MIER sees RM7b-RM10b

MIER sees RM7b-RM10b package by June

By Rupa Damodaranrupabanerji@nstp.com.my

THE Malaysian Institute of Economic Research (MIER) expects the government to launch a second stimulus package of RM7 billion to RM10 billion by the middle of the year to help boost the economy.

The first stimulus package of RM7 billion was announced in November last year.MIER executive director Professor Datuk Dr Mohamed Ariff Abdul Kareem said that a second package could see the economy growing an additional 1-2 per cent.

Even if the two packages leave the fiscal deficit for 2009 at 5.5 per cent of gross domestic product (GDP), it is "not unmanageable", he added."But jobs are not growing as fast (as the stimulus package) and that is what the government should focus on to prevent any negative growth," Mohamed Ariff told a media briefing in Kuala Lumpur yesterday.

The unemployment rate is expected to rise to 4.5 per cent this year even with pump-priming efforts by the government, he said."With lower commodity prices, the rural community will also be affected this time around, unlike in the previous crisis in the 1990s.

"The number of retrenched workers increased from 2,397 in the first quarter of last year to 11,561 in the third quarter, with the manufacturing sector reporting the highest number of lay-offs.

Mohamed Ariff said that Malaysia's growth this year would likely take a hit from the knock-on effects of worsening and uncertain external conditions, while domestic demand could be propped up through fiscal pump-priming and easier monetary policy.

MIER has revised downwards its GDP forecast for last year to 5.1 per cent, from 5.5 per cent previously, and for this year, to 1.3 per cent from 3.4 per cent, below the official growth forecast of 3.5 per cent.

Provided the global economy bottoms out, it is also looking to a marginal improvement for Malaysia's growth to 3.8 per cent in 2010.

Mohamed Ariff also said that a growth trajectory for Malaysia was expected to take place only in 2011.

Malaysia has no direct exposure to the US market, but is increasingly feeling the shock of the slowing global economy through trade and investment linkages, and monthly indicators up to November are losing momentum markedly.

Mohamed Ariff expects Bank Negara Malaysia to reduce its key Overnight Policy Rate by another 50 basis points to 2.75 per cent by June to avoid placing the ringgit at risk.

He said the ringgit was still undervalued and had probably hit bottom.He expects the ringgit to strengthen to 3.30 against US$1 by the year-end.