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Malaysia’s $16 Billion Plan Too Late to Save Economy, CLSA Says

By Wednesday March 11th, 2009 No Comments

March 11 (Bloomberg) — Malaysia’s 60 billion ringgit ($16 billion) stimulus plan will be implemented too late to save the economy from the biggest contraction since the Asian financial crisis a decade ago, CLSA Asia Pacific Markets said today.

The benefits from the two-year package, announced yesterday by Finance Minister Najib Razak, won’t be fully felt until the final quarter of this year at the earliest, Chee Wei Loong, an analyst at CLSA in Kuala Lumpur, said in a report.

It’s “almost a foregone conclusion” that Malaysia’s economy will shrink 5 percent this year, Loong said. “The key reason is timing.” Najib said yesterday the contraction in 2009 will be 1 percent at worst.

An initial 7 billion ringgit Malaysian stimulus still hasn’t been completely spent, more than four months after it was announced, Najib said yesterday. The larger-than-expected second package included efforts to increase bank lending and fast-track infrastructure projects, though there was little immediate relief for consumers, according to OSK Research Sdn.

The Kuala Lumpur Composite Index today added 0.5 percent at 11:41 a.m. local time, trailing gains by benchmarks in neighboring Singapore, Indonesia and Thailand.

“Although many of the initiatives announced would have an indirect impact on boosting economic growth, from the aspect of immediately releasing money to Malaysian households, the stimulus was somewhat disappointing,” Chris Eng, an analyst at OSK in the Malaysian capital, said in a report.

                      Possible Recession

The Southeast Asian nation will probably enter a recession in 2009 as the economy shrinks 1 percent, Eng said.

The second stimulus package will swell the 2009 budget deficit to 7.6 percent of gross domestic product, Najib said yesterday. He had estimated a budget gap of 4.8 percent of GDP in November.

Under the plan, the government will create a 5 billion- ringgit loan-guarantee program, and a fund of the same value to provide working capital to small businesses, which account for one third of the economy. A new state-owned Financial Guarantee Institution will probably help credit-strapped companies raise 15 billion ringgit of bonds, the government said.

Malaysia will also accelerate 8.4 billion ringgit of infrastructure projects under a five-year plan. The government’s investment fund, Khazanah Nasional Bhd., was given an additional 10 billion ringgit to spend in Malaysia over the next two years.

–Editors: Stephanie Phang, Tony Jordan

To contact the reporter on this story:
Angus Whitley in Kuala Lumpur at +60-3-2160-6801 or awhitley1@bloomberg.net

To contact the editor responsible for this story:
Tony Jordan at +65-6212-1150 or tjordan3@bloomberg.net; David Tweed at +81-3-3201-2494 or dtweed@bloomberg.

Source : Bloomberg

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