Monday, January 12, 2009

A Bleak Economic Outlook

Hantu Laut

Making economic forecasts and predictions can be a daunting task.It becomes even more difficult when the global market is chaotic and when there are too many uncertainties.Although, no economic forecast, not expected to, anyway, had come close to be hundred percent accurate, it would be easier to predict future trends on a stable environment rather than predicting the outcome in a volatile environment.

The Economist Intelligence Unit (EIU) had revised its forecast for 2009 for the third time now.It has finally come to the same forecast I did on Malaysia in December 2008, growth of 2 per cent possibly down to negative territory.The EIU had revised its forecast from 3.1 to 1.5 per cent, which is within the range of my forecast.

Due to its fairly diversified resources, Malaysia's economic contraction would be less severe than countries like Singapore, South Korea and Taiwan.

On 14th December 2008 I wrote
"I believe the forecast by EIU of real GDP of 3.1% is a bit on the high side.My forecast is from 2% and possibly into negative territory if the government do not increase the stimulus package of RM7 billion and if the global economy shows no sign of improvement during the 1st half of 2009.

The true picture of what to come will only be known by the 1st Quarter of 2009 when the slowdown bites in"

The full impact of the recession has not arrived yet making those in government taking it easy and less guarded against the possible negative outcome.

With the slowing down of exports beginning November 2008 and expected to worsen in the 1st Quarter of 2009, the full impact of the recession would only be felt in the 2nd Quarter 2009.

The electronic industry is expected to suffer the most with serious decline in production and export.The downturn will see significant retrenchments resulting in high unemployment in this sector.

The notion of some economists of the 'decoupling' of Asian economies from that of the West is just that, notional.

We are just later recipients of what happened earlier in the West.


SM said...


I have a lot of respect for your analysis as you have proven to be correct quite a few times (except for your prediction that the PR will fall apart!).
The BN Govt. is now saying that despite the fact that quite a few European Countries , the US & even our neighbour Singapore have / are going into recession, we (Malaysia) will be fine in 3 to 6 months time!!!
Talk about trying to "hood-wink" us stupid Malaysians?!
What do you have to say about that?!

Hantu Laut said...

Thank you. 2nd Finance Minister Md Noor just a few days ago again say no recession for Malaysia.There is now a thing they called technical recession,which means only 2 consecutive quarters of downturn,which is what those in government probably think.

I don't want to pour cold water over your pursuit of a new government, I believe it will come, but not just yet.I will not give a timeframe, but I still believe there is likelihood of the PR breaking up.