Mini Budget Speech by Datuk Seri Najib Tun Razak

MALAYSIANS will have to accept the reality that harder economic times are ahead and brace themselves for more difficulties.

Deputy Prime Minister Datuk Seri Najib Tun Razak said the country, having a highly open economy, would not be shielded from the spillover of the economic crisis already hitting major nations like the United States, Europe and Japan.

In the days ahead, Najib said Malaysians could expect the country's exports to decline due to lower demand, sharp reductions in commodity prices, smaller foreign direct investment and a global meltdown in equity markets with Bursa Malaysia already off its highs.

'After almost two years into the global financial crisis, which originated from the sub-prime financial turmoil in the US back in mid-2007, we have yet to see signs of stability in the financial sector or recovery in the advanced economies.

'Despite the announcement of large economic stimulus packages over US$3tril (RM11.4tril), including substantial amounts to bail out their financial institutions and large corporations, these measures have yet to restore consumer and investor confidence.

'Therefore, it is highly likely that the global economy will get worse before it gets better,' he said when tabling the mini-Budget in Parliament yesterday.

Najib said negative development overseas had already impacted Malaysia's economy during the fourth quarter of last year, with deteriorating exports and industrial output, declining investments and poor consumer sentiment.

This was despite the fact that the country achieved strong growth in the past and its high level of international trade, which, at almost 200% of the Gross Domestic Product, was among the highest in the world, he said.

'Exports in January declined by 27.8% while inflow of foreign investment is expected to be half of the RM51bil in 2008,' he said, pointing out that the Gross Domestic Product (GDP) had already shrunk to 0.1% for the fourth quarter, mainly due to a 13.4% reduction in export value and a 8.8% contraction in manufacturing during this period.

Najib said more than half of the world's major economies were already in recession and experiencing the worst contraction since the Great Depression, with the US being hit by -1.6% growth, Britain -2.8% and Japan -2.6%.

'Latest statistics indicate unemployment rate in the US at 8.1%, the highest since 1983.

'In this region, South Korea, Taiwan and Singapore will also have recession. In fact, Singapore's Minister Mentor said that its economy might contract 10% this year,' he added.