Country Report Malaysia April 2009

Outlook for 2009-10

• Attempts by both the ruling Barisan Nasional (BN) coalition and the Pakatan Rakyat (PR) opposition to increase their representation in national and state parliaments will ensure that the political scene remains fluid in 2009-10.
• The Economist Intelligence Unit expects the BN coalition to remain in power in 2009-10. BN still has a sufficiently large parliamentary majority to pass the bulk of new legislation unchallenged.
• There is a risk of mass demonstrations if the leader of the PR, Anwar Ibrahim, is found guilty of sodomy.
• We expect the Malaysian economy to contract by 3% in 2009. Exports of goods and services will fall by an average of 18.8% in 2009, which would be the steepest decline on record.
• Malaysia is expected to experience mild deflation in 2009 as domestic demand weakens and global prices for oil and industrial raw materials fall sharply.
• The merchandise trade surplus will fall to US$33.7bn in 2009, from an estimated US$44.2bn in 2008. Although the current-account surplus is also expected to narrow this year, it will remain sizeable.

Monthly review

• The deputy prime minister and finance minister, Najib Razak, unveiled a second stimulus package in March. At around M$60bn (US$16.5bn), it is the largest stimulus in the nation's history.
• As there are just weeks to go before Mr Najib is officially appointed as the next prime minister, he spent much of March outlining his economic vision.
• The judicial system has been given the responsibility to decide the future of the Perak state assembly, which was left in a state of flux in February, when the opposition PR challenged the validity of a new executive council.
• Preparations for three by-elections, due on April 7th, got underway in March. One by-election is for a parliamentary seat, while the other two are for seats on state assemblies.
• The government revised its GDP forecast for 2009, from growth of 3.5% to a target range of between growth of 1% and a contraction of 1%.
• Merchandise exports, measured in local-currency terms, dropped by 27.8% year on year in January. Imports, on the other hand, declined at the much faster rate of36.1%.

Source: Country Report