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."