Once booming Malaysia falls into recession
Once booming Malaysia falls into recession
KUALA LUMPUR (AP): Malaysia has fallen into full-blown recession, with its once booming economy shrinking by 7 percent, the government announced yesterday.
Prime Minister Mahathir Mohamad said the country's second quarter gross domestic product shrank a further 7 percent, from 2.8 percent in the first quarter, according to the national news agency Bernama.
The Malaysian economy, which grew at a rapid pace for the last decade and expanded 7.8 percent in 1997, has now fallen into its worst recession in 13 years.
Hours later, the central bank officially pegged the Southeast Asian economy's grim contraction at 6.8 percent, meeting the economists' formal definition of recession: shrinking GDP for two consecutive quarters.
Bank Negara also released a slew of depressing figures:
- The construction sector shrunk by 22 percent this year, compared to 10.6 percent growth in 1997.
- From full employment in the early 90s, the number of jobless in the country has surged to almost 6.7 percent, while inflation ranges between 5 percent to 6 percent.
- The agriculture sector wilted 22 percent in 1998, compared to an annual growth of 3 percent last year.
Malaysia now joins the other Asian countries also in recession --Thailand, Indonesia, Hong Kong, South Korea and Japan -- all of which have been hard hit by the year-old Asian currency crisis. For most of Malaysia's 22 million people, however, the word "recession" only reaffirms what is already in the streets and visible along the highways.
"Look around you and you'll see carcasses of buildings built halfway," said Robert Tan, who supplies imported steel girders to the country's dismantled construction sector.
"We've spent so much money on piling, earthworks for the foundation. But there's no building," he said, adding that his company's revenue has plunged by 90 percent. "We can only hang on for another year."
After a heady decade of more than 8 percent growth annually, Malaysia is bracing for a wave of bankruptcies, rising inflation and unemployment rates.
More than 2,600 people lose their jobs every week, according to the latest Human Resources Ministry report.
The Kuala Lumpur Stock Exchange has taken a beating while the Malaysian ringgit has lost 40 percent of its value against the U.S. dollar since the Asian financial crisis erupted in July 1997.
Even some of the nation's most admired corporations have scurried to court seeking protection against creditors. As a result, cash-strapped banks have become leery of dishing out credit for major industrial and construction projects. This has prompted the prime minister's top economic adviser, Daim Zainuddin, to order banks not to deny loans to profitable companies that need credit for growth.
Unless these financial institutions want to "choke the economy to death," he threatened, they had better "contribute by shaking off its over-cautiousness toward lending."
The government may need to revise downward yet again its annual economic projections, Daim said yesterday.
"Although the forecast for GDP growth for 1998 is negative 1 percent to 2 percent, the slide could be deeper if we fail to get this package of measures implemented," said Daim.
Introduced last month, the National Economic Recovery Plan is the country's blueprint for turning around its current bleak economic prospects.
During the go-go days when the stock market expanded at breakneck speed, analysts from foreign brokerages entertained their clients with helicopter rides to tropical island resorts. Today, those analysts are gone and brokerage clients are treated to 30 ringgit (US$7) lunches.
"Market observers, analysts, the companies themselves, are still too optimistic," said a senior economist who requested anonymity after her brokerage firm warned her not to speak to the media. "You think things are bad -- but this is worse than your worst nightmare."