Non economist view of Malaysian ESP – RM60 billion… WOW!
Finally, the cat is out of the bag. The government made the big announcement that everyone is waiting for. While many is waiting on how much the government is going to spend but I was more interested in the strategies of spending.
2. For the benefit of those who do not understand this whole issue of financial crisis, allow me to explain it in simple terms. The problem in Malaysia is not the same as the one in America. In our case being a producer and exporter of goods, we are suddenly faced with a situation where the buyers do not want to buy the luxury items. They do not want to spend money. The buyer is mainly in Europe and the USA who has been a victim of the subprime crisis.
3. Without the buyers, we have with limited options. To get the economy to be active, we need to encourage domestic spending. We need to encourage Malaysian and foreigners to spend in Malaysia. To spend, people must have the excess cash on hand. In example, if every Malaysian has RM 10 extra to spend and if everyone spends the money then the multiplier effect of RM270 mill will become about 1 billion.
4. In a nutshell, the government did announce some good measures but if it is look in totality and from the objective of the budget, it fails to excite the economy. The downtrend of KLSE supports this view. It failed to address two important elements in the mechanics of trying to stimulate the economy. The first, failure to increase the household liquidity and the second is lack of encouragement for people to spend locally.
