Monday, November 17, 2008

Calm Before Storm

Deputy Minister of Finance Kong Cho Ha tried to hide the signs of an imminent economic storm. He told the parliament that the Malaysian economy is not facing a recession, but expanding more slowly.

Kong said the economy is predicted to expand by 3.5 percent in 2009 following additional measures tabled as a "policy response" towards the global economic crisis by the government on Nov 4. This is a bit too presumptuous. The impact of the global economic crisis on our local economy is difficult to predict. Even US and Europe are still trying to gauge the bottom pit of the crisis through their gut feel.

Major economies in East Asia have sounded the alarm bell. Recently, China announced a stimulus package worth USD586 billion. According to Reuters, Japan has slipped into recession when its economy contracted by 0.1%. France is closing behind. South Korea has announced pay freeze for all government staff and a 5% budget cut for all public and non-profit agencies it help fund.

While, US is expecting an escalation of foreclosures another potentially huge problem is brewing - mounting credit card debts. This is also one of our teething concerns. Financial institutions are getting too promiscuous trying to lure more people to sign up for credit cards. Over the last two years, the number of credit cards issued has grown exponentially. More than 2.8 million cards are issued annually.

Malaysia's credit debt stands at nearly RM30 billion. Almost half of credit card users pay the minimum amount of 5 percent of outstanding balance. The number of bankruptcy cases due to credit card debts is increasing since 2005.

This global financial crisis coupled with our own internal problems are expected to hurt the local economy. Already a number of companies, both local and multinationals, are not creating new positions. Retired employees are not being replaced and employment contracts are not being renewed. As many as 100,000 young graduates are expected to join the workforce next year. Unemployment will soar.

Most of us are not aware of the "policy response" announced by the government. If we do, the policy obviously has very little impact in changing general perception about the economy. Many are expected to focus on essentials and save for rainy days. There will be many such days ahead.
This government must do the right thing. Next, I will focus on some steps which can be taken by Finance Minister and incoming Prime Minister Najib Razak to help steer us to the right path.


Samuel Goh Kim Eng said...


Better enjoy first the calm before the storm
That will come about without anyone to inform
Now that the economy is in gradual stages of deform
Better get ready for various forms of economic reform

(C) Samuel Goh Kim Eng - 181108
Tue. 18th Nov. 2008.

clearwater said...

Grow by 3.5% in 2009? Where is the growth coming from? Every economic sector will face a downturn as our trading partners fight recession. Our export sectors in commodities and manufacturing already face shrinking markets and depressed prices. Consumers have little extra money to spend. Denial will not solve our problems nor will obsession with party politics. I look forward to see some pragmatic proposals to tackle our impending economic crisis.

Anonymous said...

The majority of ministers selected by the PM to helm the various ministries knows nothing about the department they head.

As an example ; the health minister is not even a qualified doctor. The Deputy Minister of Finance don't even have an economics degree. Doesn't need a rocket scientist to figure out why the quality of our education is getting from bad to worse.

So that's what they meant by 'Malaysia Boleh' !