Is Malaysia already in recession? What can we do now?

What did the government say?
Nov 28, 2008 – Malaysia to escape recession, says Zeti
MALAYSIA is likely to escape a recession next year and post a modest growth despite the global financial crisis due to strong consumer demand and public spending, the central bank said.

Jan 9, 2009 – Malaysia Not In Recession Now, Says PM
Malaysia is not facing a recession now despite the global financial meltdown that has badly hit the United States and Europe, Prime Minister Datuk Seri Abdullah Ahmad Badawi said.

Jan 10, 2009 – Malaysia won’t go into recession, says Nor Mohamed
Yet another official is talking…

What did the union and private sector say?
Nov 26, 2008 – Job Losses Feared as Recession Bites
The global economic slowdown is slowly creeping onto Malaysian shores leaving many worried about the impact it will have on workers.

Jan 13, 2009 – Sell Malaysian bank stocks: Citigroup
Citigroup cut its growth forecast for Malaysia to 0.5 per cent for 2009 from 3.1 per cent on lower exports, according to the report. Citigroup’s forecast is lower than the official estimate of 3.5 per cent for economic growth in 2009.

Why governments hate to let us know that we are in recession?
Governments hate downturns. That’s because voters tend to prefer good times to hard times, unsurprisingly. A government that presides over house price growth and full employment comes in for plaudits, regardless of how that growth was achieved.

The basic ideas behind how to run an economy for a long time have been rooted in Keynesian economics. The idea is that governments can take an active role in managing the economy through various tools, including setting the interest rate. You try to make sure the economy doesn’t overheat during the good times, and in the hard times, you make money a bit more available, and maybe increase public spending too, to compensate for the downturn in the private sector and “stimulate” the economy.

The government can’t stop the recession – but it can make it worse
Does it work? Who knows? Because while it sounds good in theory, what you actually get is a government that keeps pressing the “stimulate” button for as long as it can get away with it.

With the coffers empty, there really is very little any government can now do to stand in the way of this downturn. But that won’t stop them from trying. They won’t make things any better. But as a long and grim history of price controls, currency market interventions, protectionist laws, and good old Fannie and Freddie (so-called “government-linked companies”) in US demonstrate, they might just make things worse.

If it really has to, the Government could still do something – instead of wasting tax payers’ money on inefficient and yet corruption-breeding projects or “VALUEable CAPital injection” (oops.. sorry for the spelling mistake), it could cut taxes. That would put more money in people’s pockets, which they could use as they wished.

But this won’t happen. Rather we’ll get a load of high-profile, high-spending, wasteful initiatives that will drive us deeper into the hole we’re in.

What can we do now?
Some good businesses during hard time – answer to uncertainty: feng shui & fortune teller.

Other more-practical ideas: buying essential items in bulks at hypermarts, sharing for saving, recycling, reading financial blogs, etc.

Real estate investment? Why not?
Advice from guru – hold onto gold, income-producing real estate, oil wells, and stocks when pessimism prevails.

Today’s depressed real estate market is the best time to start buying houses, even if credit is tight. Robert Kiyosaki and his wife accumulated income-producing properties when the economy stayed down from 1987 to 1995, even though they were strapped for cash and bankers did not want to lend to small investors.

Finally, and most importantly – “if you do not know what you are doing, no asset can make you rich. Ultimately, what makes you rich is your financial intelligence. Your greatest asset is your brain — so take care of it and protect it from bad advice.”
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About The Author

ongkl

Coming from a humble little town named Tangkak in north Johor state of Malaysia, I am so lucky to have chances to learn and work both in Johor Bahru and Singapore - a conurbation with 6.49 million still fast growing population - since year 1996. Hope now I can have a chance to contribute back to the community by sharing what I see, what I know and what I learn in this wonderful place.

7 Comments

  • 雷門

    Reply Reply January 15, 2009

    “Credit is tight,
    Approval of loan are low, …”
    The person who wish to own a house are forced to rent one. Thus, there is a need in rental market while this recession. But, properties has no market, value is going down, this affects rental.

    Good timing for income producing properties?

  • ongkl

    Reply Reply January 17, 2009

    Hi, 雷門, sorry for the late reply.

    We found out that although the property values have been going down after Sep 2008, rental market is not much affected, yet. We believe the rent will not drop as fast as the property value, and thus give us more and more opprotunities to find properties with high rental yield.

    In other words, the gap between the selling price and the expected rental income of a property is becoming smaller now. But here we are only talking about residential properties because people still need a place to stay in hard time.

    Cheers

  • 雷門

    Reply Reply January 17, 2009

    How do you think on Tebrau City Residences, Desa Tebrau? Shopping malls arround create much value. Developer is http://www.plenitude.com.my .

    • ongkl

      Reply Reply January 20, 2009

      Hi 雷門,
      Though we don’t know much about this project and its developer, the location is definitely premium. We also learn that the price of most properties such as the apartments under this project is considered affordable for the quality they deliver.

      Happy Lunar New Year

      Cheers

  • Poul

    Reply Reply January 19, 2009

    Thanks Ong, very interesting article!
    The Malaysian government keep announcing that the world crisis is not going to affect Malaysia much. I can understand that they keep putting a positive slant on the outlook so as to not further dampen the confidence of the business community and the average citizen of Malaysia. However, I think they are wrong. Malaysia does not operate in isolation from the rest of the world, and despite the government injections of large amounts of funds into the economy and the propping up of the ringgit, the recession will hit home severely when the government coffers are empty and the effects of the slowdown in international trade hits with full force. I wouldn’t be surprised to see the ringgit weaken shaply in the next 6 to 8 months. From a real estate perspective I think we’ll see a buyers’ bonanza over the next couple of years.

  • Hubert Ong

    Reply Reply January 30, 2009

    Singapore government is telling their citizens that is reccession is worst than 1997 asian currency criss, and nobody knows when it will hit bottom. The government anounced the 2009 budget on 22 January 2009 which UNPRECEDENT drawed to its reserves of S$4.9b, some MP said there may be off-budget if reccession is worsen in later part of the year. Why there is so much contrast view between Singapore and Malaysia goverment? Aren’t both located in the same planet?
    http://www.singaporebudget.gov.sg/

  • ongkl

    Reply Reply February 2, 2009

    Some people confront their fear bravely, so that they won’t be afraid of the same thing again in future. Just like when we learn cycling, we fall but yet we cycle again.

    Some people choose to be an ostrich when come to fear. They hide and hope others will do the same thing also, so that they won’t be seen. Just like when we lean cycling, we cycle with our eyes closed, we fall again.

    The most bravely move of Singaporean government in their 2009 budget is, they dare to reduce taxes with all means, which realy benefits the people and economy.

    Cheers

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