MIER cuts 2009 GDP growth forecast to minus 2.2%
By Wong Choon Mei
The Malaysian Institute of Economic Research expects the country’s export-reliant economy to shrink 2.2 percent this year, worst than official forecasts, but better than other private researchers have warned could happen if the government continued to dilly-dally in implementing fiscal stimulus.
“In light of the deep declines in macro indicators, the gloomy business and consumer confidence, and the dismal sectoral indices, we are obliged to revise Malaysia’s growth forecast for 2009 downwards. If exports shrink severely, the downturn could be more harmful,” MIER said in a report.
The think-tank had previously forecast GDP growth of 1.3 percent for 2009 and 3.8 percent for 2010. It now expects an upswing in 2010, with GDP growth at 3.3 percent on the back of a global recovery. It also saw 2009 inflation at 2 percent and unemployment at 4.8 percent.
The central Bank Negara may cut interest rates to 1.5 percent or lower, down from 2 percent at present, to stimulate borrowing and economic activity, the MIER said.
Not enough direct fiscal stimulus despite huge-sounding RM60bln mini-budget
On the negative side was the limited impact from the RM60 billion mini-budget announced by Prime Minister Najib Razak in March. This was “less certain” than a traditional fiscal injection as it consists mainly of guarantees, the think-tank said.
“Due to the larger indirect measures in the mini budget, the impact may be less certain than the
traditional fiscal injection. “The actual public spending for social infrastructure and public works is only 15 billion ringgit, or about 25 per cent of total, which is not a large amount to be spent over a two-year period,” said the MIER.
Najib had forecast GDP growth of between negative 1.0 percent and positive 1.0 percent, while Bank Negara governor Zeti Akhtar Aziz today told reporters she expected ‘more or less’ flat growth for this year. Some private houses have predicted a more severe contraction of 5.0 percent.
In the last quarter of 2008, 0.1 percent growth was chalked as exports plunged amid sharply declining orders as the United States - Malaysia’s top trading partner - slipped into recession. Falling world commodity prices, in particular oil palm, have also dented the agricultural sector’s contribution to the local economy.
Among large multi-nationals that have been affected by the global meltdown and closed shop here are US semiconductor behemoth, Intel Corp.
In January, the Santa Clara, California-based firm announced plans to restructure operations and shut down four site including two existing assembly test facilities in Penang, one in Cavite, Philippines and a 200mm US wafer fabrication facility in Hillsboro, Oregon.
The Malaysian Institute of Economic Research expects the country’s export-reliant economy to shrink 2.2 percent this year, worst than official forecasts, but better than other private researchers have warned could happen if the government continued to dilly-dally in implementing fiscal stimulus.
“In light of the deep declines in macro indicators, the gloomy business and consumer confidence, and the dismal sectoral indices, we are obliged to revise Malaysia’s growth forecast for 2009 downwards. If exports shrink severely, the downturn could be more harmful,” MIER said in a report.
The think-tank had previously forecast GDP growth of 1.3 percent for 2009 and 3.8 percent for 2010. It now expects an upswing in 2010, with GDP growth at 3.3 percent on the back of a global recovery. It also saw 2009 inflation at 2 percent and unemployment at 4.8 percent.
The central Bank Negara may cut interest rates to 1.5 percent or lower, down from 2 percent at present, to stimulate borrowing and economic activity, the MIER said.
Not enough direct fiscal stimulus despite huge-sounding RM60bln mini-budget
On the negative side was the limited impact from the RM60 billion mini-budget announced by Prime Minister Najib Razak in March. This was “less certain” than a traditional fiscal injection as it consists mainly of guarantees, the think-tank said.
“Due to the larger indirect measures in the mini budget, the impact may be less certain than the
traditional fiscal injection. “The actual public spending for social infrastructure and public works is only 15 billion ringgit, or about 25 per cent of total, which is not a large amount to be spent over a two-year period,” said the MIER.
Najib had forecast GDP growth of between negative 1.0 percent and positive 1.0 percent, while Bank Negara governor Zeti Akhtar Aziz today told reporters she expected ‘more or less’ flat growth for this year. Some private houses have predicted a more severe contraction of 5.0 percent.
In the last quarter of 2008, 0.1 percent growth was chalked as exports plunged amid sharply declining orders as the United States - Malaysia’s top trading partner - slipped into recession. Falling world commodity prices, in particular oil palm, have also dented the agricultural sector’s contribution to the local economy.
Among large multi-nationals that have been affected by the global meltdown and closed shop here are US semiconductor behemoth, Intel Corp.
In January, the Santa Clara, California-based firm announced plans to restructure operations and shut down four site including two existing assembly test facilities in Penang, one in Cavite, Philippines and a 200mm US wafer fabrication facility in Hillsboro, Oregon.
