Malaysia will inject US$1.4 billion into the ailing stock market and cut its growth forecast for next year amid a worsening global financial crisis, Finance Minister Najib Razak said yesterday.
Razak also said the government may review its fiscal deficit forecast for this year and next year and scale back on infrastructure projects “with limited economic multiplier effect” for the year to cushion the impact of the economic crisis.
“We had projected GDP growth of 5.4 percent for 2009. However, in the light of the worsening external developments, the growth forecast for 2009 will be reviewed downwards,” Najib said in a speech at a conference in Kuala Lumpur.
“Yes, our stock market is affected by the sentiments in other markets, but I would like to stress that we are not in a financial crisis and certainly we should not talk ourselves into one,” he said.
Najib said the government would double the size of its state-run investment company Valuecap Sdn Bhd, which was formed in 2003 to invest in undervalued but fundamentally strong shares by pumping in an additional 5 billion ringgit (US$1.4 billion).
Kaladher Govindan, research head at local brokerage TA Securities, said the move “is a positive boost for the stock market,” which has dropped 37 percent this year.
Najib, who will take over as prime minister in March, said the growth forecast revision as well as the new deficit estimates and details of the government’s policy response would be announced in parliament on Nov. 4.
He said the government would not cut back its overall expenditure but some “lumpy” projects could be postponed for the year.
Projects planned for next year will still continue, he said.
“Even if we consider the financial turmoil an external shock, which necessitates short-term responses and measures, this must not come at the expense of the long-term development imperatives of the country,” he said.
He said the government would look at liberalizing the service sector — the cornerstone of the economy — and review foreign investment guidelines to attract overseas investment in property.
Malaysia’s economy grew by 6.3 percent last year and the government targets a 5.7 percent expansion for this year.
Kuala Lumpur had projected this year’s budget deficit to reach 4.8 percent of GDP, substantially higher than the 3.1 percent forecast earlier, and expects a 3.6 percent deficit next year.
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