Briefing Notes for the Launch in Kuala Lumpur, March 2009
Growth performance and prospects
- The rate of economic growth dropped from 6.3% in 2007 to 4.6% in 2008.
- After declining steadily from 7.4% in the first quarter (year-on-year) to 4.7% in the third
quarter, the rate of growth fell abruptly in the fourth quarter to 0.1%.
- Exports dropped significantly towards the end of 2008: -2.6% in October (year-onyear),
-4.9% in November, -14.9% in December, and -27.8% in January 2009.
- The rate of growth of private consumption remained high in 2008 (8.4%) but declined
gradually over the year, from 11.7% in the first quarter to 5.3% in the fourth quarter.
- The rate of growth of gross fixed investment dropped abruptly from 3.1% in the third
quarter of 2008 (year-on-year) to -10.2% in the fourth quarter, averaging 1.1% for the
- Government consumption increased significantly from 6.6% in 2007 to 11.6% in 2008,
helping moderate the impact of the fall in exports and investment on the GDP.
- As of the beginning of March, growth was forecast to be around 0% in 2009, a similar
level than in 2001 (0.5%).
Inflation, monetary policy and exchange rate developments
- Reflecting dramatic price increases in international commodity markets in the first half of
2008, Malaysia’s inflation rate increased from an average of 2% in 2007 to 4.9% in the
second quarter of 2008 (year-on-year) and 8.4% in the third quarter.
- However, inflation decelerated towards the end of 2008, as the price of crude oil and
other commodities plunged, reaching 3.9% in February 2009.
- As commodity price inflation eased and demand for Malaysian exports contracted, the
central bank cut its policy rate 25 basis points (to 3.25%) in November, 75 basis points in
January 2009, and 50 basis points (to 2%) in February.
- The combination of drops in exports and cuts in interest rates contributed to a
depreciation of the exchange rate from an average of 3.2 ringgit per dollar in the first half
of the 2008 to 3.6 in the fourth quarter.
- Malaysia held $85b in foreign exchange reserves as of the end of February 2009, down
from $111 billion a year before.
Fiscal situation and perspectives
- The budget deficit increased from 3.2% of the GDP in 2007 to 5.1% in 2008.
- In November 2009 the Government announced a stimulus package of RM 7 billion ($1.9
billion, 1% of the GDP) including the following elements:
- Investment funds to promote strategic industries and high-speed broadband (RM
- Small-scale projects such as village roads, school repairs (RM 1.6 billion).
- Affordable housing (RM 1.5 billion).
- Education and skills training programmes (RM 1 billion).
- Public transport and military facilities (RM 1 billion).
- In March the Government unveiled a second, and much larger, stimulus package of RM
60 billion ($16.2 billion, 8.6% of GDP) to be implemented over 2009 and 2010.