Saturday 05 April 2003

Malaysia delays stimulus package

Country earns two good reviews

Simon Cameron-Moore

Malaysia has put off plans to announce an economic stimulus package while the government assesses the potential impact from the Iraq war and a deadly new flu-like virus sweeping parts of Asia.
The government had previously said it would announce the package on Monday, which some economists speculated would contain up to five billion ringgit ($1.3 billion) of extra spending to bolster a slowing economy.
Malaysia, one of the world's top 20 trading nations and a popular tourist destination, stands to lose from any drawn out war or global health scare and needs to offset the effects.
But with the world economy cast in increasing uncertainty, the government wants to avoid going public with a package that could be deemed either insufficient to meet the challenge or one that could put an unnecessary burden on the fiscal deficit.
Just last week, central Bank Negara forecast GDP growth of 4.5% this year _ a climbdown from the government's earlier optimistic expectations of 6.0-6.5%.
But with the Severe Acute Respiratory Syndrome (Sars) sweeping Asia knocking at Malaysia's door, even the most recent forecast could be outdated as economists lower their sights all around the region.
There have been no confirmed Sars cases here as of yesterday, but there have been a number of cases registered in Singapore and a heavy toll in Hong Kong and China, where many of Malaysia's large ethnic Chinese minority have strong family and business ties.
This is the third time the package has been put back. It was first to be announced in late February, but then the date was moved to late March, and then to April 7.
One official said the announcement was now put back until May, while another said there was no definite date.
``At first we thought it was going to be a short, quick war. Now we have to re-look at the whole package again,'' said one of the officials after the high-level meeting yesterday at which the decision was taken to hold fire.
P.K. Basu, regional economist at Credit Suisse First Boston in Singapore, said the government had done the right thing by not going ahead with Monday's announcement given the uncertainties.
``It would have been singularly bad timing.''
But, it has not been all being bad news recently. Malaysia's economy earned two good reviews this week.
Moody's Investors Services, in an upbeat annual report, stressed Malaysia's strong external position and noted the ability of its all-important electronics and electrical manufacturing sector to ride out volatility in global demand.
And US investment bank Merrill Lynch gave another boost by tagging Malaysia the most attractive equity market in Asia after India, and raising its weighting for the country to ``overweight'' from ``market weight''.
Merrill said interesting stocks included leisure and casino company Genting Bhd, mobile phone operator Maxis Communications Bhd and conglomerate Sime Darby Bhd.
But the Sars scare put Genting shares under a cloud along with the rest of the tourism sector.
Last year, the sector catered for over 13 million visitors who spent more than 25 billion ringgit ($6.58 billion). Tourism contributed 42.6 billion ringgit to GDP in 2002, accounting for some 19%.
But, the virus could be bad news for the entire services sector, which last year grew 4.5% to make up 57% of GDP.