Malaysian Economic Recovery: What green shoots, Hardev?
Signs of green shoots in economic recovery
By Hardev Kaur (www.nst.com.my)
Hardev Kaur
MALAYSIA is listed among the top 10 countries seen as best able to weather the current global economic crisis. This is the view of more than 7,500 businessmen in 24 countries polled for the International Business Confidence Survey. The survey, by Servcorp, was conducted over a two-week period in April aimed at understanding the current mood, business morale, impact of the economic downturn and which countries in their view were navigating through the crisis most effectively.
Australia was ranked the best able to weather the crisis, followed by China in second spot and India third.
The Malaysian economy, which registered a negative growth of 6.2 per cent in the first quarter of this year, is showing signs of improvement with positive growth forecast in the fourth quarter of this year and in 2010.
The signs of improved economic performance are emerging even in the major economies which are also major markets for Malaysian
Malaysia's Economic Wizard
products. The stock markets have gained and the KLCI is above 1,000 points. The stock market, Tan Sri Nor Mohamed Yakcop, minister in the Prime Minister’s Department, pointed out, is not only about the prices and the value created in the market but it is also indicative of the level of confidence in the economy.
The number of retrenchments has stabilised, unemployment has not really gone up and has not become a major problem, Nor Mohamed stressed. Inflation rate of 2.4 per cent in May is at a 16-month low and has been easing since hitting highs of 8.5 per cent in July and August last year. The construction sector, which has a high multiplier effect, is showing considerable improvement.
According to Jon Oh, an analyst with CLSA, the sector could have outperformed the broader market index by as much as 30 per cent over the last three months.
Prime Minister Datuk Seri Najib Razak told Parliament on Monday that “the people-friendly housing project” had been implemented on an urgent basis. Costing RM200 million to build 2,664 units of homes, the project has had a positive impact on the construction sector activity for the first quarter of this year, which posted a growth of 0.6 per cent. The housing project also provided employment and income for small contractors, especially in the rural areas.
The two stimulus packages totalling RM67 billion announced by the government last November and this March will begin to have greater impact in the second half of this year.
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said the two packages would add between one and 1.5 per cent of gross domestic product (GDP) growth. Even as Malaysia’s own domestic pre-emptive measures continue to be implemented, there are positive signs from the major developed nations. China’s stimulus package, too, is having positive impact on economy, which is a welcome sign for countries in the region.
The Finance Ministers of the Group of Eight (G8) meeting in Italy over the weekend also “began looking ahead to economic recovery”. They acknowledged that there are “signs of stabilisation” in their economies as improving economic data fuelled a rally on world stock markers. The Paris-based Organisation for Economic Cooperation and Development (OECD) said most of the world’s big economies were close to emerging from a recession and its data pointed to a possible recovery by the end of the year.
The OECD says a “possible trough” had been reached in April in the major economies that account for almost three quarters of global GDP. The composite index for 30 economies rose 0.5 points in April, the second consecutive monthly rise, after falling for the previous 21 months. The OECD added that its overall measure of advanced member countries pointed to “recovery” instead of the “strong slowdown” they had been suffering since last August.
Despite the encouraging signs, “it is still too early to assess whether it is a temporary or a more durable turning point”. And the G8 ministers were reminded not to be too eager to unwind the various stimulus packages they have put in place. While there may be some “green shoots” of economic recovery, the full impact of the financial and economic turmoil was yet to be felt in “some corners of the world”.
There are mixed signals from the Bretton Woods institutions, too. The World Bank forecast earlier last week an even worse period ahead. It said the global economy would shrink by three per cent this year, far worse than a previous estimate of a 1.75 per cent contraction.
World Bank president Bob Zoellick is more positive and is quoted by Reuters as saying that the International Monetary Fund had raised its 2010 global growth estimate to 2.4 per cent from 1.9 per cent, and confirmed its 2009 forecast for a 1.3 per cent contraction made in April.
The G8 ministers in their communique said the “situation remains uncertain and significant risks remain to economic and financial stability”. They also stressed their commitment to provide any more stimulus the economy might need. They asked the IMF to assist with the process of outlining exit strategies from monetary and fiscal stimulus measures, like tax cuts and lower interest rates, and said such plans were “essential to promote a sustainable recovery over the long term”.
I first met Hardev Kaur and Ahmad Taib when they were both cadet reporters with Business Times.
Mr Bean - June 19, 2009 at 5:17 pm
New Yorker Bean,
Hardev Kaur used to spin for Mahathir and Badawi and is doing the same thing for Najib. There is nothing solid in this article. We know that the KLSE is not a good indicator of confidence, since it is supported by EPF, PNB, Tabung Haji, Amanah Raya and other government affliated funds.
I believe that the worst is yet to come from Malaysia. Unemployment is still high. But Noh Mohamad, Malaysia’s Economic Wizard, says “The number of retrenchments has stabilised, unemployment has not really gone up and has not become a major problem.”
Hardev adds, ” Inflation rate of 2.4 per cent in May is at a 16-month low and has been easing since hitting highs of 8.5 per cent in July and August last year. The construction sector, which has a high multiplier effect, is showing considerable improvement”. Both of them are trying to put on a note of optimism by implying that our fundamentals are strong. –Din Merican
dinobeano - June 19, 2009 at 5:49 pm
Is that an editorial piece or it is just reporting? But it is true she built her career on the back of Mahathir’s rise to power back in ’79 – and so did Ahmad Taib, now a dato.
I believed she was merely quoting Nor Mohammad.
Investigative journalism is in its infancy in Malaysia and journalists cannot be relied on to investigate anything. They are just reporters and reporters do what they do best – report.
Mr Bean - June 19, 2009 at 6:00 pm
Is that an editorial piece or it is just reporting? But it is true she built her career on the back of Mahathir’s rise to power back in ’79 – and so did Ahmad Taib, now a dato.
I believed she was merely quoting Nor Mohammad.
Investigative journalism is in its infancy in Malaysia and journalists cannot be relied on to investigate anything. They are just reporters and reporters do what they do best – report.
Sorry… forgot to say great post – can’t wait to read your next one!
Mr Bean - June 19, 2009 at 7:36 pm
When it comes to spinning leave it to these “professionals”. Hardev and her ilks find it desirous to distort facts and figures regardless of what is evident on the ground. They just say what their bosses want to hear. How naive can they be? But over here naivety is part and parcel of the game. The better you spin the closer you’ll suck up to your bosses. Who are they trying to hookwink? Bung Mokthar and the “venerated” Dewan Rakyat Speaker, Pendekar Amin perhaps.
Tok Cik - June 19, 2009 at 9:11 pm
WE are same as US. They have put in US 1.4 trillion and the economy is still not growing. The money is only sufficient to buy up the debt. Moral of the story- From now on live on debt.
Thumb Logic - June 19, 2009 at 9:16 pm
You never heard of multiplier effect?
Mr Bean - June 20, 2009 at 12:19 am
True, there is hardly such a thing as Investigative journalism in Malaysia. How can you when the press here practises self-censorship and top management in all mainstream newspapers are trained shoe shiners? We also do not allow foreign journalists to work alongside local journalists. They could have provided valuable and independent feedback and training. No, of course. That’s exactly what the government of the day does not want. Well-trained and fearless journos who could expose them. See what they did to the Chinese journo who merely reported what the Penang Ahmad aka racist politician. Arrest and detain her under ISA for her protection!!!
nobeans - June 20, 2009 at 4:54 am
Bro. Din, this is another classic case of ‘denial syndrome’ . Masih lagi hendak menidakan akan keadaan ekonomi yang sebenarnya.
Kita dapati negara2 maju pun boleh menerima dan berani mengaku akan keadaan tersebut.
Saya rasa perangai ‘denial syndrome’ ini telah meneluar menjadi kanser dikepala2 pemimpin2 BN . Bodoh dan sombong !!!
Salam
ariffdanial - June 20, 2009 at 6:22 am
There are two concerns about the global economy, which Hardev did not comment on: 1) the rally in commodity prices, especially crude oil and its impact on Malaysian economic recovery. Since March this year, crude oil has risen some 60 per cent to around USD72 per barrel from USD30.The prices of copper and crude palm oil have strenghtened too; and 2) the weakening of the US dollar and the possibility of a currency crisis, meaning a return of serious inflationary pressures as result of the Obama massive stimulus package, and what the Federal Reserve’s response will likely be.
For the above reasons, I am more cautious than our gung-ho economists and self-proclaimed economic pundits and cheerleaders in the mainstream media. Green shoots or autumn leaves?–Din Merican
dinobeano - June 20, 2009 at 12:15 pm