Business

Friday May 29, 2009

Clearer picture on economic recovery in two to three months

By YAP LENG KUEN


PUTRAJAYA: There are mixed signals on the economic recovery front although some confidence has returned.

However, a clearer picture will emerge in the next two to three months when more impact from the stimulus package would have been felt.

Tan Sri Sulaiman Mahbob (during the interview)... We believe the current economic crisis is about to bottom out

“Based on some economic indicators, we believe there are signs of improving demand in the market, for instance, the rising prices of crude oil (US$36 per barrel in mid-January to US$62 per barrel), palm oil (RM1,700 per tonne in January to RM2,772 per tonne) and rubber (lowest RM4.48 per kg in January to RM5.64 per kg) as well as the better performance of the stockmarket,” said Tan Sri Sulaiman Mahbob, the director-general of the Economic Planning Unit.

In addition, the industrial production index (IPI) in March moderated with a smaller decline year-on-year of 14.4% compared with -14.7% in February.

However, on a month-on-month basis, the IPI recorded positive growth of 6.2% compared with -3.7% in February.

Total exports year-on-year fell by 15.9% in March; however, month-on-month, it increased by 10.2% in March compared with 3.4% due to improvement in manufactured exports.

“We believe the current economic crisis is about to bottom out,” Sulaiman told StarBiz yesterday.

Malaysia is not alone in this and the rate of contraction in many countries is expected to moderate from the second quarter onwards.

However, he believed the Malaysian economy would experience a relatively gradual recovery before picking up in the second half of next year.

Overall, the recovery of the economy will depend on the world economy, especially of the US and other major trading partners such as the European Union, Japan and China.

“The US has a strong economic base and intellectual capital, and is expected to recover from the crisis faster than any other economy especially with the strong leadership of President Barack Obama,’’ he said.

“Malaysia has enough international reserves at US$88bil (which can finance 8.3 months of retained imports and 3.8 times of short term debt). With a savings rate of 35% of gross domestic product, we have a sufficient pool of funds to stimulate the economy,” Sulaiman said.

On the stimulus package, he said the first stimulus package of RM7bil (of which RM6.4bil had been disbursed and RM3.9 billion spent) would be fully implemented this year.

For the second stimulus package which carried a RM15bil fiscal component, a total of RM14.5bil has been disbursed and RM3.7bil spent.

“The impact of both packages is expected to be felt in the second half, as implementation will take full steam by then,” Sulaiman said.

“We are monitoring weekly on the progress of the projects from the design, award, implementation and payment stage. We also see if the Ministries and agencies are spending and to find out the reasons if they are slow. Sometimes, it is because they need to examine and certify the payments as per the job done.

“We are taking it very seriously as standards of living have been affected and we don’t want it to get worse,” he said.

On the latest revision of the year’s economic contraction by 4%-5%, he said the Government remained cautious and prudent, and would monitor the impact of the present stimulus packages before making any further decisions.

Moreover, the Government has given guarantees on bank loans for the small and medium scale enterprises for which response has been encouraging.

On further spending by the Government, Sulaiman said the private sector could be encouraged to spend via deregulation and liberalisation measures.


For Bank Negara statements click here

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