News Room - Business/Economics

The economy in now in recession with economic growth to contract between 4 and 5 per cent in 2009, much worse than the original forecast of 1 per cent decline, prime minister Datuk Seri Najib Tun Razak said today.

Bank Negara announced worse-than-expected first quarter economic growth which shrank 6.2 per cent from a year ago, the worst quarter since it contracted 10.2 per cent in the fourth quarter of 1998 at the height of the Asian financial crisis.

But Najib, who is also finance minister, expected Malaysia fourth quarter growth in 2009 to be positive.

He has announced two economic stimulus programmes worth nearly RM70 billion but the measures have yet to show results due to slow disbursements.

“Yes we are in technical recession,” Najib told reporters when asked whether Malaysia in recession.

“The third quarter will be slight negative, and positive for fourth quarter,” said Najib, adding the fall in the forecast was driven mainly by external factors.

“Countries that are more open will be more affected, for example Singapore is on record to say the economy will shrink by 9 per cent,” said Najib.

He said while he hoped measures taken by the government will contribute to growth, recovery will depend on the world economy.

“I'm afraid our recovery depends on the world economy recovery that is contingent upon what happens in Europe and the United States,” said the prime minister who took office on April 3.

He said the liberalisation measures introduced by the government were adequate when asked whether the government has not opened up enough.

“Depends who you talk to, some people think we are moving too slow, some people think we are moving too fast,” he said.

Najib also expects demand for foreign workers in certain sectors will decline.

“Overall there will be reduction in the number of foreign workers in plantation, services, domestic help, and maybe manufacturing,” he said.

On whether the government will table another stimulus package, Najib said: “We will monitor the situation closely.”

He had announced yesterday the formation of an economic advisory council headed by Tan Sri Amirsham Abdul Aziz, who was a minister in the Abdullah administration.