March 9 (Bloomberg) — Malaysia may unveil tax cuts, public spending and other measures totaling more than 30 billion ringgit ($8 billion) tomorrow, more than four times an earlier plan, as it seeks to avoid a recession this year.
Malaysia needs a second stimulus of at least 33 billion ringgit, according to AmResearch Sdn. economist Manokaran Mottain. Deputy Finance Minister Kong Cho Ha told the Chinese- language Sin Chew Daily last month the government will announce an additional package of 30 billion ringgit to sustain economic growth and stem rising unemployment.
Asian nations have unveiled stimulus plans worth almost $700 billion and cut borrowing costs as the global slump pushed Japan, Hong Kong, Singapore and Taiwan into recession. Malaysia’s economy grew at the slowest pace in seven years last quarter as falling exports hurt companies including Malaysian Pacific Industries Bhd. and job losses surged.
“The spectre of a technical recession for Malaysia in the first half of 2009 is now a certainty while an outright recession for the full-year is inevitable,” said Azrul Azwar Ahmad Tajudin, an economist at Bank Islam Malaysia Bhd. in Kuala Lumpur. “We seriously need a bold and decisive policy action with more aggressive fiscal and monetary measures.”
Malaysia will allocate 5 billion ringgit on development and another 5 billion ringgit on “operational” spending as part of its second stimulus package, Deputy Finance Minister Kong said March 5. The total package may be worth as much as 35 billion ringgit, Agence France-Presse reported yesterday, citing a government official it didn’t identify.
Finance Minister Najib Razak, who has said the second stimulus plan, or so-called mini budget, will be “bigger and more comprehensive” than a 7 billion-ringgit package in November, is due to table the new plan in parliament tomorrow.
Malaysia’s five- and 10-year government bonds have slumped in the past six weeks on concern the government will increase debt sales to fund a widening budget deficit. Yields on the note maturing in April 2014 rose to the highest level since Nov. 24 on March 6.
The finance ministry will sell 4.5 billion ringgit of the benchmark five-year notes on March 12, the single biggest offering since June 2004. Markets in Malaysia are closed today for a public holiday.
The government’s additional spending may increase this year’s budget deficit to as much as 7.6 percent of gross domestic product, more than the 4.8 percent estimated in November, according to Citigroup Inc. That would be the biggest gap since 1987, according to Bloomberg calculations using government data for the budget balance and GDP at current prices.
“The priority for the government now is to cushion the economy from the severe global recession and to spur economic growth,” Peck Boon Soon, an economist at RHB Research Institute Sdn., said in a March 6 report in Kuala Lumpur. “We view the worsening budget deficit and a potential downgrade in credit rating as a secondary concern” as long as it is temporary.
Source : Bloomberg