Published January 21, 2009

Second stimulus plan to stave off recession: Najib

Measures to include help for firms that have been forced to lay off workers

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(KUALA LUMPUR) Malaysia will be rolling out a second economic stimulus package in an attempt to avoid a recession forecast by Citigroup Inc and Standard Chartered plc, Deputy Prime Minister Najib Razak said yesterday.

Cloudy outlook: Malaysia may enter a recession in the first half of 2009, according to Citigroup and Standard Chartered. CLSA expects the economy to shrink 1.2% in 2009

The government will introduce a second series of measures after implementing the RM7 billion (S$3 billion) package announced in November, Mr Najib said in Putrajaya, outside Kuala Lumpur.

He declined to reveal the size or details of the additional spending programme.

Mr Najib, who is also the country's finance minister, joins policy makers in India, the Philippines and South Korea in planning or deploying more measures as the global recession deepens.

Many economists expect Malaysia's government to miss its growth forecast this year as electronics exports slump, factory output slows and commodity prices fall.

'That is why we are preparing for a second stimulus package, to make sure our economy will not fall into a deep recession, or even a technical recession,' Mr Najib told reporters. 'Very soon, we will determine the timing.'

He said the government was discussing with various parties to get their views and inputs to be incorporated into the second economic stimulus package.

Mr Najib also said that the Ministry of Finance had established a special unit known as Project Management Unit to ensure that projects under the economic package are implemented effectively and within the stipulated time.

He said the unit will also review several bureaucracy aspects to enable the ministries and agencies to speed up the implementation of the package.

The second series of measures will include ways to help Malaysian companies that have been forced to dismiss workers in the economic slowdown, Mr Najib said. He rejected the notion that the package would be a bailout.

'I would like to use the word assistance,' he said. 'The second package's focus will be different from the first.'

On the progress of the first package, Mr Najib said that the allocated funds have been already handed to the respective ministries.

If the funds allocated under the first package are fully used up this year, it is expected to raise the country's economic growth by one per cent, he said.

The first package, which included spending on low-cost homes, public transport and funds for private companies, will boost economic growth by one percentage point if ministries spend the allocated funds, Mr Najib said.

That will ensure the government reaches its 3.5 per cent growth target for 2009, he said.

Malaysia may enter a recession - two consecutive quarters of negative growth - in the first half of 2009, according to Citigroup and Standard Chartered. CLSA Asia-Pacific Markets expects the economy to shrink 1.2 per cent in 2009.

Malaysia's central bank will probably cut interest rates today for the second straight meeting in a bid to spur lending and revive consumer spending, according to economists surveyed by Bloomberg News.

The overnight policy rate may be cut to 2.75 per cent from 3.25 per cent, according to the survey. -- Bloomberg, Bernama