29 January, 2009

Malaysia May Increase Budget Deficit Target for 2009


Jan. 29 (Bloomberg) — Malaysia may raise this year’s budget-deficit target, already set to match the biggest overspend since 2003, because of the cost of a second economic stimulus package.

The estimated deficit of 4.8 percent of Malaysia’s gross domestic product “will have to be adjusted upwards,” Deputy Prime Minister Najib Razak said today.

The government in November projected the same shortfall for 2008. Najib, who is also finance minister, may be sacrificing control of the budget, and the country’s credit rating, as he attempts to avoid a recession amid a global economic slump.

Agencies including Standard & Poor’s have said Malaysia needs to rein in spending to avoid downgrades. The government is “mindful” that any revised figure for the 2009 deficit shouldn’t be “too high,” Najib told reporters in Kuala Lumpur.

He declined to provide details on the second stimulus package. He said earlier this month that measures will include ways to help companies that have been forced to dismiss workers in the slowdown.

The government announced a first package worth 7 billion ringgit ($1.9 billion) in November. Malaysia’s $181 billion economy probably needs a second stimulus plan equivalent to about 2 percent of GDP, Standard Chartered Plc said on Jan. 15.

Malaysia may enter a recession — two consecutive quarters of negative growth — in the first half of this year, according to Citigroup and Standard Chartered.

CLSA Asia-Pacific Markets expects the economy to shrink 1.2 percent in 2009, compared with the government’s forecast of 3.5 percent growth.

Government ministries have been told to complete projects under the first stimulus package this year, Najib said. Small- scale construction and development projects are valued at about 5 billion ringgit, he said.

Source : Bloomberg

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