Technically, an economy is in recession if the GDP shrinks by 2 consecutive quarters. While this year’s celebration of CNY is muted and subdued in Kulim ( I believe it’s the same for the rest of Malaysia), I don’t see any strong evidence of a massive crash like the one we are seeing, reading or hearing everyday in US, UK and Europe. STAR reported 12,000 job cuts on Tuesday alone in US which affected all industries. It was 71,000 layoffs on Monday. All together 211,000 jobs have been lost in the month of January alone in US. What is peculiar is not only losing company are slashing jobs but profitable companies like Microsoft which announced $4 billion quarterly earnings are retrenching to the tune of 3,000 job cuts. This implies that the management is expecting a longer and deeper recession beyond 2010. At this moment US and UK economy is going for a free fall. Financial institutions are the most vulnerable. Unfortunately also, they are the heart and soul of the economy, not to mention employment and wealth creation. It is a vicious cycle. Remarkable news today is not only companies are falling like a pack of card but government as well, like in the case of Iceland. Indeed the Titanic has hit the iceberg.
Malaysian economy is expected to slow down drastically after CNY. You will be seeing a lot of hangover blues after Chap Goh Mei. In fact, many won’t have to wait that long as the HR ministry has reported officially 50,000 jobs will be lost. This has prompted Bank Negara to cut interest rates by 0.75% to 2.5% as a pre-emptive measure against economic slowdown. It also reported credit card NPL stood at 2.6% recently. I hope this is true figure. Time will tell.
Anyway, judging from today’s restaurant and food business in Kulim on the third day of CNY, I can say satisfactory. No doubt business has dropped by 30% but this decline is manageable. I believe the number could have been lower if business is willing to slash prices or reduce their profit margin. We have not reached the desperate level of US and UK. The financial institutions are still flush with liquidity. The Chinese have big reserves as they have saved during good times. At the same time, the civil servants are getting increment in pension. By today’s figure, the Malay would have formed nearly 85% of the civil services are they are prolific consumers unlike the kiasu and kiasi Chinese. So the Malays play a big role in generating consumption and investment. The role of government is of great important at this stage. Which is why at this stage, I am still using the word slowdown instead of recession in Malaysia. On a micro level, my estimation is we have a reserve of 18 months till July 2010 before feeling the devastating impact. So if we can stand for another 18 months with the hope that the first light of recovery in US seen by 3rd. quarter 2010, Malaysia will avoid recession. At this moment the odds are only 25% that we will have recession in 2009. Malaysia suffers not from credit crunch but from confidence to lend and borrow. This will be difference between slowdown and recession. I wish all Malaysian Chinese Gong Xi Fa Chai in the year of the OX.
Malaysian economy is expected to slow down drastically after CNY. You will be seeing a lot of hangover blues after Chap Goh Mei. In fact, many won’t have to wait that long as the HR ministry has reported officially 50,000 jobs will be lost. This has prompted Bank Negara to cut interest rates by 0.75% to 2.5% as a pre-emptive measure against economic slowdown. It also reported credit card NPL stood at 2.6% recently. I hope this is true figure. Time will tell.
Anyway, judging from today’s restaurant and food business in Kulim on the third day of CNY, I can say satisfactory. No doubt business has dropped by 30% but this decline is manageable. I believe the number could have been lower if business is willing to slash prices or reduce their profit margin. We have not reached the desperate level of US and UK. The financial institutions are still flush with liquidity. The Chinese have big reserves as they have saved during good times. At the same time, the civil servants are getting increment in pension. By today’s figure, the Malay would have formed nearly 85% of the civil services are they are prolific consumers unlike the kiasu and kiasi Chinese. So the Malays play a big role in generating consumption and investment. The role of government is of great important at this stage. Which is why at this stage, I am still using the word slowdown instead of recession in Malaysia. On a micro level, my estimation is we have a reserve of 18 months till July 2010 before feeling the devastating impact. So if we can stand for another 18 months with the hope that the first light of recovery in US seen by 3rd. quarter 2010, Malaysia will avoid recession. At this moment the odds are only 25% that we will have recession in 2009. Malaysia suffers not from credit crunch but from confidence to lend and borrow. This will be difference between slowdown and recession. I wish all Malaysian Chinese Gong Xi Fa Chai in the year of the OX.
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