The government of Malaysia is tipped to bring out its second package of economic stimulus worth RM7 billion (S$2.92 billion) to RM10 billion (S$4.17 billion) in the next coming month.
In March, Najib Razak, the Deputy Prime Minister of Malaysia, will soon become the prime minister of the country. He noted that another stimulus package is being expected as the global recession turns out to be more severe nowadays.
The economy in Kuala Lumpur is expected to grow by 3.5 percent in 2009 in real terms. However, almost all private economists foresee growth of 0 percent to 2 percent.
Their pessimism was mainly based on reality. For the past two months, exports have plunged, manufacture of production has broken off and Malaysia’s two main exports prices – gas and oil, as well as palm oil – have come off acliff.
Unemployment is deemed to have an increase, with the country’s biggest Chinese industries planning to cut back, according to the Malaysian Chinese Chamber of Commerce survey.
The risk of the spending package of the new government can be downgrading in the sovereign debt rating of Malaysia, as the budget shortage can arise to 6 percent to 7 percent of Gross Domestic Product or GDP, from an approximated 4.8 percent.
However, this is improbable to faze the planners of the government. According to economists, given the downturn scale, almost each country will encounter a budget shortage.
So far, Kuala Lumpur has announced another stimulus package, slash interest rates two times in 2 months – the rate of the overnight policy is currently 2.5 percent, down to 75 points basis – and reduced legal reserve requirements of banks so they will have more money to lend.
The central bank has apportioned an amount of RM2 billion to be lent by both medium and small enterprises. At the same time, the influx of migrant workers was frozen and several measures will be considered to lessen the number that was already in Malaysia.
Last week, Mr. Najib invited Malaysians to make a note to his own with some recommendations on how to undertake this crisis. His invitation had over 135 responses, with several suggestions varying from taxes and tariff cuts to bigger expenditure on energy projects that are renewable.
Some can well adopt. Analysts consider that the government will probably cut charges and taxes – particularly for electricity – and aim necessary industry sectors for expenditure.
Nevertheless, almost all the analysts agree that the pace of implementation and the target industry sectors are vital. The project implementation under the Ninth Malaysia Plan was really abysmal. For instance, the water transfer project in Pahang-Selangor and the second network in Penang have not yet started, after several years of planning.
Several analysts are getting worried that Kuala Lumpur will persist to distribute political projects to maintain peace in the United Malays National Organisation (Umno), which Mr. Najib will administer in March.
“If they are still going to give out contracts to the so-called Class F contractors, it will do nothing for the economy,” said one economist. ”The Finance Ministry should keep its focus”.
Contractors that belong to Class F are handful ethnic Malay businesspersons, generally lacking of skills and nearly all are Umno members.