Published February 6, 2009

Broader Malaysia stimulus package by March: source

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(KUALA LUMPUR) Malaysia is set to introduce a second round of spending in February or March, and it will be far more wide-ranging than the first fiscal boost announced last November, a source familiar with government thinking said.

The Malaysian government, which is forecasting economic growth of 3.5 per cent this year, will also revise its forecasts in the light of weaker exports, lower commodity prices and an expected fall in foreign investment, the source said.

News of the second package came days after Fitch Ratings lowered Malaysia's 'A-plus' local currency rating outlook to negative from stable, due to expectations that its fiscal position would worsen in this year and next.

Finance Minister Najib Razak has told officials that the second fiscal package 'may be more far-reaching, and it might well be called a 'mini-budget', said the source. The first spending package totalled RM7 billion (S$2.9 billion) and economists have been forecasting that the new fiscal boost could be worth between RM7 and RM10 billion.

'Najib said the second package may well be more widely encompassing, and it may be bigger than the first if it is found that a more far-reaching package is required,' said the source.

Malaysia's government has forecast that the budget deficit would come in at 4.8 per cent of gross domestic product this year, although Fitch said that it could be as high as 5.7 per cent this year and 7.4 per cent of GDP in 2010. -- Reuters