Wednesday, May 27, 2009

Negative 6.2% GDP in Q1

The GDP numbers from the first quarter of 2009 are finally out. A snapshot view shows that the Malaysian economy shrank by 6.2%. This is certainly worse than anybody has expected; expert or, otherwise.

Given the sharp downturn...not exactly unexpected if you've troubled yourself to read the label "economy" in this blog...it seems certain that this second quarter will also show a contraction. The technical definition of a recession, therefore, looms ominously.

Digging ourselves out of this is going to be more dependent on the state of the U.S. economy than anything else. When you hear people talk about the Chinese economy being more important than the U.S. - take a pause to remember that the U.S. is China's largest market. So, if you cut to the chase, it's really the U.S. economic health that matters.

Other export markets are essentially intermediating for the consumptive prowess of the U.S. Thus, belt-tightening by the U.S. consumer means a meagre export volume for the rest of gthe world.

Malaysia's exports have been contracting for 6 straight months now.

The electrical and electronics (E&E) sector has shrunk by 41% in value.

Domestic consumption is not really relevant.

Domestic investment is more important.

Skills enhancement, education standards, employability and value-adding is far more important than passive consumption patterns.

Is Q1 the most painful quarter that Malaysia is going to see? That is one perspective. Others may not be so optimistic.

The game is afoot, ladies and gentlemen.

7 comments:

etheorist said...

I thought I was being flippant when I casually suggested in my March 11 post that growth this year could be -5% to -1% when the RM60 billion stimulus was announced.

Alas, I wasn't far off.

US should stimulate. China should restructure. Malaysia should undergo a major overhaul.

de minimis said...

You made the right call, Guru. This Q1 negative should be an impetus for the overhaul that you refer to. Will the focus be there? Will there be the necessary political will?

We should all keep the input coming so that the policy-makers and economic managers keep their courage to stay the course on major economic reforms.

Mat Cendana said...

This post makes enough sense to me. It just goes to show that those who include pages of graphs and charts might not really know what they're talking about - the graphics and statistics are just to impress or/and scare off people from questioning:-)

Anyway, even a Lower Six Economics student should know that "something serious, firm" needs to be done about our situation.

Let's hope the government is up to the task. If there's hesitancy, hanky-panky and other things that threaten us, I'm going to swing to "the other side", seriously.

Had just read about the Great Depression inAustralia - about something called Sosso and the humiliating experiences it created for some unfortunate Aussies back then. I don't want something like that here. So, if those with the power just act like donkeys, that means they don't really care. But I will care about them though... giving the attention on how to KICK.

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flyer168 said...

De minimis,

Malaysia badly needs “Role Model” established Leaders & Politicians of HONOUR with Calibre, Maturity & Tolerance without Fear or Favour on Both sides of the Political Divide....

Further, this nation Desperately needs Intelligent, Time Proven Pragmatic Successful modelled, Financial & Politiical “SOLUTIONS” on Both sides of the Political Divide NOW , to mitigate the IMPENDING Political & Financial fallout.

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."

- Iceland has a population of about 300,000 citizen, half of whom have their "Home" there, work overseas, enjoy the "Welfare State Benefits" but do not pay "Taxes" from their "Oversea Income"....

- Alot of "Wheeling & Dealing" went on with the "Hot Russian Oil Money" available leading to the "Carefree MAX GAIN US Investments, etc"....

- And "Bang" the US Subprime Financial Market Bubble "Burst" resulting in the "Collapse" of the Icelandic "Financial Market & its Economy"....

- Today even their "Millionaires" are "Crying" when their Icelandic Kroner is only worth 20%, so you can imagine how the rest are surviving...

- No jobs, no money, no future in sight....hungry people....

- so they "Protested" until the Government of the day....

- "ACCEPTED THEIR FAILURE NOT THROUGH CORRUPTION THOUGH"....

- thereafter "GRACIOUSLY & HONOURABLY STEPPING DOWN ENBLOC"....

- A "New Government is now in place" trying hard to "Salvage" the nation!

Contd....

flyer168 said...

Contd....

De minimis,

UMNO, its Ketuanan Leaders & their “Mercenaries” have lost the “Plot” completely & are “Bankrupt” of Honourable & Intelligent Political, Financial & Economic Solutions to MITIGATE this nation’s WOES.”

So how can they be "Honourable" to carry out their duties diligently without "Fear or favour" or "Step Down Honourably", even after taking an "Oath" to the King/Sultan/the nation & rayaat."

If they just “Swallow their False Pride, be Honest & Sincere”, the “Whole Nation and the World” will be with us to HELP out!

We only have to “Look, Acknowledge, Ask and Learn” from our neighbour down South – their COST EFFECTIVE TESTED, TRIED and PROVEN solutions which have “ENDURED THE TEST OF TIME” –

DYNAMIC and RESILIENT SUCCESSFUL Political, Financial, Economic & Social POLICIES, ETC.

Our Southern neighbour adopts the best criteria Brains, Politicians, Implementers, etc with Academic, Professional, Long and Proven Track performance of “Excellence”, who are “Accredited and Remunerated” very well (from a few hundred thousand to more than a Million Singapore Dollars per annum) with “Structured Job Specs” in this 21st century context....and they DELIVER!

The right person for the job at hand!

Integrity and Accountability – Either “deliver or else you are out”.

With such a Policy in place, their Senior Leaders, Generals, CEOs, etc do not even have to be seen....but everything runs the way it should for the nation and its rakyat’s “Guaranteed Basic Needs”

They are the “True Leaders” involved in the “Bigger Vision” for the Nation’s International Political, Security, Economic, R & D, Manufacturing, etc Policy and Standing....

The DBS, MAS and Termasek together have financial “Reserves” of more than 600 Billion Singapore Dollars.

For a small nation, they have acknowledged, deliberated, identified and mobilized a “Structured and Dynamic” contingency financial plan to mitigate this financial meltdown

– with an initial package of 20.5 Billion Singapore Dollars and they are “Rock Solid” with their cash reserves.

Anyone involved in “Graft, Corruption, etc” would rather “Self-Destruct” than have to face the Senior PM and their peers.

In Bolehland, our Jaguh Kampung Wannabe UMNO/BN Leaders are still....

Playing with “MARBLES” when all the other nation’s Leaders, Politicians & Government are playing “CHESS”, Synergising & Strategising on the Global Political & Financial Chessboard....

Yes, Guru etheorist is perfectly correct....

US should stimulate. China should restructure....

"Malaysia should undergo a "MAJOR overhaul."

Yes, “POLITICALLY” to EFFECT that CHANGE!

Cheers.

hishamh said...

@Mat Cendana:

You mean like this one? :)

While I agree that something must be done, the billion dollar question is what? Are we talking here about a demand side shift, or a supply side shift, or both?

There's definitely room to boost consumption on the demand side as it is rather low, but that's a characteristic shared by many export-oriented countries (including advanced ones like Japan and Germany). So the consumption-led model is not necessarily a given we must follow, especially with the example of America before us.

Investment led growth sounds attractive, but when we benefited from that in the 1980s to mid-1990s, it was in confluence with the hollowing out of Japan's manufacturing. I don't see any other "sugar daddies" out there right now unless China prices itself out of low-cost manufacturing.

On the supply side, manufacturing is dying, agriculture has been criminally neglected for 30 years (except for monocultures like palm oil), and mining is a long term dead end.

Which leads back to services - but here, finance is as big as I'm comfortable with, and so is government. That doesn't exactly leave a whole lot of alternatives.

I rather suspect the economy will evolve on its own without any prompting from planners, and we'll end up having a mixed bag of models, rather than having one stand out as the model.