November 14, 2008
Bleak Times Ahead – CPPS forum
The Nut Graph, present at the recent CPPS forum, reported on it with a gloomy title (understandably so). Still, with all the pessimism coming up, one must still hold onto some glimmer of hope for self, family and country. Tighten the belt and pray hard, it seems to be the case.
By Deborah Loh
YES, we are staring at the gathering clouds of an economic crisis. Sure, economic fundamentals are strong, as government ministers keep saying, but that’s only half the picture.
The other half is the financial scenario, as economic and financial principles are two different things. The sub-prime crisis that began in the US and western countries is essentially a financial problem. But in an interdependent world, a financial crisis in one place could result in an economic crisis in another.
To illustrate, if US consumers buy fewer cars from say, Japan, Japan slows production and therefore imports less steel and rubber from say, Malaysia. Faced with low demand, Malaysian factories may be forced to downsize by cutting wages or workforce. That would be the worst-case scenario.
Which begs the question: how well is Malaysia positioned to face an “imported” crisis we had no hand in starting?
No new revenue
To a panel of experts at The Global Financial Crisis and Implications on Malaysia forum on 12 Nov 2008 at Universiti Malaya, Malaysia is taking a practical, albeit predictable, approach by spending its way out of a crisis.
It is typical of most governments to respond to a crisis by injecting funds to keep the wheels of market and business turning.
Spend, but prioritise, is the panel’s advice. (From left) Sieh, Syed
Amin, moderator Tan Sri Ramon Navaratnam, and Denison Jayasooria, the experts at the Centre for Public Policy Studies-organised forum also wondered, where was the money going to come from?
Already, the government has revised the national deficit for 2009 to 4.8%, up from the originally projected 3.6%.
Malaysia has had a budget deficit for the last 11 years. With earnings from commodities like crude oil and palm oil falling, the question is whether there will be enough money to pump-prime the economy.
The RM7 billion package announced by Deputy Prime Minister and Finance Minister Datuk Seri Najib Razak on 4 Nov is not new money. It is sourced from the savings made from reducing fuel subsidies following the drop in oil prices.
But while low oil prices may mean lesser government subsidies, hence more money in the government’s coffers, it also means less revenue because Malaysia is a net oil-exporting country. Indeed, national oil company Petronas contributes over 40% to government coffers.
Read more here.
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