Business

Thursday May 7, 2009

RAM says the economy has started to stabilise in second quarter


KUALA LUMPUR: The country is likely to see a “mild recovery” in the second half as the economy begins to show signs of stabilisation.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng expected the first quarter to contract 3% to 4% but the economy had started to stabilise in the second quarter, and the downtrend looked like it was bottoming out.

“We may have seen the worst in the first quarter. The second quarter is showing some improvement as the stimulus package kicks in.

“There are also signs of stabilisation, particularly in the United States and China. There could be an upward revision if things continue to look good but we are maintaining our gross domestic product forecast of 0.9% growth for the time being,” he said after RAM AGM yesterday.

Yeah said RAM was not revising its forecast yet as it wanted to look for more sustainable factors.

In recent weeks, a number of local and global economic indicators have shown some improvement while some indicated slower pace in drops.

The second quarter is showing some improvement as the stimulus package kicks in... DR YEAH KIM LENG

“The worst may be over” although financial restructuring was still seen in the United States and the Europe, he said, adding: “Our economy can be sustained. Take it (current economic turmoil) as cyclical external shock. Cyclical phenomenon.”

Yeah said Malaysia’s exports had plunged double digit during the dotcom bubble burst in 2001 and a similar pattern was seen in the current export contraction.

“I think when demand stabilises in the second half, we will see at least contribution from net exports. Once demand rises, exports will rise as well,” he said.

Yeah said Malaysia might now start focusing on long-term structural issues such as raising competitiveness, moving to a higher level of growth and achieving growth potential.

He said Malaysia had been known for not achieving its full potential despite its good infrastructure, trainable workforce and multi-cultural environment which made it an attraction to foreign investors.

In addressing these structural issues, Yeah said the country needed to tackle the decline in domestic private investments as well.

“Last year, there was a short outflow. We must now find more opportunities regionally as well as internationally. It is important to enhance the investment climate and encourage more private investment, as once investment rises, productivity and employment can be created.”

Yeah said it would be quite a challenge for Prime Minister Datuk Seri Najib Tun Razak, as these issues could be seen as a new economic agenda.

Executive deputy chairman Tan Sri C. Rajandram expects a slowdown in the issuance of bonds this year.

“There is a shrinkage in the market. Bond issuance this year will be lower than in 2008 and even much lower than 2007,” he said.

Foreign issuers were coming into Malaysia to raise ringgit-denominated bonds last year, he said, adding that about 10 issuers from India, the Middle East and South Korea had come to tap the local debt market.

Last year, some RM30bil of corporate papers were issued.

RAM Rating Services Sdn Bhd chief executive officer Liza Mohd Noor expects RM20bil to RM25bil bonds to be issued by companies this year.

“We are looking at the lower end, probably about RM20bil will be issued this year. The first four months had been very slow,” she said.

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