Recession or no recession?

(image ) Dun chee sak.

Malaysia will go to a technical recession

KUALA LUMPUR, Jan 13 — Citigroup Global Market forecast that Malaysia will go into a technical recession likely in fourth quarter of 2008 and first quarter of 2009.

It also downgraded its gross domestic forecast (GDP) for 2009 to 0.5 per cent from 3.1 per cent.
The government official GDP forecast is 3.5 per cent.

In a media briefing on Malaysia’s Market Outlook for 2009 here today, it said that there could be a cut between 50-75 basis point in overnight policy rate in the first quarter of 2009.
According to Citigroup, GDP for 2010 is estimated at 4.2 per cent, while fiscal balance is forecast at minus five per cent in 2009 and minus 4.5 per cent in 2010.
GDP for quarter four 2008 is forecast at two per cent.

Despite the downgrade forecast by Citigroup, Second Finance Minister Tan Sri Nor Mohamed Yakcop was earlier reported as saying that the government was confident that the country would not be experiencing a technical recession this year.

He said the country’s economic growth was expected to stay positive during the period from January to June this year based on the equity of the financial system which exceeds 13 per cent, total liquidity which is in billions of ringgit and the low non-performing loan (NPL) rate which is at about 2.5 per cent.

Abdullah Ahmad Badawi "We are not having too much problem in the fourth quarter. Even the growth at two percent in the quarter, it would give us an average of more than five percent," he told reporters after opening the permanent secretariat of the World Islamic Economic Forum (WIEF) Foundation. ( Bernama)

Malaysia’s industrial output, which fell 7.7% in November last year from the same month in 2007, was worse than economists’ consensus estimates of a 6.4% fall. ( Star) - and will surely fall more in December 08, which means a high probability of a negative quarter.

Najib, Nor Yaakob and AAB has been championing the idea that Malaysia is insulated from the global recession/ depression since last year. Citing the strategy to sell products to China and India, they were not bothered to access the reality that both countries are also feeling a squeeze. Only at the end of the year, some conceded that there is very small, indirect effect but not the R-word. Recession is impossible! Especially during a by election. Hence, we are in the middle of January 2009 and the EPU has not submitted any data on the last quarter of 2008. Who wants to bet that the news won't be any good?

p.s. Singapore is transparent about its economic data when it showed its citizen that it was in recession and here are the plans. ( retraining, welfare, union enagement etc.). The Malaysia's ministry of labour till now has not come out with the framework on the retrenchment fund & guess the other ministers are still sleeping.

Nor Yaakob's Conspiracy theory

Photo taken from http://thestar.com.my/archives/2007/7/19/nation/n_25nor.jpg

Almost anything in Malaysia would come with a conspiracy theory nowadays. Sure, there are some real conspiracies and some are well imagined. The others are rethorics that was formed from coffee shop talks. It takes a person who is mature to know how to distinguish between more credible talks than angan -angan (inspiration). For example, the Home Minister decided to lock down Kuala Lumpur on the basis of 2 sms, 2 blogs and 2 speaches that he is still unable to produce as 'credible evidences". Till he is able to produce these 'evidences', it would be in the domain of speculative decision making.

I was on the plane to another country where the economy is booming and everything is being built at the same time. In contrast to that, the Malaysian economy seemed to be uninspired, rudderless and lethargic at best. Against this backdrop, it is even more harder to digest the Star newspaper headline that screamed "Nor Mohamed: Economy under attack every 10 years ". He claimed that " these “attacks” could be either coincidental or attempts by “unseen hands” to sabotage the economy". I do want to know who these attackers are and if indeed, the current mess in our economy is a product of external factors than internal mismanagement and inefficiency.

The BN's mouthpiece in the web also came out with an article " Policy Flip flop due to flops" where it decided to investigate the issue of competency and performance of our ministers.

"The decades of sacrificing meritocracy and having a political system which views smart individuals as a threat is hurting the country like never before.

Just run through the list of Cabinet ministers from Prime Minister Datuk Seri Abdullah Ahmad Badawi downwards. Only a clutch of them have a strong grasp of economics and understand how the market works. Tan Sri Nor Mohamed Yakcop. Datuk Amirsham Aziz, Datuk Mustapa Mohamed. Perhaps a handful of others. Perhaps.

The rest are, well, politicians. They rose up the ranks in Umno, MIC, MCA because they are astute politicians; they are adept at working the ground, are good orators; are powerful warlords in their respective states and are the best that their component party can offer"

This piece should be written prior to Nor Yaakob's unsubstantiated revelation of conspiracy. Perhaps he was trying to go to the level of Tun Dr Mahathir when he tackled the 1997 Currency exchange related economic challenge. The difference between then and now is that there was a consensus that indeed the currency speculation and subsequent domino failings of national currencies ( baht, rupiah etc.) is real. And the fact that Nor Yaakob is not Tun Dr. Mahathir.

Would suggest few reading materials for our distinguished Finance Minister. I for one do not hold highly a Finance Minister who are not able to articulate his strategy on the cuff and remarked that Tony Fernandes ( CEO of Airasia) did a better job responding to Bloombergs' line of questioning and came out stronger. I have not seen this minister attempting such a rudimentary skill of an economist and probably would not want to see another minister shooting themselves in the foot.

> Finance 101 - business cycle or economic cycle via wikipedia

> The Kondratieff Theory - slightly wordy but good grounding to know that these theories have been around for some time.

> Generating economic cycle by HL Moore

So, unless that this minister provide more insight into his allegation, would this just be another speculative uttering from a supposedly authority in economic policy driving?