Published July 17, 2009

Manufacturing sales in M'sia dip 26% in May

But the RM36.6b amount is 2.2% higher than in April, shows Mier data

By PAULINE NG
IN KUALA LUMPUR

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MALAYSIA'S manufacturing sales sagged almost 26 per cent in May to RM36.6 billion (S$14.9 billion) from a year ago. But their value was 2.2 per cent higher than in April.

With the general slump persisting, the Malaysian Institute of Economic Research (Mier) suggests, another RM8 billion may be required in stimulus spending to mitigate a sharper contraction in the economy, which it now projects to shrink 4.2 per cent this year, instead of 2.2 per cent.

The number of employees in the sector continues to decline. In May, it was 935,761 - almost 78,000 or 7.7 per cent lower than a year ago. Compared with April, the number of workers employed was 7,710 or 0.8 per cent lower.

The figures for the first five months of 2009 are telling. The sales value of manufactured goods plunged more than a quarter to RM177 billion - RM62.2 billion down from RM240 billion in the same period last year. On the jobs front, the sector employed 77,600 fewer workers.

With Malaysia already in a technical recession, the government may have little option but to loosen the purse strings if economic recovery is anaemic, Mier executive director Mohamed Ariff said in a presentation on the economy yesterday.

Having announced two stimulus packages amounting to RM67 billion over 2009-2010, Prime Minister Najib Razak is reluctant to increase spending, especially as the budget deficit is expected to hit 7.6 per cent of gross domestic product this year, and going beyond 8 per cent next year. Spending an extra RM8 billion would swell the deficit closer to 10 per cent and put the country's sovereign ratings at further risk.

Of the RM60 billion allocated in the second package, only a quarter or RM15 billion is direct spending - an amount that Mr Ariff believes could be insufficient, especially if it is not quickly and efficiently implemented. Potential leakages are another area of concern, and even though RM7 billion of the initial spending package has been allocated, most businesses say that the effects have not been apparent.

Mier said that recent moves to liberalise the services sector and policy changes to bumiputra quotas that make listings and corporate and real estate transactions less restrictive would not have an immediate impact, but could attract more investors when the global economy recovers. On a brighter note, Mier's indices show that the changes have significantly boosted consumer and business sentiment.

Although the rate of decline eased slightly in some sectors in May, Mier said, monthly indicators were 'still losing momentum markedly'.

The 11 per cent drop in industrial output in May was narrower than the 18 per cent year-on-year fall in January. But exports have yet to show signs of stabilising - in May, the dive was almost 30 per cent. Foreign direct investment has also fallen off the cliff, totalling just RM4.2 billion as at May - a tenth of the RM46 billion netted last year.

Mier anticipates global recovery to be gradual or U-shaped and has downgraded Malaysia's growth next year to 2.8 per cent, from 3.3 per cent. Malaysia expects the economy to contract between 4 and 5 per cent this year.