Economic Stimulus Package for Malaysia (2008)

Better “something” than “nothing”…

Following the footsteps of several major and regional economies, the Government unveiled an economic stimulus package (ESP)on Nov 4, 2008. The key measures include:
(i) a RM7b new Government spending package,
(ii) allowing workers to opt for lower EPF contributions of 8% for two years, and
(iii) liberalising building material industries, as well as foreign investment in commercial properties and the services sector.

These measures add to the long list of measures that the Government had put in place, first to help the economy – especially consumers – cope with inflationary pressures, and now to deal with recessionary pressures. Over the past three months, steps already announced included a string of reductions in fuel (petrol and diesel) prices to reflect falling crude oil prices, 100% guarantees on deposits, and an additional RM5b to Value Cap.

The Government also revised its 2009 key macroeconomic forecasts, for lower real GDP growth and higher budget deficits. Our 2009 growth forecast is “stable” but under “negative watch” in view of the need to continuously assess the:
(i) effectiveness and execution of the ESP,
(ii) performance of the global economy, and
(iii) developments on commodity prices.