February, showing that we have a massive export reduction as reflected in the manufacturing data. But the impact is less negative on consumer spending,” she said.

She said this at a press conference here today on the findings of the 2009 UN-United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) Economic and Social Survey of Asia and the Pacific.

The survey indicated that Malaysia’s gross domestic product growth rate is expected to drop to zero percent this year as the global financial crisis evolves into a deepening subregional industrial crisis in Southeast Asia.

An overall economic growth rate of 1.2 percent is also expected for Southeast Asia this year, the lowest among the developing Asia Pacific subregions.

Dr Mahani said the country could avoid a technical recession in the second half of this year if the earlier RM7 billion stimulus package is implemented immediately in an effective way.

“So far, the spending power among Malaysian is still sustainable and in the short term, this will help to cushion the economic activities,” she said.

Malaysian exports plunged by 27.8 percent in January to RM38.3 billion from a year ago while imports dropped 32 percent to RM29.47 billion.

The inflation rate in February increased to 3.7 percent.

The government has spent RM1.0 billion from the first package and another RM5.6 billion is to be spent by the middle of this year.

“Of course, there will be a challenge in implementing the projects and distributing the money, but in the current situation now, the implementation must be done quicker and more effectively, because we have two packages,” she said.

On the second RM60 billion economic package, Dr Mahani said the government has the capability to seek for the funding.

“The government is only coming out with RM15 billion, but the majority of funding would be in the form of guarantee funds amounting to RM25 billion, so I believe that this is within the government’s ability,” she said.

She explained that Malaysia is not the only country introducing this measure as Japan, Taiwan and the United States have also taken a similar move.

The previous stimulus package saw the government’s direct spending in infrastucture but this time around, the people will have other forms of assistance from the government, so that the private sector can participate, she said.

Dr Mahani said the government should take advantage from the economic crisis by putting more money on new technologies to further strengthen the industries in which the country has an advantage.

She pointed out the Islamic finance industry, education, health tourism and logistics as some of the industries that would gain from further development.

The package could also be used to invest in energy efficient industries which are expected to grow positively when the economy rebounds, she added.–BERNAMA

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