Wednesday, April 15, 2009

Malaysia’s Economy May Contract More Than Expected

This is just a quick post to draw your attention to the Bloomberg report on MIER's latest statement. I haven't the time to comment or analyse yet:

Southeast Asia’s third-largest economy will probably contract 2.2 percent in 2009, the institute said in a report released in Kuala Lumpur today, cutting its forecast from 1.3 percent growth. Exports may fall 24 percent, MIER said.

“The crisis has not hit the bottom,” Mohamed Ariff Kareem, MIER’s executive director, said in a speech. “It is almost certain that Malaysia will slide into a technical recession in the first half. If exports shrink severely, the downturn could be more harmful,” MIER said.

The government, which expects the economy to shrink as much as 1 percent or grow that amount at best this year, has unveiled two stimulus plans worth a combined 67 billion ringgit ($19 billion) to shield the nation from the worldwide slump. The benefits from those measures may only be felt at the end of this year and more may be needed, the institute said today.

“If the economy turns gloomier in coming months, another stimulus may be called for,” MIER said in the report. The “moderate” impact from the second stimulus will only partially cushion the economy, it said.

‘Worst Case’

In the worst-case scenario, Malaysia’s economy may shrink 3.8 percent this year if the stimulus packages fail, MIER said in its report. The partially government-funded research institute also cut its forecast for Malaysia’s growth next year to 3.3 percent from 3.8 percent.

There may be no global recovery until the U.S. dollar weakens, MIER said. The strength of the U.S. currency, which MIER says is overvalued, caps demand for U.S. exports, makes foreign goods cheaper, and risks fueling a rise in protectionism, Ariff said.

...unemployment is a bigger worry for MIER. The jobless rate may reach 4.8 percent in 2009 from 3.7 percent in 2008, Ariff said.

Malaysian employers may cut 200,000 jobs in this slump, more than double the number lost in the Asian financial crisis more than a decade ago, according to Ariff. There’s no sign that domestic retrenchments are abating, he said.

Governments worldwide may also be setting up the next economic crisis by racking up budget deficits with domestic stimulus plans, Ariff said. Wider budget gaps lead to greater debt, the origin of the current crisis, which may in turn curb consumer spending and threaten future economic growth, he said.

“They may be inadvertently sowing the seeds of the next crisis,” he said.


walla said...

flyer168 said...

De minimis,

I would like to share this article with you & your readers....


Is The New Captain Another Football Captain Just Warming Up? It May Be Worse, The Team (i.e. Advisers) Is Still In The Dressing Room! - By Matthias Chang

By Matthias Chang
Thursday, 16 April 2009 00:06


"When the Badawi regime was listless and napping, Badawi gave the excuse that he was merely warming up.

I pointed out that he had five years to warm up as the deputy prime minister to the then prime minister, Tun Dr. Mahathir Mohamad and that he cannot have the luxury to “warm up” when the game has already started.

Badawi did not heed my advice and when the game resumed after half-time, he gave away five goals.

A third rate team scored five massive goals and was surprised that the much touted BN team was unimaginative in offensive play and its defenders were four overweight and over-rated players.

Badawi refused to accept responsibility for the massacre and demanded that he remain as Captain.

The whole team sheepishly agreed that the captain should be allowed to serve the full term.

The stupid rationale was that “a captain should not be challenged” as it was against the “culture”.

The fans and critics were so pissed off that they gave the ultimate warning that if there was no change in the leadership, they would bury the entire team.

Some team members asked the Deputy to take over the leadership but he refused.

He calculated that it would be safer for his long term future that others should do the heavy work of pushing aside the captain.

The Deputy knew that sooner or later, the captain would be toppled as the fans were really pissed off.

The Deputy’s advisers, being opportunists and lacking in principles agreed to this game plan.

The fans and critics fed up with the charade, mounted a massive campaign and indicated that events would turn ugly and the whole team beaten to a pulp, if the captain was not booted out.

That scared the shits out of the entire team. And as they say, the rest is history, albeit a recent history.

One would have thought that the Deputy who had assumed the captaincy would be more than grateful to the fans and critics who for five years, did all the heavy work to boot out the under-performing captain.

To the utter consternation of the fans and critics, this new captain was not only ungrateful but worse, he has informed his opportunist “advisers” (a carbon copy of the 4th Floor Boys) that he intends to appoint the moribund and just retired captain as his adviser.

It was reported that the new captain was fond of saying that the just retired captain was an “honourable man” as he had kept his word to retire.

Maybe we should remind this new captain that the just retired captain wanted to “retire” in 2010 as he had “unfinished business” to attend.

The fans went ballistic and demanded “December 2008 or else….”

The just retired captain, with the tacit agreement of the Deputy, deviously postponed the Annual Meeting from December 2008 to March 2009 in the hope of buying time.

But it was not to be, as the fans were adamant that the captain must get out of their sight for good!

So how in the world can this new captain and his opportunist advisers claim that IT WAS THEIR STRATEGY THAT WROUGHT THE CAPTAINCY from the just retired captain?

I am not going to waste my time arguing this point.

I will be blunt and frank.

I will now issue a warning to the new captain and his opportunist advisers.

You had five years of warming up. Enough is enough!

You had five years of experience in mismanaging the country under the just retired captain.

You had five years of experience in how to destroy a political party under the just retired captain.

You had five years of our patience and tolerance.

You had five years to address our grievances but you neglected our frustrations and F#@K up big time and paid a heavy price, when your team gave away five massive goals to our opponents.

A day of infamy!

You had five years to prepare a program to make good the damage, but you and your team just did not have the balls to do what it takes to make things right.

You had five years, and it freaks us out that you and your team, right at this moment is still figuring out what is required to put things right.

If your bloody idiotic advisers, whoever they are, cannot see the shits that have hit the ceiling fan and messed up the whole place by now, its about time, you ditch each and everyone of these ass#@L#@!!!!!!!!!!


You must be freaking out to think we will fall for more spin!





So why are you and your team still warming up, when you should be up and running and scoring some spectacular goals so that we have something to cheer, instead of hearing more excuses?

Team BN lost by five goals in the big game in March 2008.

Since then you have lost three critical games.

It would have been a consolation of sorts to have scored at least one goal in the three matches. But you came up with duds!

That is just not acceptable. It is the same old team, with the same tactics, and the same cheer leaders.

Can you just tell us what is new, different and really meaningful?

And for heaven’s sake, don’t do or say anything that will remind us of the just retired captain, his arrogant son-in-law and their baggage.

If you should utter again that the just retired captain is OK and you will look to him for advice, then all bets are off.

We are tired of watching the same movie over and over again.

Is this so difficult for you and your idiotic and opportunist advisers to comprehend?

FINALLY, get into your head that it is the economy that is our priority and if you don’t get it right by July, your time is up and you will have to go the same way as the just retired captain.

Please do the following as proof that you are listening to the rakyat.

Ask yourself the following questions:

Since you became the Finance Minister, why were you not up to speed on the global financial crisis?

If it is because you were getting the wrong data and advice (inspite of all the public warnings and publications), then why are you still keeping these advisers and or officials at the Central Bank and the Treasury?

What is the single most important thing that you must do as captain and treasurer of the team to win the confidence and support of the fans?

If you and your team do not know the answer, I suggest that you join the just retired captain and save us a whole load of aggravation.

You have been warned!" unquote.

This is Beautifully written, TIMELY & I am glad this author has voiced his strong version of what I had commented many times on Blogsites!

Cheers Bro.

hishamh said...

I'm a bit puzzled by Prof Ariff's comments about the USD.

It's one thing to say the USD "should" depreciate (which I think will happen), it's quite another to say that global recovery (as opposed to US economic recovery) is predicated on said depreciation.

He'd be more correct to say that resolving global imbalances depends on a USD depreciation, which I'd readily concur with. But that implies slower global growth as economies restructure their spending and production, not faster.

Or is this another case of journalists not understanding what's being said?

flyer168 said...

De minimis & hishamh,

Does it really matter if Prof Ariff's comments about the USD "Should" or "Should not".

Presently I feel the markets have not bottomed out sufficiently to park our "Hard Earned Retirement" eggs....

I had planned years before my retirement in 2002, to leave all my CPF savings in Singapore for almost 3 decades when I came back to K.L with my employment until my retirement (With my EPF here!).

I have converted my RM into Euro, AUD & Singapore Foreign Currency FDs at the Local SCB Bank.

And not USD as it is a matter of time before it collapse....

Heard of the "Amero"?

For long term I am not concerned on the FD rates, rather the Capital value appreciation which is 2 pronged....

Interest higher than RM FDs & Currency Appreciation vs RM which could suffer a sudden depreciation!

Our neighbour Singapore & the World G20 Leaders are Intelligently Brainstorming, Strategising & Synergising their positions on the GLOBAL FINANCIAL "CHESS Board"....

Synergising & Harnessing their Best Brains & Best Practices SOLUTION Models....

To LEAD Singapore & the G20 nations & its people SAFELY out of this Financial Tsunami.

This Bolehland has a “Long” way to go with their “Blatant Denials” & “Childish Charades” even at this eleventh hour, to be able to catch up!

With the Global Financial Meltdown, NO Country or Government can understand & appreciate the "Actual Impact" to the "Nation" & its "People" until they get hit "Hard" like "Iceland."....

And Malaysia could JOIN the many, many more to come!

The toxic time bomb is ticking and it is only a matter of time before it explodes.

I would like to take this opportunity to suggest to the good people of Malaysia....

Ignore the political theatrics of both sides, focus on the financial crisis and save your family from unemployment, foreclosure and or bankruptcy if you are deep in debt.

There is no time to waste. After March 2009, the economy will turn messy.

hishamh said...


The view on USD matters, because it represents a different understanding of the endgame for the global crisis. Prof Ariff's view is that USD depreciation is required for global recovery - I don't.

I expect current USD strength will reverse, but the extent of the depreciation required, in my view, isn't that much - and this has nothing to do with global economic recovery or its absence. The fact that a reversal of global imbalances is already happening despite USD strength signals that currency adjustment isn't the only operative channel.

I just read this interesting paper yesterday which outlines some of the other factors (warning: really wonkish discussion; the author however is an expert on external asset stocks):

My thinking is that US economic recovery will have to be balanced against the need to normalise quantitative easing, which will require higher interest rates to contain inflation. In that scenario, USD depreciation will at worst be slow. Nonetheless, a recovery will happen, even without a depreciation.

Secondly, the trajectory for the rest of the world is different. In the absence of the US as consumer of last resort, the rest of the world will have to restructure their economies more inwards, or find some other country to export to (hint: China). USD depreciation is not required for this to happen.

In short, I don't have much sympathy for the USD collapse meme. And Amero is a non-starter.

I think what you've done, re: currency deposits is prudent, except for the AUD - I'm curious for your reasons for that, as AUD strikes me as high risk. EURMYR is at fair value, SGDMYR is slightly overvalued (good call there), but AUDMYR is still undervalued even after the appreciation of the last 6 months.

Also, under the current MYR exchange regime, the risk of a sudden depreciation is highly unlikely. This isn't 1997. For currencies that are free floating, MYR is fluctuating based on fundamentals, unlike in 1996-97 when MYR (under a soft USD peg regime) was significantly overvalued.