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February 03, 2009 17:15 PM

RM10 Billion For Second Stimulus Package

KUALA LUMPUR, Feb 3 (Bernama) -- The much-anticipated second stimulus package is expected to about RM10 billion on account of further savings from the fuel subsidy -- RM3 billion more than the first package announced on Nov 4, 2008.

Kenanga Research, in its report, "Economic Outlook 2009", released here today, said any increase in development spending was expected to further cushion the Malaysian economy from deepening global credit crisis.

"Assuming the multiplier effect of the November fiscal stimulus starts to kick in during the second quarter of 2009 and the next stimulus package in April would start to have an impact in the fourth quarter 2009, we believe it would help support domestic demand growth and eventually cushion the impact," it said.

It said public expenditure was projected to expand by 9.4 percent this year, up from an estimated 6.1 percent in 2008, which meant a contribution of 2.3 percentage points to the country's overall gross domestic product growth.

Kenaga said the impact of the packages, however, was premised on speedy implementation of the projects and disbursements of payment to relevant economic parties.

It said another plus for Malaysia was the fact that its overall financial sector's ability to remain relatively unscathed following the US sub-prime debt crisis.

"This may lessen the overall adverse impact on the economy," it said.

Kenanga said, however, the worst case scenario assumed a sharply deteriorating global economy on rising deflationary risk while implementation of domestic fiscal policy stumbled resulting in higher unemployment and sharply lower domestic demand.

It said the domestic economy was expected to endure a technical recession in the first half of 2009 which may delay an anticipated gradual recovery towards year-end.

"The damaging effect of a technical recession in first half of 2009 will drag down the potential growth of the country's economy for the whole of 2009 to 0.6 percent," it said.

Kenanga said for now, this assumption appeared relatively remote.

-- BERNAMA

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