Malaysia’s government unveiled plans yesterday to inject 10 billion ringgit (US$2.7 billion) to stimulate the sagging economy and avert a recession.
This will bring the total stimulus spending to 17 billion ringgit after a 7 billion ringgit package announced in November. But some economists said it might be insufficient to keep recession at bay.
The proposed second stimulus plan was tabled for its first reading in parliament by Deputy Finance Minister Kong Cho Ha.
MORE TO COME?
Kong said 5 billion ringgit would be used for development and the rest for operational expenses. The government may increase the amount later, he said, without elaborating.
Deputy Prime Minister Najib Razak will outline full details of the new stimulus package in parliament on March 10, which will include fiscal, monetary and other measures to boost the economy, officials said.
Many economists have predicted Malaysia’s trade-driven economy could plunge into a recession this year — its first since 1998.
The economy grew a dismal 0.1 percent in the fourth quarter of last year, bringing full-year growth to 4.6 percent, falling short of the official target of 5 percent.
The central bank has slashed interest rates three times since November and the government has indicated it may cut its growth forecast of 3.5 percent for this year amid the protracted turmoil in the global economy.
In a recent report, AmResearch estimated the government would need at least 40 billion ringgit in increased spending, or 5 percent of GDP, to prevent the economy from contracting this year. The manufacturing slump should continue until September, it said.
SINGAPORE STING
In related news, Singapore’s economy may contract by as much as 10 percent this year if exports continue to fall sharply, former prime minister Lee Kuan Yew (李光耀) said in remarks published yesterday.
If exports drop by another 30 percent to 40 percent in the second quarter, GDP will go down 10 percent, Lee said at a financial forum.
In January, Singapore’s exports declined by 35 percent year-on-year — the largest drop on record.
The government’s official projection is for the trade-dependent economy to contract between 2 percent and 5 percent this year after growing 1.1 percent last year.
A 10 percent contraction in GDP would be four times worse than in 2001, when the economy fell by 2.4 percent, Lee told the forum on Wednesday.
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