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.