cartoon901

Malaysia may need another RM8 billion to fight recession in its economy that the Malaysian Institute of Economic Research (MIER) says will shrink 4.2 per cent this year.

The government has already put in RM67 billion in two stimulus packages of cash and guarantees to defend the economy that Prime Minister Datuk Seri Najib Razak said will contract between 4 and 5 per cent in 2009.

MIER executive director Professor Emeritus Datuk Dr Mohamed Ariff said the economy needs pure government spending of RM30 billion or 4 per cent of GDP but the combined stimulus packages only had about RM22 billion for that while the rest was “padding that doesn’t mean much”.

“We need more government spending to make a critical impact. There may be a case for another RM8 billion in pure government spending,” Ariff told reporters at MIER’s national economic briefing.

He said recent reforms by the prime minister aimed at opening up the economy were a good beginning but the full impact would only be felt when the economy recovers.

“Our forecasts are not really impacted by these long-term measures,” he said.

MIER had revised Malaysia’s 2009 growth forecast downwards from -2.2 per cent previously to -4.2 per cent, and expects negative growth for the second and third quarters and a slight growth in the fourth quarter.

It also revised its growth forecast for 2010 to 2.8 per cent from 3.3 per cent previously.

Several MIER surveys however indicate that business and consumer confidence had improved in the second quarter of the year, possibly influenced by government measures to support the economy.

The Business Conditions Index (BCI) and Consumer Sentiments Index (CSI) passed the 100 points threshold that separates an expansion from a contraction, said MIER.

The BCI gained 44.1 points to 105.2 in the second quarter, indicating that business confidence has regained strength. The CSI rose 26.9 points to 105.8 in the second quarter.

Ariff said Malaysia remains one of the stronger economies in the region with sound fundamentals but that the crisis, while easing, is still ongoing.

“Jobs statistics in countries like the US and South Korea are not encouraging. We’re not out of the woods yet,” said Ariff.

 

Source: Malaysia Insider