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Dow Jones: Economists Differ With PM On Malaysia Recession
By Tara Patel

17/7/2001 10:22 am Tue

[Pakar ekonomi tidak menyetujui kenyataan PM bahawa Malaysia tidak akan menghadapi kemelesetan kerana terdapat kejatuhan yang meruncing dalam sektor perkilangan. Mahathir mengungkit keuntungan 'banyak' syarikat tahun ini tetapi mengapa banyak bon pula muncul pada tahun ini? Tidakkah ini bermakna sudah tidak berduit lagi? - Editor]

Monday July 16, 4:41 PM

WRAP: Economists Differ With PM On Malaysia Recession

By Tara Patel


KUALA LUMPUR (Dow Jones)--Prime Minister Mahathir Mohamad said Monday that Malaysia isn't heading for a recession, but economic data published earlier in the day tell a different story, economists said.

"As far as we can read, the figures don't show we are going to a recession," Mahathir told reporters. He didn't elaborate on which economic indicators he was referring to.

But, earlier, the statistics department reported manufacturing sales in May dropped to 25.4 billion ringgit ($1=MYR3.80), an 8.0% fall on year and a 1.6% decline compared with April.

In April, manufacturing sales rose 2.4% on year and declined 6.1% on month.

The manufacturing data reflect the sharp regional slowdown in the electronics industry, economists said, and indicate Malaysia may be slumping into a recession in the second quarter, just as neighboring Singapore has had.

"It adds to the body of evidence pointing to the fact that Malaysia is on the verge of a technical recession," said Song Seng Wun, regional economist at G.K. Goh Research of Singapore.

Advance estimates out last week showed Singapore's economy contracted at an annualized pace of 10.1% in the second quarter from the first quarter.

Coming after the 11.3% annualized quarter-on-quarter drop in the January-March period, the latest data mean Singapore is now in a recession by conventional standards - two consecutive quarters of GDP shrinkage.

When speaking about GDP, Malaysian government and central bank officials refer to year-on-year comparisons, which is what Mahathir was referring to Monday.

He said the Malaysian economy is more diversified than Singapore and doesn't rely as much on electronics. "We won't be affected as much as Singapore (from the global technology slowdown," he said.

Electronics made up about half of Malaysia's exports in May.

Second-Quarter GDP Data To Be Issued August 23

However, economists said, even using optimistic GDP growth forecasts for the second quarter, the country appears likely to slide into a recession by the conventional quarter-on-quarter comparison.

Malaysia's GDP grew 3.2% on year in the first quarter but contracted 3.7% from the fourth quarter of 2000.

Central Bank Governor Zeti Akthar Aziz said Monday that second-quarter GDP figures will be issued Aug. 23. She didn't comment further.

"Overall it will be touch-and-go, but even if growth is an optimistic 1.2% on year in the second quarter, this will generate a quarter-on-quarter decline on a seasonally-adjusted basis," Song said. "I believe Malaysia, like Singapore, will be in technical recession."

Many economists aren't even that optimistic about second-quarter growth.

David Cohen of Standard & Poor's MMS International said he is expecting 0.5% on-year growth in the second quarter, which would give a quarter-on-quarter decline of 5%.

"The picture remains tentative, and officials are trying to maintain a brave face," Cohen said. "But the economy in reality has been contracting. The question is when will it bottom out."

Singapore has slashed its 2001 GDP forecast to 0.5%-1.5% growth from the already revised 3.5%-5.5% estimate. But Malaysia's official forecast still stands at 5%-6% growth compared with 8.3% growth in 2000.

Malaysia's statistics department also issued Monday consumer price data for June, which showed a 1.5% rise on year, in line with economists' expectations and near the 1.6% rise the previous month. The rise in prices for the first half was 1.5%, at the lower end of the central bank's 1.5%-2.0% full-year forecast.

While Malaysia's benign inflation isn't expected to put any pressure on the central bank to alter its loose monetary policy, economists say it is also further evidence of an economic slowdown since it indicates Malaysian consumers have turned extremely cautious about spending.