KL to raise pump-priming to offset U.S. fallout

KL to raise pump-priming to offset U.S. fallout

KUALA LUMPUR (AFP): Malaysia is considering further pump priming measures to mitigate a weakening of the U.S. economy due to this week's terrorist attacks, Prime Minister Mahathir Mohamad said Friday.

The premier said the Malaysian economy was "closely-pegged" with that of the United States and the "incident will divert all attention away from pure trade and things like that to matters of security."

"The U.S. economy will suffer and we will also be affected," he was quoted as saying by Bernama news agency after signing the condolence book at the U.S. embassy here.

"We are seriously looking into doing this," he said when asked whether Malaysia would introduce further fiscal pump-priming to stimulate the economy.

The government in March unveiled a three billion ringgit (US$789 million) supplementary budget to shore up the economy.

The United States accounts for about 19 percent of Malaysia's global trade, mainly in rubber products, textiles and clothing, optical and scientific goods, electrical and electronics products and wood products.

The government will for a second time revise its official growth forecast for this year when it unveils its 2002 budget next month. In March it cut its growth estimate from seven percent to between five and six percent amid the U.S. slowdown. The economy grew 8.5 percent in 2000.

Meanwhile, the National Economic Action Council executive director Mustapa Mohamed said a special team has been formed to monitor U.S. developments and ensure they did not adversely affect Malaysia's economy.

The special team will hold daily meetings with public and private sector representatives and various business chambers and groups, he said.

Mustapa said Malaysia was concerned over the effects of the terrorist attacks and U.S. retaliation on the world economy, such as rising oil prices and expansion of the US armed forces capabilities.

However he believed Malaysia would not be badly affected because of its resilient financial system and the currency peg which had helped ease the severity of the economic downturn.

The local ringgit has been pegged at 3.80 to the dollar since 1998.