Malaysia risks recession next year: MIER

Posted on 18 October 2008. Filed under: Banking, Finance, Pelaburan, Perbankkan | Tags: , , , , |

Malaysia risks recession next year: MIER

17th October, 2008

KUALA LUMPUR: Leading think-tank in the nation on Thursday slashed its 2009 economic growth forecast for the country to 3.4 percent and said there was a risk of recession if the US economy tumbles.

The influential Malaysian Institute of Economic Research (MIER) said the economy was expected to expand by 5.3 percent in 2008 after a strong first half but that it would deteriorate in the new year.

It cut its 2009 forecast from 5.0 percent to 3.4 percent, in contrast to the government which in its 2009 budget unveiled in August predicted 5.4 percent growth next year. The economy grew by 6.3 percent in 2007.

“In the first half of the year the Malaysian economy did well but we don’t think this will be the case for the rest of the year given the flagging global economy,” MIER executive director Mohamed Ariff told a press conference.

“If the US economy goes into some kind of recession in… the first quarter or second quarter (of 2009) we think somewhere in the middle, second or third quarter, we may experience (technical recession),” he said.

“There is a 40 percent chance that Malaysia will register technical recession in 2009, meaning two quarters of negative growth and a 30 percent chance it could be a real recession lasting more than two quarters.”

However, Ariff said he did not expect a recession to be as severe as the 1997-98 regional financial crisis when the economy contracted sharply.

“This recession is going to be milder but I think (it’s) going to last longer,” he said.

Ariff said there could be a revision in official interest rates but it would not happen just yet. The central bank is expected to keep interest rates at 3.50 percent until the year-end.

Malaysia’s inflation jumped to a 26-year high of 8.5 percent in August, driven by the escalating cost of food and fuel, Ariff said that on the bright side, Malaysian banks were fundamentally strong and this would help keep the economy on the right footing, although there could be further risk as the crisis unfolds.

“All banks are adequately capitalised and the NPL (non-performing loans) problem actually for now is a non-issue because it is less than 3.0 percent of total bad loans, which is considered very low by any standards,” he said.

“But come next year there is a chance that the NPL problem may get worse if the real property sector and the construction sector caves in.”

Ariff said the political uncertainty that has paralysed the stock market and investment in recent months may compound Malaysia’s economic problems.

Sumber dari New Sabah Times.

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