“Its the Economy, Stupid” – Part I

People, let me be totally blunt. Our economy is in deep shit. A global recession is looming and its going to hit Malaysia hard, and I mean real hard.  Its gonna be the worst financial meltdown since the Great Depression. Iceland has declared national bankruptcy and our neighbour down south is already in recession. I just received word from Canada today that the banks there, in the US and Europe are falling like tenpins. Our populist expansionary budget for 2009 will not hold and is unsustainable. Its deficit targets will go off tangent with the drop in oil prices. Capital flight and outflows are also at an all time high and the stock market is spiralling in a freefall. If you think your money and your investments in our domestic banks are safe, then think again. This impending disaster will rip us so bad and will affect the lives of every Anak Bangsa Malaysia.

Yet in Malaysia, authorities have recently issued reassurances the country was well buffered from the fast-spreading recessionary trend. Government leaders, instead of taking pre-empting measures to stave off the impending hardship of the rakyat are more interested to jostle for political ground. To them what’s more important is the No. 1, No 2 and the VPs posts in the coming UMNO elections.

I hope it will not turn out to be a case of ‘UMNO fiddling while Malaysia burns’.



‘Within the 10-member Asean trading bloc, Malaysia was glaring as the only country to record a negative flow. This took place despite the fact that the Southeast Asian region recorded its highest ever FDI inflow – which leapt 81.1 percent to RM209.2 billion in 2007 from RM115.5 billion in 2006.’ – Malaysiakini

Malaysiakini Report:

A financial crisis is looming over the country, threatening to rip into the real economy and affecting the lives of ordinary men and women, but government leaders seem to be in denial of the impending disaster, said several opposition members of parliament.

According to the DAP parliamentarians, instead of addressing the concerns of the people and coming up with concrete steps to stave off economic hardship, government leaders were more interested to jostle for political ground.

charles santiago“The last time such a disaster happened was ten years. This suggests that instability is systemic to the free market system, which has been used by corporations to benefit themselves,” said DAP MP for Klang Charles Santiago

“Ultimately, the socialisation of risks means it is the ordinary man and woman who will pay for their mistakes. Social policies will now be placed on the back-burners of government plans if they’re not completely taken off the national budget,” he added.

The latest financial crisis striking across the US and Europe – dubbed the worst financial meltdown since the Great Depression – has seen the former announcing an unprecedented bailout package of US700 billion dollars for the financial sector and European policymakers making similar, though smaller-scaled pacakages.

In Asia, India, South Korea, Japan, Taiwan, Hong Kong and China have also put in place measures to deflect off the worst effects of the global financial crisis. Whilst in Singapore, the government has already declared a state of recession.

najib and ringgit and us dollarYet in Malaysia, Finance Minister Najib Abdul Razak and Second Finance Minister Nor Mohamed Yakcob have recently issued reassurances the country was well buffered from the fast-spreading, incurring criticism from several quarters including Transparency International Malaysia.

Najib, who is also deputy prime minister, was reported to have said Malaysia’s economy was stable and several proactive measures would be announced soon to boost growth. He also said Malaysia enjoyed strong economic fundamentals, financial markets and infrastructure that would increase its resilience to any external shock.

“Such a response by Najib to the financial crisis – which will hit ordinary men and women in a very hard way – have not been helpful at all to assure us the government is dealing with the issues effectively, if at all,” Santiago said.

Possible run on banks

There is talk that as in other countries, retailers in Malaysia will be quickly decreasing orders in anticipation of the impending slump in demand, which will hit in turn hit major manufacturing exporters later this year.

There was also the possibility of a run on domestic banks, which are suffering from overseas investment losses. Tourist arrivals, commodity prices and manufacturing exports are also expected to be lower.

Santiago said the government was projecting a false picture of stability when Nor Mohamed recently said Malaysia’s diversified economy would save it from the global financial crisis. The second finance minister had said Malaysian exports accounted for only 30% of economic growth, a sizeable – and increasing – proportion of which went to China and India.

“Both India and China may import some our products in the form of product inputs, but they are also dependent on the US and European markets. If demands from the US and Europe markets reduce, then demands from India and China of our products will also decline,” said Santiago.

He also demanded that the government clarified how the 2009 Budget would be modified to reflect the sinking economic conditions.

tony puaAnother DAP leader, Petaling Jaya Utara MP Tony Pua, said the global recession and lower oil prices would wreak “havoc” on the government’s revenue and expenditure as project in the 2009 Budget.

“The more than 20% fall in crude oil prices will have a major impact on the Government’s revenue… Without a any reduction in the government’s planned record expenditure, this will mean a massive increase in the government’s budget deficit to a precarious 5.4%, from its projected 3.6%,” said Pua in a statement.

Pua also called on Najib to table a revised budget in Parliament in light of the volatile economic circumstances.

“Najib must not only spew rhetoric about Malaysia’s sound economic fundamentals and be in denial about the economic fallout which is about to hit us very hard, but instead take action and demonstrate his ability to soundly managing the country’s financials to reassure investors and return the loss of confidence in Malaysia’s economy.”

“It’s the economy, stupid” was a phrase used by Bill Clinton’s in his successful 1992 presidential campaign against George H.W. Bush and would be quite appropriate for all those politicians indulging in the current political elections and drama, oblivious to the negative impact the financial meltdown will bring upon Malaysians. This will be the title of a series of compilations, comments and dire warning on the current economic and financial meltdown that’s going to hit Malaysia like a falling asteroid.


2 Responses to “Its the Economy, Stupid” – Part I

  1. Jackie Lee says:

    Keep it up brother. Alert as many people as you can. Some of them might even say thank you for alerting them. Now is not about politic……. now is about financial meltdown.

    Be the best……

  2. Patricia says:

    Thanks for this one, Bangmalaysia,

    I was thinking just these very same thoughts, eventhough I am no economist! And I shuddered each time I heard reassurances from our new Finance Minister – could it be that he doesn’t read the news or watch tv? Let alone be briefed by Bank Negara? Yesterday, I heard Singapore declare that they are in recession. And we are buffered???

    Yes, a revised, less myopic budget is in order. But it would seem that they are too busy with the umno elections to give a crap for the economy, until it falls on their heads and bites them!

    Thanks Pat especially your comment which was a pretty sharp observation. I’m no economist either but did Economy 101 (Intro to Economy) back in University. What I can see is that we may be heading for a recession or contraction or negative growth ie “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP”. This is particularly so when our closest neighbour Singapore, a major trading patner is already experiencing it. Normally neighbouring countries will experience the impact, its like a domino effect. But with the current state of excessive politicking by UMNO and BN component parties, and no one is really bothered, I fear that the recession will sustained and turn into a depression. I hope we will not experience what happened once in the Baling district where Malaysians were literally dying of starvation.

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