Mini-Budget more than RM10b as recession looms

KUALA LUMPUR, Feb 11 — The mini-Budget believed to be in excess of RM10 billion will be the government’s last throw of the dice to keep the economy in positive territory in 2009.

But economists and fund managers believe that the despite these best efforts, Malaysia will experience between one to three quarters of negative growth this year, courtesy of slumping world trade and the catastrophic situation in the United States.

The Malaysian Insider has learnt that after crunching the latest economic data including export figures, officials from Bank Negara and the Ministry of Finance now believe that growth this year will be below one per cent, some way off the original estimate of 3.5 per cent.

Some banks and research houses are even more pessimistic saying that Malaysia will slip into a recession this year, a position even usually hawkish government officials are willing to consider as a possibility.

Most troubling to government officials in the last eight weeks has been the sharp plunge in exports and its drag on the important manufacturing sector.

Over 30 per cent of Malaysia’s trade is with Singapore, the US and Japan, three economies in a tailspin and most severely affected by the global economic turmoil.

As a result of limp worldwide demand for goods, the contraction of the manufacturing sector in December was in double figures.

The Malaysian Insider has learnt that given the worsening economic picture, government ministers were forced to face up to the fact that another piecemeal stimulus package may not have packed sufficient firepower to keep public consumption up and businesses chugging along.

That was why Finance Minister Datuk Seri Najib Razak announced last week that the government was going to unveil a mini-Budget during this Parliament session. The House meets from Feb 16 but it is likely that the mini-Budget will be introduced later this month or in early March.

A slew of measures are being considered, from allowing employers to suspend certain contributions made on behalf of employees for a one-year period to having a more liberal environment for foreign investment, including overhauling the role of the Foreign Investment Committee.

A senior government official told The Malaysian Insider: “Nearly everything is on the table. The mini-Budget will be a stimulus package but will also involve some major structural and policies issues. We have received wish lists from industry and their needs will be considered seriously. Our goals are to save jobs and ensure that the economy is competitive and attractive enough to ride the upswing when it happens.’’

Sources said that at the moment the mini-Budget will cost the government in excess of RM10 billion but noted that the final figure will only be known after the Treasury have sifted through all the proposals and ideas currently on the table.