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Recession risk high and rising, says RHB

By Lee Wei Lian
The Malaysian Insider
Oct 12, 2011

KUALA LUMPUR, Oct 12 — Malaysia’s economic growth could slow to just 3.6 per cent next year from a projected 4.3 per cent this year due to the increasing risk of a double dip global recession, said the RHB Research Institute.

The RHB unit’s growth projection issued yesterday is significantly lower than Prime Minister Datuk Seri Najib Razak’s forecast of five to six per cent growth for 2012 in his proposed RM232 billion Budget 2012 tabled last Friday.

The research house said that the risk of a double-dip global recession is high and rising as both the US and Europe cannot withstand another shock although a recession could be averted if leaders in both continents act fast enough to contain the debt crises and avert a contagion that could lead to a complete meltdown in confidence.

It also expected businesses to cut spending in view of rising uncertainties although some growth will come from the implementation of the Economic Transformation Programme (ETP).

Private investment growth is projected to soften further to 4.6 per cent in 2012, after slowing to an estimated 5.7 per cent for 2011, the report added.

Exports, meanwhile, are expected to grow at just 1.1 per cent compared to 3.4 per cent this year due to dampened foreign demand for electronics and electrical items.

Domestic demand is projected to grow at a slower pace of 5.1 per cent in 2012, compared with an estimated 5.8 per cent for 2011.

RHB said, however, that consumer spending is expected to remain “reasonably resilient” and grow at around 5.3 per cent in 2012, compared with 6.0 per cent for 2011, given high savings, rising consumerism and an increase in salary.

Most research houses have lowered their 2012 growth projections for Malaysia despite Najib’s optimism in the Budget proposals, which critics have say is primed for the next general election that must be called by early 2013.

Bank of America Global Research estimated Malaysia’s gross domestic product (GDP) to grow at 4.2 per cent in 2012 while Maybank Investment Bank said it expected Malaysia’s GDP to expand at between 3.5-4 per cent. CIMB Investment Bank forecast a GDP growth of 3.8 per cent next year.

In his Budget 2012 proposals, Najib promised cash handouts, more money for civil servants, schools and a fund for “high-impact development” projects as part of measures to put money in the pockets of the majority of Malaysians who live in the lower income group.

The government will offer a one-off RM500 cash handout to households with a monthly income of less than RM3,000, a RM100 cash aid and RM200 book vouchers for students from the Budget, which is forecast to only have a 4.7 per cent fiscal deficit, down from the projected 5.4 per cent this year.

Authorities will trim development spending and maintain subsidies to keep prices down, while banking on low borrowing costs and a healthy job market to keep economic growth on an even keel next year.

The 2012 Budget funds for subsidies is expected to total RM33.2 billion.

12 Replies to “Recession risk high and rising, says RHB”

  1. Its not a double dip recession that is the issue. Its a full blown crises. A double dip recession will slow growth but we will still have some. THERE IS ABSOLUTELY NO CHANCE OF NAJIB’S BUDGET PROJECTION COMING TRUE.

    What it looks like is that EU (and US) are determined to kick the ball down the road for the time being. Its not even clear if they will be able to kick the ball through ENTIRE NEXT YEAR but the chances look better. BUT even if they manage to kick the ball through next year, problems will crop up again the year after i.e. 2014.

    In other words, the urgency of ‘Tranformation’ is NOW. Najib’s CURRENT failure is actually COSTLY to us, and continuing failure will be eventually be UNAFFORDABLE. His current failure is going to cost us almost guaranteed passing of GST after the GE. If he gets the GST pass at small amount, eventually it will rise to at least 6% likely even higher sooner or later.

    In other words, Najib leadership failure is an indulgence. The issue is will Malaysian wake up and understand they can’t afford it and have to pay for it pretty soon.

  2. “2 put money in d pockets of d majority of Malaysians who live in d lower income group”
    CAN really believe 1 aaah?
    Last time, UmnoB chaps even siphoned off $$ meant 4 HARDCORE POOR – truly bangsat 1, shld b struck dead by lightning lor
    As always, we will expect lots of abuses n unethical corrupt habits of UmnoB/BN in d proposed CASH HANDOUTS – YES, cash channelled in2 d pockets of UmnoB/BN

    If UmnoB/BN sincere n honest n really handing out cash to poor Malays, by now, 40 yrs after NEP, there shld NOT b any poor Malay families
    Instead we hv super-rich pseudo Malays like Toyol with his Balinese palace

  3. Alamak, whoever in RHB who wrote this report will now be cold-storaged. How can you come up with this low growth projection when Najib said a much higher number is in store for 2012 ? How can Najib be made to lose face this way ? Aiya….economist at RHB better send CV out for new job….

  4. If a bank spends like Najib when signs of recession coming….that bank will go bankrupt.
    Najib’s priority has always been fishing for votes.
    Financial Institutions locally and foreign have pointed out all the bad signs for Malaysia.
    I guess….Najib can always bluff his way out by comparing Malaysia with countries worst than us…ignoring the steady and stable ones…that don’t have one drop of oil or timber/furniture…..palm oil… to export…and earn billions each year.
    These scoundrels must keep on fooling Malaysians……more so now…to do or die.
    That’s how good UMNO b government is….do or die.
    Why be so dramatic if Najib is so pure and honest?

  8. Dont know ’bout you ppl. Me. Am well prepared for this. Got my underwear all sorted out. Yes. In three categories. New, used but still decent, old and loose. When the going gets tough, I will sell the second category, first. And when push comes to shove, I will next sell the first category. These two rounds of QEs ought to set up me alright for a few weeks. Think probably I wont hv to sell the final (oops if I do) category.

    As experts and economists all over have been saying for the last several months (what the heck), the economic numbers may not show a recession in the technical sense the feeling all around is no different from that of recession.

  9. //Got my underwear all sorted out. Yes. In three categories. New, used but still decent, old and loose.//

    The only person who buys used underwear is saifool bookhali…. and when he approaches you, better run for your life. Else you will be occupying a cell next to anwar in sungai buluh prison because the dna from your underwear will turn up in that (pang)saifull’s as#hole….

  10. “Putrajaya insists its estimates of growth rates are achievable.”

    What can you do if they insist ? What can you do if they spend a lot more than they receive and still insist it’s not serious ? What can you do if they insist that a deficit is not a deficit or that a deficit never exists ? You and I read Bloomberg and Financial Times. Chengho and his buddies read Utusan and smoke their joints under the rambutan tree…and there are more of them believers than there are of us skeptics. So what they “insist” goes.

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