Najib unveils RM60 bln mini-budget for 2 years, warns 2009 GDP may contract -1 pct
By Wong Choon Mei, Suara keADILan
Deputy Prime Minister Najib Abdul Razak has unveiled a RM60 billion mini-budget that straddles a two-year period between 2009 and 2010, aimed at keeping recession at bay and Malaysians employed.
But analysts were less than impressed, labeling the package as overblown and bombastic, perhaps with the underlying intention of heading off criticism that there has already been fatal delay in resuscitating the economy.
“It is a bit overblown. You can have RM100 billion of fiscal stimulus but can you implement it in time? Even the November RM7 billion stimulus has still not been fully implemented, and yet, you want investors to believe we can pump in a figure like RM60 billion quickly and efficiently,” said Azrul Azwa, economist at Bank Islam.
Mohamed Ariff Abdul Kareem, head of Malaysian Institute of Economic Research, said the package was not as large as it may seem as it was for two years. “Much depends on how it is being implemented and the amount of confidence that it can generate. I hope the government can implement it transparently.”
“Maybe, this is why it is straddled over two years, in case only a small bit gets into the economy this year. Otherwise, why move into 2010 when there is the 2010 annual budget to do that,” said an economist at a large foreign bank.
Too late, Malaysia sharply into recession
The core of the mini-budget – the second economic stimulus plan to be announced in five months – revolves around RM10 billion of direct injection into the economy in the form of RM5 billion of operating expenditure and RM5 billion of development spending. Tax incentives and tariff cuts plus a slew of other investments form the balance.
The package, announced in Parliament today, is equivalent to nine percent of last year’s GDP and will push the fiscal deficit to a record-high 7.0 percent of GDP from versus the previous forecast of 4.8 percent.
It will consist of RM15 billion in fiscal injection, RM25 billion in guarantee funds, RM10 billion in equity investment, RM7 billion for private finance initiative and off-budget projects and RM 3 billion in tax initiatives. Details provided were still sketchy, with little information on how, where and who would manage or receive the funds.
“The government is confident that the deficit can be financed from domestic sources, given the ample liquidity in the domestic financial system. In addition, the federal government debt ratio is still at a prudent level,” said Najib.
Nevertheless, analysts have pointed out that national pension funds such as the EPF and state investment agency Khazanah may not have sufficient funds and Najib may have be forced to seek funding overseas.
“No doubt all countries are having deficit problems, but some like Singapore can afford to spend much more because of their high reserves. Malaysia can tap the international bond markets, but hopefully, the debt will still be gradeable because of our high deficit. We should not be reduced to issuing junk bonds,” said Azrul.
It’s the economy, Najib!
Najib, who is also Finance Minister, warned of probable negative economic growth for this year. He forecast a GDP growth of between -1.0 percent to 1.0 percent for 2009, in sharp contrast to his November 2008 projection of 3.5 percent growth.
Malaysia’s export-led economy slowed to its weakest pace in eight years in the fourth quarter, hit by plunging exports. GDP growth rose only 0.1 percent in the final quarter of 2008 from a year earlier, sharply lower than expected.
Private forecasters have also predicted that as many as 20,000 Malaysians could face the sack each month until the global economy stabilised and firms stopped retrenching to cut costs. This in turn could bring simmering social tensions to the boil, as has happened in Europe and other badly affected economies.
To a large extent, Najib has his political ambition to blame for the weak state of the economy. Due to take over from Prime Minister Abdullah Ahmad Badawi on April 1, he has been trying hard to shore up his political clout, especially within his Umno party, at the expense of the nation.
Although, he won the Umno presidency uncontested, his popularity within the party has dropped. A recent survey by the Universiti of Malaya showed that his preferred lieutenants have fallen back in the race for top party posts, while those aligned to Abdullah have gained ground.
Najib will also be assuming the premiership as one of the most unpopular leaders ever to hold office in Malaysia. His supporters have tried to blame the Pakatan Rakyat coalition led by Opposition Leader Anwar Ibrahim for his troubles.
But the gambit has not worked and even Abdullah last month chided him and his agencies for being slow and not up to mark in disbursing a RM7 billion ringgit stimulus unveiled on Nov 4 last year.
“I do not know why the government has been delaying the second stimulus package. Parliament has been in sitting for four weeks but they are waiting because of a political agenda,” said Umno veteran Tengku Razaleigh Hamzah last night.
