Saturday, November 15, 2008

I Shall Be Damned.

Hantu Laut

I must be the only mad person in the whole country when it comes to predicting the state of the economy and the coming of recession to Malaysia.Almost every one, from the Prime Minister,Deputy Prime Minister and now to the very person who is the central figure of the economic apparatus and one that advises the government on its financial and monetary policies have said there will be no recession in the country.

The Governor of Bank Negara Zeti Akthar Aziz said “Half the world will likely be in a recession. We are not in a recession and we don’t expect to be in one,’’ Read the story here.

A very reassuring statement indeed and completely opposed to what the rest of the world are grappling with, the fear of a deep recession, and one that can lead to an economic nightmare that the world have not seen since the depressions of the 1930s.

Where did we get the immunity that makes us so recession proof ?What are the fundamentals that make us so different from the rest of the world and one that can shield us from the contagion of this global epidemic.Almost every developed country have declared that they are already in recessions.

A few months before the US financial meltdown some optimistic economists predicted only slower growth and mild or no recession in the US.They are proven wrong. The problem is bigger than one would like to imagine.Now, fear of deep and prolonged recession is on every world leaders mind except Malaysian leaders who keep telling us not to worry as there won't be any recession in Malaysia, we are insulated and isolated from such nonsense.Only the rest of the world will suffer.Malaysians have natural antibodies against recessions.

The problem is, only the bad news has arrived, the deepest cut is yet to come.The Malaysian economy has not slowed down yet.There is always time lapse of at least six months between what happened in the West and us, before we feel the blow.This lapse of time should not be taken as an indication that all is well.

How can Malaysia be insulated when it is one of the top twenty trading nations in the world and a GDP highly dependant on selling to the world markets particularly Western nations. Won't it make sense that if there were recessions in the West there would be less money,less buying and,therefore,less exports from Malaysia to these markets.Than there would be the domino effect, sales gone down,profit down and liquidity tight.Those directly or indirectly involved in export business would start to lose money and face with cash flow problems and, therefore, unable to service their debts.Bad liquidity would bring about increase in the NPL(non-performing loan) with banks and other financial institutions.

If the recessions in the West stretch for more than six months the likelihood of Malaysia seeing bad times is extremely high, whatever rosy picture the government may wish to paint, catching the flu may be slow but sure.

I shall be damned if I am wrong.


Pak Idrus said...

Friend, those folks went to a different Economic school, the learn some new economic theory that we all are not aware of. The EU has just announced that they are in a recession. Singapore has announced that they are in a recession. I am not sure who are naive, us or they. Well I already smell recession, am I naive!!!.

Have a nice day anyway.

Pok Kam said...

Dear HL,

While what you have predicted may paint a gloomy picture, I do believe in what you have predicted.

Again I believe somehow recession is imminent. I just hate it when I have to agree to something bad which is about to happen.

donplaypuks® said...

There is a thing called talking yourself into recession.

But, this time around, given the sudden collapse of oil ($140 to $66)and oil palm prices ($4,500 to $1,500) the writing is somewhat on the wall.

As to the severity of it, and despite the fact that we cannot trust any statistic announced by our glorious bolehland UMNO Govt, we may not suffer as much as the western nations.

What is worrying is that money is being siphoned out of the country by companies such as YTL who have made a curious real estate investment in Singapore at a veru high valuation.

Not to forget that outrageous ovet-the-top valued $8 billion investment by Maybank in Indon, despite Bank Negara's strong objection. Someday soon, the truth will emerge and we will then know which local commission agent hiding behind off-shore set-ups, made a killing at the expense of M'sian taxpayer!!

Anonymous said...

everyone is on syabul. what recession? joke.
chedet mentioned it.
anyway, maybe the money circulating from umno elections is keeping up consumer spending.

Hantu Laut said...

pak idrus,
Just too bad we have politicians who like to hide the truth.

Hantu Laut said...

pok kam,
As much as I hate it,I don't think we can escape from it.

Hantu Laut said...

I think our banks are still alright.They are stronger and wiser after the Asian financial meltdown and the mergers.

That's besides the point.A strong financial system does not give us immunity from catching the sickness.We would still be in a recession.

Hantu Laut said...

jed yoong,
I think the nation is on auto-pilot until the UMNO elections are over.