theSun | WEDNESDAY DECEMBER 24 2008
business news
Malaysia to ride out ‘bumpy’
economic journey next year
KUALA LUMPUR: Malaysia has
strong fundamentals which make
the economy resilient enough to get
through next year when the fallout of
the global economic slowdown begins
to take effect.
Analysts’ said the ongoing
economic measures are expected to
help drive the country through the
“bumpy” journey next year, no thanks
to the United States and the massive
failure of its financial system.
Even before the crisis, it was still a
difficult year as the government had
to contend with rising crude oil prices
which touched US$147 (RM514.50)
per barrel in July before receding to
US$36.50 (RM127.75) just last week.
As if this was not enough, the
United States sub-prime crisis boiled
over soon after the tabling of the
2009 Budget on Aug 29, spreading its
ill-effects all around the globe.
As a policy response towards
the global financial crisis, Malaysia
unveiled a stimulus package, injecting
RM7 billion into the economy to
ensure sustained growth.
“Extraordinary times require
extraordinary measures,” said Deputy
Prime Minister and Finance Minister
Datuk Seri Najib Abdul Razak.
Pragmatic government policies and
prudent measures practised by Bank
Negara and relevant agencies, such
as the Securities Commission, have
made the country’s financial system
stable.
The country’s financial and
property markets are not surrounded
by speculative bubble symptoms as in
the 1997/98 Asian Financial crisis.
Furthermore, analysts say, less
than 5% of Malaysian assets are
exposed to the US economy.
Malaysia is also not exposed to
the “complex and uncontrollable”
innovative financial products which
finally became the main cause of the
US sub-prime crisis.
Malaysia’s capital market,
meanwhile, is largely based on
Syariah principles, which requires
“proper” debt level and financial
management.
In addition, the country has a
total funding of about 37% to gross
domestic product (GDP), indicating
that it has ample liquidity that can be
used to churn economic activities.
The banking sector remains strong
with a low non-performing loans
(NPLs) level of 2.5% and risk weighted
capital ratio (RWCR) of 13.2%, which
is more than the 8% international
requirement level.
However, Malaysia is not an
exception in having to face the current
challenging time with the 2009 Budget
having already indicated slower growth.
In line with regional peers, the
GDP growth for next year has been
revised to 3.5%, with the government
confident of achieving 5% for 2008.
In the wake of a fall in most
commodity prices in mid-2008 due
to the lack of global demand, the
government realised potential federal
earnings would be squeezed while at
the same time having to continue to
spend for mass development.
The fiscal deficit for 2009 is
A prudent fiscal move is that
the government will review
some projects and give priority
to those that can be speeded
up with high multiplier effects,
besides having low import
ingredients.
projected at 4.8%, the same level as
this year. At this level, the government
will carry on implementing an
“expansionary” fiscal policy, which is
also being adopted by other countries
at present.
In the 2009 Budget, the government
has indicated that it had the flexibility
to implement high impact projects
through savings from the oil subsidy.
It must be noted that there is no
change in the total amount to be spent
under the 2009 Budget.
The government allocated RM207.9
billion for the 2009 Budget, of which
RM154.2 billion is for operating
expenditure and RM53.7 billion for
development.
A prudent fiscal move is that the
government will review some projects
and give priority to those that can
be speeded up with high multiplier
effects, besides having low import
ingredients.
The RM7 billion savings from the
oil subsidy would then be channelled
19
KLCI
Sensitivity by
Company Price (RM) Change (RM) KLCI Points
MISC 8.40 -0.25 -1.73
IOICorp 3.54 +0.10 -1.14
Sime 5.40 -0.10 -1.12
BAT 46.00 +2.00 +1.06
DiGi 21.50 +0.70 +1.01
TNB 6.00 +0.10 +0.81
PBBank 8.60 -0.10 -0.66
KLK 8.75 -0.20 -0.40
BJToto 4.70 +0.14 +0.35
Commerz 5.85 -0.05 -0.31
Others
KLCI 871.16
-2.13
-0.14
-2.27
into sectors like construction,
residential, transport, investment, and
training and information technology.
As for inflation, the government
has projected that the level could be
in the range of 3-4% for next year,
subject to the continuing downtrend
in the global crude oil prices.
Malaysia’s inflation rate rose to a
new 26-year high of 8.5% in July 2008,
driven by the escalating cost of fuel
and electricity.
In an effort to curb rising inflation,
“jump-started” by the increase in
retail fuel prices up to RM2.70 per
litre, Bank Negara Malaysia reduced Toshiba
the Overnight Policy Rate (OPR) by 25
basis points to 3.25% in November. bullish
It was the first such cut since April despite
2006. global
Crude oil prices are now hovering
below US$40 (RM140) per barrel, slowdown
dropping significantly from its all time pg 19
high of US$147 per barrel recorded
in July this year. The petrol price at
pump was reduced to RM1.80 on Dec
15, the fifth time since the increase of
78 sen in June 2008.
As for crude palm oil (CPO) prices,
the government is working with its
Indonesian counterpart to stabilise the
price at RM2,000-2,600 a tonne level.
Among the other measures
taken to reduce supply is the oil
palm replanting programme while
promoting the usage of bio-diesel
from palm oil to increase demand.
The CPO prices have fallen by
almost 60% from a record high of
RM4,486 per tonne in March after
the global economic crisis hit the
commodity market. market, the government on Oct 20 investment in the midst of global
As for domestic economic announced the injection of RM5 economic slowdown.
activities, the government will give billion into Valuecap Sdn Bhd, the There would also be full
extra attention to generate growth, government investment agency, import duty exemption on raw
as international trade and external to buy undervalued stocks in the materials and intermediate
demands gets slower. local bourse. goods to be used for domestic
This time around, the government Valuecap’s portfolio has grown manufacturing activities.
has said the “export-led recovery” from RM5 billion initially to RM8 The total FDI for the
policy could not be implemented as billion now. January to August period in the
successfully as during the 1997/98 To attract Foreign Direct manufacturing sector was RM36.8
crisis. Investment (FDI), the government billion, surpassing last year’s
The government also realises on Nov 14 announced pre- figure of RM33.4 billion.
that slower economic growth could emptive measures, among others, However, International Trade
see a reduction in job creations, manufacturing licences would and Industry Minister Tan Sri
thus projecting the unemployment be issued automatically effective Muhyiddin Yassin said there might
rate of about 4-4.5%, a level that the from Dec 1. be some impact next year or the
government said was “manageable”. The move is aimed at following year on FDI due to the
In an effort to stimulate the capital cushioning the impact on economic slowdown. – Bernama