KUALA LUMPUR, 15 April 2009: The Malaysian Institute of Economic Research (MIER) has revised downwards the country’s gross domestic product (GDP) forecast this year to -2.2% from 1.3% earlier on the back of export slump arising from the global economic turmoil.
The private think-tank said it was almost certain that Malaysia’s growth would slide into a technical recession in the first half of 2009.
It said exports were expected to be reduced by 24%.
“The crisis has not hit the bottom and if exports shrink adversely, the downturn could be more harmful,” MIER’s executive director, Professor Datuk Dr Mohamed Ariff Abdul Kareem, said in its 14th Corporate Economic Briefing here today.
Mohd Ariff said, however, the economy overall was actually still okay and the -2.2% forecast was still considered mild compared to other countries in the region.
MIER said the Malaysian economy would recover gradually to 3.3% in 2010. It had earlier forecast growth of 3.8% for next year.
Bank Negara Malaysia (BNM) had projected the country’s economy to contract by -1.0% or to growth of one percent in 2009.
The government has introduced two economic stimulus package worth a combined RM67 billion to boost the economy affected by global economic recession.
Mohamed Ariff said the benefits from the two stimulus plans could only be seen by year-end and additional package may be needed.
“I’m thinking of another RM10 billion but the third package should be done in a different way and in much more effective manner.
“The government, however, must make sure the first and second packages are well-implemented before thinking of another package,” he said.
He said the country had an adequate liquidity and resources to fund another stimulus package.
Mohamed Ariff said BNM still had room to reduce the overnight policy rate to one percent from the current two.
BNM will hold its monetary policy committee meeting on 29 April.
He, however, expressed concern that the low interest rate may depressed the performance of the ringgit, which was currently traded at RM3.60 to the US dollar.
“The lower rate can also hurt savers and those who rely on deposits to generate income,” he said.
Mohamed Ariff said MIER wanted the ringgit to be internationalised to strengthen and boost demand for the local currency.
“It is time for the ringgit to be traded offshore during this current economic crisis as it provides a positive psychological impact on the economy,” he said.
He said the stronger ringgit would not have negative impact on exports as external demand played a greater role in influencing the export trend compared to the exchange rate. — Bernama