Economic Outlook

I was reading the Public Bank June 2008 Economic Review this morning (yes, I do read them boring stuff besides shopping catalogues, travel brochures, and my normal reading material of novels and NatGeo magazines) and it is quite optimistic. It says Malaysia has strong economic fundamentals which have been aggressively built in the post-Asian financial crisis characterised by strong external position (high external reserves and low external debt), strong and stable Ringgit (contributed by steady inflows of foreign direct investment and portfolio capital), high national savings and strong banking system (following the banking consolidation in 2000 which leaves the banking system well-capitalised).

The review goes on to say that the removal of fuel subsidies is justified because the subsidies had resulted in a significant distortion in market prices of goods and services in the economy. Fuel subsidies also encourage over-consumption of the scarce commodity. Hence, the removal of the subsidies will allow the prices of goods and services and the Malaysian economy to adjust to the new economic environment and encourage fuel and energy conservation and attract new investments and R&D in alternative energies which will contribute to sustainable development. In the medium and long term, the removal of the subsidies will also hasten the process in which all industries and firms have to take to enhance productivity and remain competitive internationally.

The review expects the Malaysian economy to remain positive but challenging in the second half of 2008 due to soft external demand and higher domestic inflation. Consumer and business sentiments may weaken slightly in the second half of the year by the expected increase in headline inflation and the continuing uncertainties in the global economies. However, the domestic economy has the fundamental strength and options to sustain its growth and reduce inflationary pressures.

From the demand side, domestic demand will continue to drive the economy, with support from intra-regional trade and also trade with the traditional trading partners, particularly the Euro area and Japan. From the production side, growth will remain broad-based. The services sector will continue to lead growth followed by manufacturing, agriculture and construction sectors. Contributions from commodities are expected to remain robust due to sustained international demand. Tourist arrivals are expected to remain high.

The positive outlook is also based on the fact that Malaysia has built a stronger domestic economy to support domestic activity. At the same time, Malaysia has a strong external position, large international reserves, large current account surplus and low external debt which can be leveraged to support the economy.

Other strong attributes of the Malaysian economy include high savings, strong and well capitalised banking system, ample liquidity, healthy household and corporate balance sheet and Government's fiscal flexibility. The country's flexible exchange rate regime provides greater flexibility for monetary policy to achieve domestic economic policy objectives.

Downside risks to this outlook include sharper than expected deceleration in the global economy, higher inflation and delays in implementation of projects under the Ninth Malaysia Plan which will affect both public and private investment projects.

Hmm, I don’t know. Granted we have those but I’m not as confident of the economic outlook. Anyway, enough of all this economic seriousness! And not to worry, it will be a while before I post anything so serious and sombre!

By the way, I once read an article in the Middle East Insurance Review... and it misspelt ‘mudharaba’ as ‘mudahraba’ (direct translation: easy to fondle). Hahaha!

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I was watching CSI: New York ‘Boo’ last night – Danny and Lindsay were investigating a mass murder at the infamous Amityville Horror house while Stella and Mac worked on a murder in the midst of a zombie gathering in midtown NYC, and it was Halloween – and getting caught up and involved with it (as I’m prone to do).

The episode was nearing its climax, Mac and Stella was at a tarot reader’s place (I think) and they met this girl, maker of voodoo dolls, who had the numbers 333 and 666 on her right and left eyelids respectively. Mac looked intrigued, surprised and curious. I watched entranced and enthralled, so absorbed was I. Then suddenly, poof! the light and TV went out. I was shrouded in darkness. My heart which was beating rapidly beat even harder until I felt my heart was at my mouth before it gradually slowed down again when I realised it was a blackout after all. But still, it was scary - imagine experiencing a blackout when you’re watching a horror or thriller movie and you’re at the climax part of the movie.

Called up my mate and he said his area also just had a blackout. But thankfully, it didn’t last long and I was able to watch the episode after about seven minutes had lapsed (and missed the crucial parts, dang!).