Oct 16, 2008

Impact of Global Financial Crisis on Malaysia

What wil be the impact of the world financial crisis on Malaysia?

Malaysia will not be spared from the global financial meltdown and already suffering from spiralling inflation before the financial crisis and recorded highest ever inflation rate during this year, even before the people could adjust to the inflationary cost of living the global financial crisis will inevitably affect world economy and Malaysia is highly dependent on its major trading partners which will see a global slowdown and is expected to trigger a deeper and harder recession.

Slumping commodities prices on the concern of global recession has seen crude oil fell more than 50 percent from its high in July 2008 to about US$ 73 per barrel and crude palm oil is now trading at a low of Ringgit 1760 from a high of Ringgit 4300 dropping more than 60 percent according to old Ben. Ben added that this will throw out the recent financial budget as it was drawn up based on now outdated prices of these commodities of which Malaysia is highly dependent on.

The International Monetary Fund (IMF) forecast recently that the world economy will be at its weakest pace since 1982. Demand for made-in-Asia exports is weakening as growth in the region's biggest markets in the US, Europe and Japan slows amid a global financial crisis.

The Malaysian Institute of Economy Research (MIER) said that the Malaysian economy may grow at its slowest pace since 2000 and may expand at 3.4 percent in 2009 after growing at 5.3 percent this year. 'It is likely that growth would deteriorate in late 2008, as the Malaysian economy takes the hit from the knock-on effects of a flagging global economy,' the partially government-funded research institute said in a statement. The outlook for the global economy is 'turning increasingly dismal,' MIER said.

Mr Carl Weinberg, chief economist at High Frequency Economics, said that even if credit flows are restored, the troubles are not over for the entire global economy.

'The world economy is still headed into a recession despite the global financial market rescue effort,' Mr Weinberg said.

'The decline will be deep and protracted. It has already started. Nowhere is the economic house in greater disorder than Euroland, although some may argue that Japan is a bigger mess.'


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