KUALA LUMPUR(Themalaysianinsider), Dec 22 — The R word may be used sparingly in public but the possibility of the economy sliding into negative territory next year is keeping government officials awake at night.
With economic indicators showing that the economy is slowing faster than expected and Malaysia's trade partners including the United States, China, Singapore and other Asean countries in a deeper hole than estimated, there is a growing sentiment in Putrajaya that it will be a major challenge to achieve next year's growth forecast of 3.5 per cent.
Indeed several banks and research houses believe that Malaysia's economic growth will be between 0.5 per cent and 2.0 per cent.
Morgan Stanley in its latest report said it expected growth to be 0.5 per cent, noting that latest figures showed that the country's trade surplus was narrowing.
Their gloomy forecast could be unhinged further if there are further shocks to the global economy and if Malaysia's RM7 billion stimulus package is not implemented by the first quarter of next year. A country is in technical recession is there is negative growth for two consecutive quarters.
Publicly, Prime Minister Datuk Seri Abdullah Ahmad Badawi, Finance Minister Datuk Seri Najib Razak and Second Finance Minister Tan Sri Nor Mohamed Yakcop have been leading the cheerleaders in pointing out the resilience of the economy, but they are preparing to unveil a strategic package of measures in February and are prepared to unleash another multibillion ringgit stimulus package if necessary.
Already, data is trickling from across the country showing that factories are either not renewing the contracts of their workers or reducing the operating hours of their plants.
This situation is evident in the electrical and electronics sector in Penang where orders for computer parts have been slow because of the soft demand in the US. Government officials are preparing for the worst, believing that unemployment figures could climb to be in the six figures, a historical high.
To date, government captured data only shows that 30,000 Malaysians have lost their jobs but the Human Resource Ministry believes that the number will spike by the first quarter of 2009 and have recently asked the Cabinet for an additional RM100 million to retrain retrenched workers.
At the same time, ministry officials have been asked to put together a package of initiatives to help middle-level management who could be displaced by next year and find work for the 120,000 new graduates.
The message to the ministry is simple: consider all options, including placing retrenched middle managers as tutors and lecturers in tertiary institutions.
A government official told The Malaysian Insider that worse case scenarios have been sketched by the Ministry of Finance and Economic Planning Unit.
"We still think that Malaysia will avoid going into a recession next year but nothing is being discounted. Much will depend on whether our trading partners sink further and the level of confidence in Malaysia.''
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