4.5% economic growth from stimulus package

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Govt in a state of denial despite the RM7.3 billion economic stimulus package as evident from Mahathir’s optimism of 4.5% economic growth this year

Media Statement
by Lim Kit Siang

(Petaling Jaya, Friday): Despite the RM7.3 billion economic stimulus package announced on Wednesday, the government is still in a state of denial as evident from the optimism of the Prime Minister and Finance Minister, Datuk Seri Dr. Mahathir Mohamad that the package would enable Malaysia to achieve the economic growth of 4.5 per cent this year – down from the original forecast of 6 to 6.5 per cent made in the 2003 Budget.

However, this is an optimism which is not shared by any economic analyst or research group, who generally believe that it would be tough to reach the 4.5 per cent official growth forecast given the global economic uncertainties and renewed threats of terrorist attacks.

Various economists, analysts and research houses interviewed after the release of the economic stimulus packages have stuck to their growth estimates from 3.3 per cent (Azrul Azwar of MIDF Sisma Securities) to the highest forecast of 4.1 per cent (Mayban Securities Research), without a single one endorsing the 4.5% forecast.

As Parliament is meeting on 16^th June, the RM7.3 billion economic stimulus package should be the first item of business and parliamentary approval sought in the form of a mini-budgetary proposal, which will allow Parliament to review and debate the government’s handling of the Malaysian economic crisis as a result of a quadruple whammy, viz:

global economic downturn; which had rendered the 6 to 6.5 per cent economic growth forecast for this year in the 2003 Budget last September irrelevant even before the end of last year;

Iraq war;

Severe Acute Respiratory Syndrome (SARS) epidemic; and

Renewed threat of international terrorism.

Mahathir said yesterday that critics of the economic stimulus package should look at the bigger picture, including the RM2 billion a year in liquidity arising from the two per cent cut in Employees’ Provident Fund contributions. The first economic stimulus package in March 2001 had announced a two per cent cut in the employees’ contribution to EPF to boost consumption, but it was a pathetic failure at the time. What is there to guarantee that it will succeed this time when it failed two years ago?

Mahathir is right however that we must look at the bigger picture, as for instance, how the EPF could have incurred an astronomical loss of RM15 billion which have to be written off in lower EPF dividends every year – and this is why there should be a comprehensive debate on the economic stimulus package in Parliament next month.

(23/5/2003)

* Lim Kit Siang, DAP National Chairman