News Room - Business/Economics

Posted on 06 Feb 2009

Economic slump might persist for next two quarters

The sharp economic deceleration experienced by Asia-Pacific countries in the fourth quarter will likely persist for the next two quarters.

 

However, a turnaround was expected in the second half of this year, said Standard & Poor’s (S&P) in its Asia-Pacific Economic Outlook Q1 2009 report.

 

The rating agency attributed the sluggish economy to the lagging effect of monetary tightening in the first half of 2008 and contemporaneous effect of a slowdown in exports and capital flows. Related activities such as logistics and financial intermediation would also suffer.

 

It added that the massive monetary reversal after July inside and outside the region should begin to have its own lagged impact, based on the assumption of no further shocks from the global financial system.

 

According to the S&P report, September 2008 was viewed as a significant discontinuity in the evolving global scenario, mainly as a result of the collapse of Lehman Brothers and its impact on financial markets and consumer and investor expectations.

 

This could be one of the reasons why the US, Europe as well as Asia Pacific decelerated sharply.

 

Before that, Asia Pacific was showing reasonable growth even as concerns of the global financial problem and its spillover into macroeconomic intensified.

 

In Malaysia, while the blow from the global slowdown would be felt this year, recovery would be relatively strong in 2010, said S&P.

 

This year fiscal spending and more aggressive monetary policy could cushion the impact of lower commodity prices and weakening external demand for manufactures.

 

Malaysia’s gross domestic product moderated to 4.7% in the third-quarter of 2008 and the weakened momentum points would carry well into the fourth quarter.

 

In November, inflation in Malaysia dropped to 5.7% from the peak of 8.5% in July and August.

 

December saw a softer inflation rate of 4.4%. With the partly administered prices and no major risk to regional inflation, Malaysia’s inflation should remain fairly benign, said the report.