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Malaysia 2010 : An outlook on stimulus packages
The global financial crisis took a turn for the worse towards the second half of 2008, prompting the government to announce two stimulus packages to help stimulate the slowing economy. Sources from the Malaysian Institute of Economic Research (MIER) revealed that 2010 can expect growth to be closer to 4 per cent. In relation to growth, Prime Minister Datuk Seri Najib Tun Razak’s first budget announcement has created high expectations in terms of what to expect in 2010 and an idea of where these stimulus packages would be plugged into.
Insights of what the 2010 Budget Strategies entail are as below:
First Strategy : Driving the nation towards a high-income economy
- Increasing private investment
- Intensifying research, development and commercialization
- Leveraging fully on niche areas
- Advancing agriculture sector
- Promoting construction industry
- Strengthening small and medium enterprises
- Developing green technology
- Promoting creative industry
Second Strategy : Ensuring holistic and sustainable development
- Enhancing highly-skilled human capital
- Strengthening banking and financial system
- Combating corruption
- Development of regional economic corridors
- Improving effectiveness and efficiency of government administration
Third Strategy : Focusing on the well-being of the people
- Preventing crime
- Improving income and quality of life of the people
- Strengthening infrastructure in rural and remote areas
- Improving public transport
To date, the country has rolled out two stimulus packages totaling RM67 billion to shore up the economy. Under the first stimulus package of RM7 billion, a sum of RM6.9 billion was disbursed to various ministries and agencies. "A total of 53,571 projects worth RM6.1 billion have been awarded and at end-September 2009, RM4.3 billion had been spent," said the Economic Report 2009/2010. The government has been injecting RM1 billion every month to boost the economy until May 2010, with the hope that the external environment would have improved.
Meanwhile, under the second stimulus package of RM60 billion, disbursements to ministries and related agencies as at end of September amounted to RM14.5 billion and contracts worth RM7.6 billion have been awarded for 31,158 projects. Expenditure to date is RM3.9 billion with 10,710 projects completed. "By the end of 2010, all programmes and projects under the package are expected to be completed," the report said.
However, 2010 would be a challenging year as a 4 per cent growth is way below Malaysia’s potential growth of 5.5 per cent. The economy cannot afford to have a high interest rate regime at this point in time. And as such, Bank Negara has stated that Malaysia will be keeping its interest rates relatively low at 2 per cent to stimulate both consumption and investment. The country's growth may reach its peak early and decelerate thereafter should the United States (US) run into a double dip contraction in the first half of 2010. In which case, Malaysia might need to put in a third stimulus package to build a stronger economic base.
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