Even the Malaysian Institute of Economic Research (MIER) executive director Mohamed Ariff had to be very careful and indulge in verbal gymnastics when he said that Malaysia “may hit the brink of a recession but chances are we will be able to avert a technical recession”.
Although he conceded on the one hand that “indications are that Malaysia is heading towards a technical recession (defined as two consecutive quarters of negative growth year-on-year)”, he quickly qualified by saying that the country is unlikely to suffer the same fate as Singapore (which is in technical recession), given the diversity of the local manufacturing, agriculture and petroleum sectors.
Arief need not be so diplomatic when he presented MIER’s first quarterly economic forecast in April 17, when he said that the Malaysian economy was heading towards a mild recession.
In the MIER’s first quarterly forecast in April, it revised its gross domestic product (GDP) growth forecast for the country for 2001 from 5% to “a more realistic” 4%, though it dismissed another forecast of 3.5% as “unduly pessimistic”.
Three months later, MIER has slashed its forecast for the country’s economic growth this year for the second time, down to 2.2%.
In April, Arief forecast that this year’s growth in the first two quarters was expected to be below four per cent, with the last two quarters experiencing more than four per cent growth each, resulting in an average GDP growth for the whole year at four per cent.
Malaysia will not be able to avoid a recession just because Mahathir has decreed so, as the Malaysian economy had slowed down sharply in the first quarter of the year, recording a real gross domestic product growth of 3.2 per cent or half the pace in the previous quarter when it grew by 6.5% - or from 11.7 per cent in the corresponding quarter in 2000.
MIER’s revised forecast of 2.2 per cent economic growth is fairly optimistic when compared to those of other economic analysts, who have reduced their forecasts to one per cent or even lower.
However, even going by MIER’s revised 2.2 per cent GDP growth for the
year, with the 3.2 per cent growth in the first quarter, there is
no way the Malaysian economy is likely to avoid a recession - whether Mahathir
has banned the term from “polite” discussion in Malaysian economic debate
or mainstream media - and this is admitted by Arief who said that
the growth rates for the second and third quarters are likely to be dismal,
given the decline in industrial production and exports.
Some economists expect the second quarter GDP growth to be less than one per cent over the first quarter.
Everyone is banking on a recovery in the fourth quarter, but this will depend on whether the United States economic downturn is just a short-term blip or will last for some time. The global economy is regarded as in recession, based on the International Monetary Fund definition when the world's Gross Domestic Product growth drops below 2.5 per cent as new data shows 2001 world GDP growth estimates to be 2.4 per cent.
The RM3 billion economic stimulus package of “pre-emptive measures” announced by Mahathir in March to counter the US economic slowdown and sustain the country’s growth momentum had clearly failed in its purpose and this should be the subject of intense scrutiny and debate in the current meeting of Parliament.
It is shocking that the government is trying to evade parliamentary accountability for the RM3 billion economic stimulus package, as it has not been tabled in Parliament for debate - when it should have been presented to Parliament in April for scrutiny and approval before implementation.
Members of Parliament from both the Barisan Nasional and Barisan Alternative should insist that the RM3 billion economic stimulus package should be tabled in Parliament for debate and Parliament should focus on the looming economic recession in Malaysia as the centrepiece of its concern in the current parliamentary meeting.