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.