Worse-than-expected economic slowdown: Expecting 660,000 unemployed ~ Malaysiakini
The global crisis has magnified and shown up how vulnerable the country is for not pursuing greater financial prudence in the past.
It makes transparency and anti-graft measures all the more imperative in current times, as the government prepares to spend record sums in the name of economic recovery …
By Wong Choon Mei
More gloomy news on the economic front for Malaysia as a member of the government’s National Economic Council predicts that unemployement could hit as high as 6.0 percent this year, the highest in two decades.
Citing worse-than-expected economic slowdown, Zainal Aznam Yusof expects GDP growth to be around 2.0 percent, lower than the official forecast of 3.5 percent.
“It is a shock to the system and the brunt is on employment,” Zainal was quoted as saying. “Malaysia has a working population of 11 million. A six per cent rate translates into 660,000 unemployed people.
“We should brace for a large overhang of unemployed, especially when the graduates enter the job market.”
Zainal expects retrenchment to take place across all sectors of the economy, with export industries likely to be worst-hit..
In the construction and plantation sectors, most of those laid off will be foreigner workers. However, locals will suffer more in the services and manufacturing sectors.
“So far, the monthly retrenchment is not huge yet, but it is going up,” he said.
Najib concedes budget deficit will rise again
Meanwhile, Deputy Premier and Finance Minister Najib Abdul Razak said the country’s budget deficit will be pushed up higher than the 4.8 percent of GDP level that he forecast in November.
His reason being that the government plans to launch a second economic stimulus package soon.
Najib admitted the RM7 billion package introduced in November, in addition to the RM207.9 billion 2009 budget package unveiled in August, would not be sufficient to arrest the economic decline.
“We are mindful of the fiscal deficit and do not want to see it too high,” he said.
But he declined to say if the budget deficit could hit 6.0 percent as speculated.
“It all depends on the fiscal pump-priming that we are going to do,” he said. “I am working on it. I will let you know when we present the second stimulus package.”
The Finance Minister also said more than 70 per cent of the RM7 billion plan has been implemented up to now.
However, just less than two weeks ago, he had drawn flak for admitting that none of the initiatives outlined in the package had been carried out yet.
“Procedures are being streamlined for speedy implementation of the projects, which have high impact and high multiplier effect to stimulate the economic growth and resilience,” said Najib.
Borrowing rose even in good economic times
Malaysia has drawn sharp rebuke for its financial indiscipline. While economists recognise that the government will have little choice but to spend its way out of trouble, they point out that the current pace of taking on debt posed great risks for the future.
Money market analysts expect the government’s net issuance of debt securities to shoot past the RM60 billion mark and hit a fresh record high in 2009.
For comparison, in 1997 net debt issuance was just RM 3.8 billion, pushed up to RM17.7 billion in 1998 by the Asian financial crisis.
But despite the government’s promise to balance the budget, it has steadily ballooned from then on, crossing the RM50 billion ringgit mark for the first time to end 2007 at RM53.7 billion. In 2006, the figure was RM38.33 billion, RM34.7 billion in 2005.
“If you look at the trend, you will see Malaysia borrowing whether in good times or bad times. There has been little discipline, and when you look at the economic structures in place, you wonder where the money went,” said an economist at a large bank.
“Other governments, like Singapore, can afford to really bring out their reserves now because they were prudent in the past. We are already in record negative territory and this is despite the past few years, which were wonderful economically.
“What happened then, why didn’t we balance the budget then? More importantly, will this time be any different or will the same happen to all the proposed, new spending. Will we be able to see it or feel its effects better this time around?”
