By Soraya Permatasari and Ranjeetha Pakiam
Nov. 4 (Bloomberg) -- Malaysia's government announced public projects worth 7 billion ringgit ($1.98 billion) to support economic expansion as it predicted the slowest growth in eight years in 2009.
Gross domestic product will expand 3.5 percent next year, Finance Minister Najib Razak said today in Kuala Lumpur, cutting an August forecast of 5.4 percent. The government will also let workers pay less into a national pension fund, he said.
Najib, due to succeed Prime Minister Abdullah Ahmad Badawi in March, needs Malaysians to keep spending to support the economy as the worldwide financial crisis threatens to trigger a global recession. Malaysia's exports grew the least in five months in August, and prices for the nation's biggest commodity exports -- crude oil and palm oil -- have slumped.
``They are relying on the local economy,'' said Enrico Tanuwidjaja, an economist at Oversea-Chinese Banking Corp. in Singapore. ``If they can use domestic spending to sustain growth, they have some grounds to say a recession may not be coming.''
The budget deficit next year will be 4.8 percent of GDP, wider than the previous estimate of 3.6 percent as falling commodity prices cap revenue, Najib told parliament today. Next year's overspend will match the expected 2008 deficit, set to be the biggest gap between revenue and expenditure since 2003.
Malaysia needs to ``take proactive action to contain the impact from the current global crisis,'' Najib said in his speech. ``Focus will be placed on encouraging domestic economic activity'' as Malaysia can't rely on an ``export-led recovery'' with global demand slowing, he said.
Fuel Savings
The additional projects announced today will be funded by government savings from lower fuel subsidies, following a slump in crude oil prices from record levels earlier this year, Najib said.
The government estimates crude oil will average $70 a barrel next year, Najib said, up from about $64.70 now. Even if crude oil rises more than expected, the government will maintain its budget deficit target by cutting back on some domestic projects if required, he said.
Out of the 7 billion ringgit planned, the government will allocate 1.2 billion ringgit for low-cost homes, 500 million ringgit to improve transportation in Malaysia's cities, and set up a 1.5 billion-ringgit fund for private enterprise, Najib said.
Opposition lawmakers led by former deputy Prime Minister Anwar Ibrahim walked out of parliament during Najib's speech, saying they weren't given enough time to vote on today's revised spending plans and economic forecasts. Government lawmakers passed the 7 billion-ringgit spending plan after Najib spoke.
No Growth?
Economic expansion this year will be at least 5 percent, Najib said today. The finance ministry in August had forecast 5.7 percent growth for this year.
Announcing preliminary measures to support the economy, Najib on Oct. 20 said the government will make it easier for foreigners to invest in the country and buy property. He also pledged to ``liberalize'' the services industry and doubled the size of state-run asset manager Valuecap Sdn. to 10 billion ringgit in a bid to prop up the stock market.
The finance ministry has repeatedly said the nation isn't in a crisis or heading for a recession, even after neighboring Singapore entered its first recession since 2002. Malaysia's central bank has guaranteed bank deposits and said the nation's banks have enough available cash to lend to each other.
Still, UBS AG said yesterday that Malaysia's economy probably won't grow at all in 2009, even after any measures the government might introduce to boost growth.
Aseambankers Malaysia Bhd. said the same day that profits at the nation's banks, which include Public Bank Bhd. and Bumiputra-Commerce Holdings Bhd., will shrink an average 6 percent in 2009 as bad debts rise while loan growth and capital markets slow.
From January 2009, workers can contribute as little as 8 percent of their salary into the Employees Provident Fund, a state-run pension fund, instead of the current minimum of 11 percent. The lower level will remain for two years, Najib said.
To contact the reporters on this story: Angus Whitley in Kuala Lumpur at awhitley1@bloomberg.net; Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net
Posts
No comments:
Post a Comment