Malaysia can increase fiscal stimulus, IMF says

Published: 15/08/2009 05:00

0

222 views
Malaysia has “limited room” for additional fiscal stimulus should the country’s economic condition deteriorate, the International Monetary Fund (IMF) said.

Any decision on boosting spending should be made in the medium term because the country faces high budget deficits and rising debt, executive directors at the Washington-based lender said Friday in a statement. Malaysia also needs to focus more on “strengthening domestic demand as a source of growth,” IMF officials said.

“Malaysia is well positioned to weather the severe impact of the global downturn,” the IMF said in the statement, part of the country’s annual “Article IV” review. There is “some limited room for additional stimulus if the downturn proves longer or deeper than expected.”

The Southeast Asian country has unveiled 67 billion ringgit (US$19 billion) of stimulus measures to counter a global recession that policy makers predict may cause the economy to shrink as much as 5 percent in 2009.

“The Malaysian economy has been weak and could benefit from continued fiscal stimulus,” said David Cohen, an economist with Action Economics in Singapore. “At the same time, just like the other regional economies, the economic outlook has been improving with the turnaround in exports, improving global backdrop.”

The country’s industrial production fell by the least in seven months in June as a nine-month slump in exports eased, according to figures from the Putrajaya-based Statistics Department released this week.

Budget shortfall

Malaysia’s budget shortfall may rise to 7.7 percent of gross domestic product this year, from an estimated 4.6 percent in 2008, the IMF said.

Steps to reduce medium-term fiscal risks include broadening the non-oil tax base and moving ahead on subsidy reform, IMF officials also said. To boost domestic demand, the country should continue to promote private investment and make labor-market improvements, they said.

Malaysia’s central bank has recommended that the government sell new global bonds, Governor Zeti Akhtar Aziz said in Kuala Lumpur this week. Bank Negara Malaysia made the recommendation to the government, Zeti said.

The central bank held interest rates steady at 2 percent for a third straight meeting last month, saying the $187 billion economy showed “signs of stabilizing in the second quarter.”

The IMF said that Malaysia’s monetary policy has been “loosened decisively” and that “dollar liquidity has remained adequate.”

Source: Bloomberg

Provide by Vietnam Travel

Malaysia can increase fiscal stimulus, IMF says - International - News |  vietnam travel company

You can see more



enews & updates

Sign up to receive breaking news as well as receive other site updates!

Ads by Adonline