Malaysia yesterday unveiled a 60 billion ringgit (US$16.2 billion) stimulus package but warned the export-driven economy could still shrink by 1 percent this year despite the massive spending.
The plan was much larger than expected, and comes with the Southeast Asian nation fighting slowing growth as the global downturn dries up demand for its exports in the US and Europe.
“The implementation of such a large stimulus package is unprecedented in the nation’s economic history,” said Deputy Premier and Finance Minister Najib Razak, who will take over as prime minister at the end of this month.
He said the package would “contribute towards mitigating the impact of the global contraction on the domestic economy.”
But despite the measure, and a US$1.9 billion stimulus package announced last year, he said the economy could still be headed for a contraction. The government had previously stuck to its forecast of 3.5 percent growth for this year.
“Taking into account these measures, GDP growth is expected to be in the range of minus 1 percent to 1 percent for 2009. Without these efforts the economy faces the prospect of a deep recession,” he told parliament.
The plan accounts for almost 9 percent of GDP and will be implemented this year and next.
Malaysia’s growth slowed to just 0.1 percent in the fourth quarter of last year, hit by declining exports and manufacturing as demand from its trading partners evaporated.
January exports plunged 27.8 percent year-on-year to their lowest level since 2001.
Yeah Kim Leng (姚金龍), an economist with ratings agency RAM Holdings, said the huge stimulus package could avert a fully-fledged recession, although a technical recession of two consecutive quarters of negative growth was unavoidable.
“We can see this is a response to a once-in-a-lifetime economic crisis. This is a larger-than-expected stimulus package,” he said.
“It should be adequate to address the needs of the country in facing the exports downturn, which is having a strong knock-on effect on domestic demand and investors’ confidence levels,” he said.
The spending plan is a major test for Najib, who is taking on the top job one year after general elections that saw the ruling coalition battered by a resurgent opposition.
Within days of taking office he faces a series of by-elections which will be seen as a barometer of his popularity, and the coalition’s ability to claw back support after the electoral drubbing.
In related news, the government announced yesterday it was canceling visas for more than 55,000 Bangladeshi nationals who obtained their work permits in 2007, but have yet to enter the country.
The move was in response to a recent announcement by the Bangladesh High Commission in Kuala Lumpur that more than 70,000 workers with approved visas would be entering the country soon.
Home Minister Syed Hamid Albar said yesterday that only 55,147 Bangladeshi nationals were given work permits in 2007 and that none had entered Malaysia yet.
“The government has decided to cancel all entry visas for Bangladeshi workers wanting to enter the country,” Syed Hamid was quoted as saying by the official Bernama news agency. “This is due to the current scenario in the country, in that there is no need for foreign labour, except for certain sectors identified by the government.”
He said the government would refund the workers’ levies to local employers soon, but made no mention of the losses that would be incurred by the affected workers, many of whom were forced to borrow money in order to apply for their visas.
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