Archive for category Finance
Four Nations, Four Lessons
By N. GREGORY MANKIW
The New York Times
October 22, 2011
AS the economy languishes, politicians and pundits are debating what to do next. When we look around the world, it’s hard to find positive role models. But as we search for answers, it is useful to keep in mind those fates that we would like to avoid.
The recent economic histories of four nations are noteworthy: France, Greece, Japan and Zimbabwe. Each illustrates a kind of policy mistake that could, if we are not careful, presage the future of the United States economy. Think of them as the four horsemen of the economic apocalypse.
Let’s start with Zimbabwe. If there were an award for the world’s worst economic policy, it might well have won it several times over the past decade. In particular, in 2008 and 2009, it experienced truly spectacular hyperinflation. Prices rose so fast that the central bank eventually printed 100 trillion-dollar notes for people to carry. The nation has since abandoned using its own currency, but you can still buy one of those notes as a novelty item for about $5 (American, that is).
Some may find it hard to imagine that the United States would ever go down this route. Read the rest of this entry »
Malaysian confidence dives as global recovery ends, says survey
Posted by Kit in Budget Debate, Economics, Finance on Monday, 17 October 2011
By Lee Wei Lian
The Malaysian Insider
Oct 17, 2011
KUALA LUMPUR, Oct 17 — The largest-ever global survey of finance professionals by the Association of Chartered Certified Accountants (ACCA) shows that all signs of the global economic recovery have disappeared.
The confidence level in Malaysia also deteriorated markedly in the survey as out of 222 finance professionals who responded in Malaysia, only eight per cent reported confidence gains, down from 20 per cent in the last quarter, and 77 per cent believe the global economy is either stagnating or deteriorating compared with 54 per cent.
In terms of the global outlook, three-quarters of the 2,873 professionals who took part in the Global Economic Conditions Survey between August 19 and September 7, 2011 thought global economic conditions were deteriorating or stagnating.
The ACCA’s global business confidence index returned a reading of -34 for the third quarter of 2011, down from -8 in the previous quarter.
It said that based on past observations, a reading lower than -14 should indicate that the developed world is slipping into negative growth. Read the rest of this entry »
Rich world economic malaise to endure into 2012: Reuters poll
Posted by Kit in Budget Debate, Economics, Finance on Friday, 14 October 2011
By Andy Bruce
Reuters
LONDON (Reuters) – Stagnation is probably the best many of the world’s biggest developed economies can hope for over the next year, with several facing a significant chance of recession, Reuters polls of around 350 economists showed on Thursday.
After a promising start, 2011 has turned into an enormous disappointment for major rich world economies, which have been hobbled by a noxious combination of austerity, debt crises, natural disaster and political impasse.
Backed up by Thursday’s weak trade figures from China, which pointed to profound global economic weakness, the October quarterly survey suggested a bout of weak growth in many G7 economies could extend deep into next year and beyond.
The world economy will grow 3.8 percent in 2011, the poll showed, and just 3.6 percent next year — a stark contrast to the 4.1 percent and 4.3 percent forecasts from the last quarterly survey in July.
But even these tepid growth rates could depend on progress in clearing some of the world’s biggest economic hurdles, like the euro zone sovereign debt crisis and finding ways to boost growth in the United States. Read the rest of this entry »
IMF trims Asian growth forecasts as risks grow
Posted by Kit in Budget Debate, Economics, Finance on Thursday, 13 October 2011
By KELVIN CHAN
AP Business Writer – 3 hours ago
HONG KONG (AP) — The International Monetary Fund trimmed its economic growth forecasts for Asia on Thursday because of financial turbulence in Europe and a possible slowdown in the U.S.
The risks to Asia’s growth are “decidedly tilted to the downside” reflecting the negative outlooks for Europe and the U.S., which are the major markets for the region’s exports, the IMF said in a twice-yearly report.
Asia’s economic growth is forecast to average 6.3 percent in 2011, rising to 6.7 percent in 2012. That’s lower than the IMF’s April forecast of nearly 7 percent in both years.
The report covers 20 economies in a vast region stretching from India to Japan to New Zealand. Read the rest of this entry »
MIER trims GDP estimates as global economic slump bites
Posted by Kit in Budget Debate, Finance, Najib Razak on Thursday, 13 October 2011
By Lee Wei Lian
The Malaysian Insider
Oct 13, 2011
KUALA LUMPUR, Oct 13 — The Malaysian Institute of Economic Research (MIER) cut to 4.6 per cent, from 5.2 per cent, its projection for the country’s economic growth this year, citing a sliding global economy that it said could hurt exports.
The government-funded MIER also downgraded its estimates for 2012 to 5.5 per cent, which is within the Najib administration’s projected growth range of between five and six per cent.
Some market and bank analysts have described next year’s projections as too rosy, with RHB Research Institute saying this week that Malaysia’s economic growth could slow to just 3.6 per cent next year, from a projected 4.3 per cent, this year due to the increasing risk of a double dip global recession.
MIER executive director Zakariah Abdul Rashid said today that while the 2012 Budget unveiled last Friday will help boost private consumption, it will not be able to offset a slump in external demand.
“The 2012 Budget is insufficient to overcome external weakness,” he said in a briefing today. Read the rest of this entry »
Malaysia’s Old Economic Model
Posted by Kit in Budget Debate, Finance, Najib Razak on Wednesday, 12 October 2011
The government still offers handouts instead of reforms to woo voters.
Wall Street Journal
12th Oct 2011
Malaysian Prime Minister Najib Razak has unveiled a budget full of freebies designed to win over voters in the next general election, expected in the next six months. In the process, he is dashing expectations of economic reforms needed to promote growth.
This contrasts with the political reforms Mr. Najib announced last month. A promised overhaul of the country’s colonial-era legal code would guarantee political and civil freedoms long denied to Malaysians.
Mr. Najib seems to have thought of a handout for nearly everyone in 2012. The country’s 1.3 million civil servants will see salaries and pensions rise, in many cases by as much as 30%; households earning less than 3,000 ringgit ($960) a month will receive one-off payments of 500 ringgit; parents will find many school fees abolished or reduced. Then there are the taxi drivers who get fat tax exemptions. Read the rest of this entry »
Recession risk high and rising, says RHB
Posted by Kit in Budget Debate, Finance, Najib Razak on Wednesday, 12 October 2011
By Lee Wei Lian
The Malaysian Insider
Oct 12, 2011
KUALA LUMPUR, Oct 12 — Malaysia’s economic growth could slow to just 3.6 per cent next year from a projected 4.3 per cent this year due to the increasing risk of a double dip global recession, said the RHB Research Institute.
The RHB unit’s growth projection issued yesterday is significantly lower than Prime Minister Datuk Seri Najib Razak’s forecast of five to six per cent growth for 2012 in his proposed RM232 billion Budget 2012 tabled last Friday.
The research house said that the risk of a double-dip global recession is high and rising as both the US and Europe cannot withstand another shock although a recession could be averted if leaders in both continents act fast enough to contain the debt crises and avert a contagion that could lead to a complete meltdown in confidence.
It also expected businesses to cut spending in view of rising uncertainties although some growth will come from the implementation of the Economic Transformation Programme (ETP).
Private investment growth is projected to soften further to 4.6 per cent in 2012, after slowing to an estimated 5.7 per cent for 2011, the report added.
Exports, meanwhile, are expected to grow at just 1.1 per cent compared to 3.4 per cent this year due to dampened foreign demand for electronics and electrical items.
Domestic demand is projected to grow at a slower pace of 5.1 per cent in 2012, compared with an estimated 5.8 per cent for 2011.
RHB said, however, that consumer spending is expected to remain “reasonably resilient” and grow at around 5.3 per cent in 2012, compared with 6.0 per cent for 2011, given high savings, rising consumerism and an increase in salary.
Most research houses have lowered their 2012 growth projections for Malaysia despite Najib’s optimism in the Budget proposals, which critics have say is primed for the next general election that must be called by early 2013. Read the rest of this entry »
Goldman Sachs says Malaysia needs tougher reforms
Posted by Kit in Budget Debate, Finance, Najib Razak on Tuesday, 11 October 2011
By Shannon Teoh
The Malaysian Insider
Oct 11, 2011
KUALA LUMPUR, Oct 11 — Global banking giant Goldman Sachs believes Malaysia must push through tougher reforms such as a goods and services tax (GST) and slashing subsidies if it wants to transform into a high-income nation.
Its review of Budget 2012 proposals said the recovery in private investment since the 1997 Asian financial crisis has been held back “by scepticism over the government’s transformation efforts over the years.”
“Pushing through tougher reforms is ultimately what is needed to catalyse the economic transformation process. Read the rest of this entry »
Economists uneasy over sugary Budget
Posted by Kit in Budget Debate, Finance, Najib Razak on Monday, 10 October 2011
By Lee Wei Lian
The Malaysian Insider
Oct 10, 2011
KUALA LUMPUR, Oct 10 — Economists said today that the 2012 Budget risks committing Malaysia to the path of unsustainable spending at a time when the global economic outlook remains uncertain.
Bank of America director of global research Chua Hak Bin noted that both Malaysia’s public and household debt levels were at worrying levels, and said the government appeared to be kicking the debt can further down the road by not addressing it in the Budget.
“Will debt dynamics increase and will Malaysia face a year of reckoning?” he asked at the post-Budget dialogue organised by the Malaysian Economic Association and University of Malaya here.
Chua said there was a chance government revenues would be hit by a recession, which would make it harder to meet the commitment to trim the deficit to 4.7 per cent next year from 5.4 per cent now.
“The deficit is extremely sensitive to the state of the economy,” he pointed out. Read the rest of this entry »
2012 budget – cornucopia of goodies for votes
Posted by Kit in Budget Debate, Corruption, Finance, Najib Razak on Sunday, 9 October 2011
Prime Minister cum Finance Minister Datuk Seri Najib Razak’s 2012 Budget on Friday was a veritable cornucopia of goodies for votes in the 13th general elections – the most brazen and cynical budget exercise in the nation’s history to reach out for voter support from a whole swathe of targetted groups comprising important vote-banks.
But the inequitable and corrupt system which bred decades of injustice, inequality and exploitation remains completely untouched.
The 2012 Budget is designed to win the next general elections for Najib and not to reform and transform the country’s system, structures and institutions to end the rot which has seen Malaysia losing out in international competitiveness and being overtaken by more and more countries in national, economic and human resource development including in South East Asia. Read the rest of this entry »
Barisan Nasional’s Budget 2012 is like a sugar-coated placebo – makes you feel good after taking it, only to tax you more later
Posted by Kit in Budget Debate, Finance, Parliament on Saturday, 8 October 2011
by Tony Pua
8 Oct 2011
It is difficult not to “feel good” after a record-breaking pre-election budget where goodies big and small, were liberally handed out to practically all segments of society. The question is, beneath the sweeteners, are there substantive reforms proposed in the Budget 2012 to make “transformative” changes to our economy to achieve the goal of becoming a “high-income nation” by 2020.
The answer, when compared side by side with Pakatan Rakyat (PR) Alternative Budget is obvious. There is little in the Barisan Nasional (BN) federal government’s budget that indicates a determination to slaughter sacred cows and take the Malaysian economy to the next level.
Both the PR and BN’s budgets had proposed cash grants to various deserving segments of society in order to help alleviate their increasingly heavy burdens. However, PR matched its welfare benefits with policies to rectify the distortions created by the current government to reduce inflationary pressures and the cost of living over the longer term.
PR has called for the abolition of artificial monopolies licensed by the Government such as Bernas which monopolises the sale and distribution of local and imported rice. In addition, predatory market strategies by Telekom Malaysia to stifle competition will be made illegal while the monopoly of satellite and cable television will be abolished. Read the rest of this entry »
Tax reliefs: Hidden subsidies that favour the rich
Posted by Kit in Budget Debate, Finance on Friday, 7 October 2011
— Subramaniam Pillay
The Malaysian Insider
Oct 07, 2011
OCT 7 — In the past couple of years, there has been a lot of talk on subsidy rationalisation i.e. the removal of subsidies for basic items like cooking oil, sugar, flour and petrol. The argument is that it subsidises the poor as well as the rich; it is unfair to provide subsidies for the rich, so we must eliminate the subsidies and let market forces work.
Many of these subsidies help the poor and the rich equally. For example, if a family consumes 5kg of cooking oil per month, they get the same subsidy regardless of their wealth and income. Usually, consumption of basic food items does not increase with increasing wealth and income.
However, there is a large hidden subsidy which favours the rich over the poor that has been conveniently forgotten. And this comes in the form of the various tax reliefs offered to taxpayers. In this week, before the 2012 Budget is announced, there have been numerous calls to increase the tax relief for various items including premiums for medical insurance, educational insurance and life insurance.
Tax reliefs are is a very regressive form of government subsidies to the taxpayers. The richer the taxpayer, the more subsidy she gets from the government. Thus it is unfair and inequitable. Read the rest of this entry »
Foreign sell-off, economy top concerns despite reforms push
Posted by Kit in Economics, Elections, Finance, Najib Razak on Monday, 19 September 2011
by Lee Wei Lian
The Malaysian Insider
Sep 19, 2011
KUALA LUMPUR, Sept 19 — Despite the Najib administration’s political reforms, a Bloomberg report today said foreign funds may continue paring down local share stakes in an indication that the world economy will remain the government’s biggest headache ahead of an expected general election.
Terence Wong, head of research at Kuala Lumpur-based CIMB, was reported as saying that worsening global economic turmoil may cause investors to keep unloading the nation’s equities.
Wong also said that promises made last week by Prime Minister Datuk Seri Najib Razak to burnish Malaysia’s democratic credentials and abolish the controversial security and media laws will not be enough to boost confidence.
The Bloomberg report said that KLSE data showed that foreign funds sold RM3.8 billion worth of Malaysian shares last month, the most since at least October 2009 after four consecutive months of inflows. Read the rest of this entry »
Economists no longer able to predict economic crisis, says ISIS chief
By Lee Wei Lian
The Malaysian Insider
Sep 14, 2011
KUALA LUMPUR, September 14 — The global economy is now so unbalanced that economists are no longer able to predict crises, said Institute of Strategic and International Studies (ISIS) chief Datuk Mahani Zainal Abidin today.
This comes as the global markets continue to be plagued with uncertainty due to the lingering effects of the 2008 financial meltdown that hit the United States and Europe.
While Malaysia was spared from the financial crisis and has resumed economic expansion after the 2009 recession, its stock market has been rocked by global volatility, while inflation has soared due to pressure from high commodity prices. Property prices have also jumped dramatically owing to ample liquidity.
The think tank chief said that the problem was that the financial economy has become much larger than the real economy and admitted that assumptions used by economists no longer work. Read the rest of this entry »
Pua: Telcos’ tax is illegal
K Pragalath | September 13, 2011
Free Malaysia Today
Decision to charge the 6% service tax is akin to price fixing and is against the soon to be implemented Competition Act 2010, says PJ Utara MP.
PETALING JAYA: Petaling Jaya Utara MP Tony Pua criticised the decision by telecommunication companies to charge the 6% service tax as illegal because the companies were trying to fix prices.
“There is no question that the joint statement (on the decision) and attempt by the four telecommunication companies to raise prices by the same percentage concurrently is illegal because they are colluding to form a cartel for the purposes of price-fixing.
“The real issue at hand is the blatant and coordinated attempt by the telecommunication companies to raise prices concurrently, contemptuous of the competitive spirit,” said Pua. Read the rest of this entry »
And the pretending goes on …
Posted by Kit in Elections, Finance, Najib Razak on Tuesday, 13 September 2011
— The Malaysian Insider
Sep 13, 2011
SEPT 13 — Presumably, if you keep on message all the time, you must hope that fiction turns into fact. Let’s take the issue of the six per cent service tax on users of prepaid mobile services.
It was introduced by this government (included somewhere in the last budget by the Finance Minister) and yet Malaysians have had to go through this painful sandiwara by Prime Minister Datuk Seri Najib Razak (who urged the telcos to reconsider passing on the tax to consumers), Information Minister Datuk Seri Rais Yatim, who was keen to paint the telcos as the bad guys, and now DPM Tan Sri Muhyiddin Yassin.
The country’s number two, like his Cabinet and Umno colleagues, is keen to show that the government is compassionate and mindful of the pain felt by the rakyat. He, like his friends, speaks as if it was some third party who suddenly imposed this tax out of thin air and the BN fairy came along, waved a wand and took away the pain of the rakyat. Read the rest of this entry »
Is the world facing fundamental changes?
Viewpoint by Chris Williamson
Chief economist at global financial information firm Markit
BBC News Business
18 August 2011
Recent events, including stock market falls, the escalating sovereign debt crises, US credit rating downgrade and a near-stalling of growth in the developed world is leading increasing numbers of experts to wonder if the world is facing some fundamental changes.
In reality, many of the ideas reflect trends that have been under way for many years, but the crisis had accelerated the process of change.
Four years after the financial crisis began and the world has certainly not returned to normal.
No major developed economy has yet fully regained the output lost during the recession and global share prices remain almost a third lower than their peak prior to the crisis.
Financial stocks have lost two-thirds of their value. Government debt has spiralled due to the bank bailouts, although it has become apparent that not all governments can finance this debt.
If stage one of the crisis involved the transfer of liabilities from the financial sector to governments via bank bailouts, stage two is witnessing transfers from weaker governments to stronger governments, as the latter seek to prevent the former from defaulting and causing more financial turmoil. Read the rest of this entry »
Malaysia’s economy: resilient?
by Kevin Brown
Financial Times
August 17, 2011
Is Malaysia set for sustained economic growth this year, or exposed to serious potential problems if wobbles in the West turn into another slowdown? It depends who you ask.
The central bank is in no doubt that growth will continue, in spite of a fall in the annual pace of growth from 4.9 per cent in the first quarter to 4 per cent in the second.
In robustly positive comments issued with the numbers on Wednesday, Bank Negara acknowledged the impact of weakness in the advanced economies, but insisted that growth prospects remained underpinned by the expansion of private domestic demand and strong exports of commodities and resource-based products – for which read oil, gas and palm oil. Read the rest of this entry »
GDP growth slows to 4pc as global economy falters
By Lee Wei Lian
The Malaysian Insider
Aug 17, 2011
KUALA LUMPUR, Aug 17 — Malaysia’s economic growth decelerated to its slowest pace of four per cent since the 2009 recession as the country was hit by a slowdown in external demand and a moderation in government spending, Bank Negara said today.
This was the fifth consecutive decline in quarterly growth and down from the 4.6 per cent growth registered in the first quarter of this year.
Bank Negara governor Tan Sri Zeti Akhtar Aziz added, however, that stronger growth is expected in the second half of the year and that while there is no revision to the 5-6 per cent growth target for the year, it will “very likely be closer to 5 per cent.” Read the rest of this entry »
The evolution of crisis
By George Friedman
Aug 11, 2011 | Asia Times
Classical political economists like Adam Smith or David Ricardo never used the term ”economy” by itself. They always used the term ”political economy.” For classical economists, it was impossible to understand politics without economics or economics without politics. The two fields are certainly different but they are also intimately linked.
The use of the term ”economy” by itself did not begin until the late 19th century. Smith understood that while an efficient market would emerge from individual choices, those choices were framed by the political system in which they were made, just as the political system was shaped by economic realities. For classical economists, the political and economic systems were intertwined, each dependent on the other for its existence. Read the rest of this entry »
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