Global Trends by Martin Khor
Monday 2 March 2009
Global crisis reaches Malaysian shores
released last week show that the tidal waves of the global economic
crisis have hit Malaysian shores as the country’s
effects of the global economic crisis reached Malaysian shores at the
end of last year, according to data released last week by Bank Negara
and the Statistics Department.
Production and income have been hit, and this was led by the fall in exports in manufacturing, oil and agricultural products.
The falls in the key figures have been surprisingly steep, showing that the Malaysian economy started stalling and then falling in the last three or four months of 2008.
Although recessionary conditions have affected the Western countries which are the origin of the financial crisis, in fact they have affected Asian countries even more badly.
is vividly brought up by a graph in the Financial Times of 26 February,
showing that the exports in the latest month (compared to 12 months
previously) fell in
week, the Department of Statistics released data showing that
was a sharp drop of 3.6% when compared to the third quarter of 2008
the fall in the economy is even more pronounced. The current
the sectors have been hit, in terms of deceleration of growth between
the third and fourth quarter of last year. The real
There is no doubt that the negative trend was caused by the global crisis, since the trade sector has been the worst hit.
latest data from Bank Negara’s Monthly Statistical Bulletin show that
The most worrying fall has been in manufacturing exports, and within that in the exports of electronics, electrical machinery and appliances.
Total manufacturing exports dropped 20% from RM138 bil in third-quarter 2008 to RM110 bil in the fourth quarter, and in the same period the exports of the electronic and electrical sector fell 20% from RM78 bil to RM62 bil.
Other export declines in the same period were in petroleum (from RM12.4 to 8.3 bil), palm oil (RM15.5 to 9.3 bil) and rubber (RM2.5 to 1.3 bil). Fortunately these were to some extent offset by a rise in LNG exports (from RM9.3 to 14.7 bil).
sign of bad times is the sudden turnaround from good surpluses to significant
deficits in the overall balance of payments (
change in trend in the
this trend was checked and on 13 February the reserves remained at RM317
bil, indicating that the overall
most recent data from the Statistics Department shows that a large outflow
of capital was the cause of the deterioration in the overall
current account balance (mainly reflecting trade) remained in high surplus
of RM38.7 bil in third-quarter 2008 but there was a massive RM61.4 bil
outflow of capital, causing the overall
the financial crisis began in the
then the financial crisis began to affect the Western countries’ “real
economy” of production and incomes in the second part of 2008, and this
has been increasingly transmitted to
The transmission channels have been through trade (affecting export prices and volumes) and finance (affecting especially the outflow of foreign portfolio capital).
global crisis did not start with Asia or
Nevertheless now that the tidal waves generated elsewhere have hit the home shores, there is no alternative but to deal seriously with countering the crisis.