Will the Malaysian economy recover next year with economic growth increasing to 5% to 6%?


Media Statement
by Lim Kit Siang

(Petaling Jaya, Friday): Deputy Prime Minister, Datuk Seri Anwar Ibrahim has at least given some indication that he expects the Malaysian economy to recover next year, that after the government had scaled back its 1998 GDP growth forecast to between 4% to 5% from an earlier projection of 7%, it would be able to move on somewhat to about 5% to 6% the following year.

While all Malaysians would definitely welcome such an economic recovery, they have to be realistic and be fully aware of other forecasts which expect a much slower economic rate of growth for Malaysia this year.

For instance, the International Monetary Fund in its Interim World Economic Outlook released in Washington on December 19, 1997 had drastically revised downwards the earlier IMF projections about Malaysia’s GDP growth for 1998. The latest IMF projection for Malaysia’s GDP growth for this year is 2.5%, as compared to the earlier 6.5 per cent forecast in October 1997 and the 7.9 per cent forecast in May 1997.

Although the Malaysian Government has not responded in any manner to the IMF’s projection of 2.5 per cent growth this year, it is closer to the projections of most economists and financial analysts. Although the 2.5 % projected growth could be regarded as low, it should be noted that the IMF Interim World Economic Outlook revised forecast of 2% growth for Indonesia in 1998 has proved to be too optimistic, as the Indonesian government has itself forecast zero growth for this year!

In this connection, it is pertinent to note that the Switzerland-based Institute of International Finance (IIF), a global association of financial institutions with over 280 members, in its report Capital Flows to Emerging Markets which was released in Zurich on January 29, projected "positive growth of nearly 2 per cent in Malaysia" in 1998, which is even lower than the IMF’s latest projection.

The IIF Report grouped Malaysia with Indonesia, Philippines, South Korea and Thailand as "the five economies most affected by the Asian crisis" where net private capital flows fell from US$93 billion in 1996 to an outflow of US$12 billion in 1997. The IIF forecast that for 1998, there would be a continued private capital outflow from these five countries to the tune of US$9.4 billion.

It is also pertinent to note an Asian Executives Poll in the January 29, 1998 issue of the Far Eastern Economic Review which canvassed the opinions of top company executives in ten Asian countries on various issues.

To the question "When do you expect Asia’s economic crisis to end", among the top Malaysian company executives polled, 7.4% of respondents say the crisis will end in 1998, 48.2% in two years and 44.4% in six or more years.

It is also interesting to note the reactions of the executives of other Asian countries to this poll:

When do you expect Asia’s economic crisis to end?

In 1988

In two years

In 3-5 years

In 6 or more years

Philippines

33.3

40

26.7

-

Taiwan

15.4

53.8

30.8

-

Thailand

15

35

50

-

Japan

7.7.

34.6

53.9

3.8

Malaysia

7.4

48.2

44.4

-

South Korea

6.3

31.3

56.1

-

Indonesia

5.3

42.1

52.6

-

Australia

-

80

20

-

Singapore

-

54.5

41

4.5

Hong Kong

-

35.3

57.8

6.9

In his interview with Reuters, Anwar said Malaysia’s aim of reaching developed nation status by 2020 is not in jeopardy even though it is unlikely to regain its high-growth path before the turn of the century.

This is different from a statement made by the Prime Minister, Datuk Seri Dr. Mahathir Mohamad in his exclusive interview with AP-Dow Jones on 18th September last year, where he said that the turmoil in the Malaysian financial markets "has set back by 10 years" his efforts to turn Malaysia into a developed nation by the year 2020.

There is an urgent need for government leaders to make consistent statements to reduce public confusion from too many conflicting and contradictory pronouncements by top government officials.

(6/2/98)


*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong