M’sia Able To Weather Any Eurozone Break-Up
Just how would a potential break-up of the eurozone impact Asia? The Wall Street Journal has sought to answer this question by giving a country- by-country guide to what lies in store if and when the eurozone cracks. Its forecast for Malaysia is a mixed bag, and not a disaster as some pro-Opposition websites have claimed.
In terms of direct exposure to the crisis, the respected daily points to our high foreign ownership of government bonds, saying: “Some fear a spike in borrowing costs if investors leave in a global panic. Malaysia does have large currency reserves to fight such a capital flight.”
Bank Negara Malaysia head Tan Sri Dr Zeti Akhtar Aziz dealt with this exact issue last month, saying there was nothing to fear from European banks deleveraging in Asia, because in a nation of savers like Malaysia, “our financial sector can step in to provide the liquidity.”
The WSJ acknowledges the country’s year on year growth of 4.7 per cent of GDP, yet somehow manages to list this as a negative, saying that it has been dropping over the past three quarters.
This is irrational given that the eurozone economies at the heart of the firestorm have been reporting negative growth or no growth at all. Many are already in a double dip recession.
On the positive side, though, the WSJ admitted that Malaysia “has the firepower to continue sizeable government spending projects”.
This underlines the importance of not just the Government’s continuing infrastructure agenda from roads to broadband and high speed rail, but also the work it is doing to transform the economy in partnership with the private sector.
The Economic Transformation Programme (ETP) under the stewardship of Datuk Seri Idris Jala has so far created 315,000 jobs with more than 80 per cent of the money coming from corporations partnering with the Government.
This year alone, the ETP has been praised by the World Bank, the IMF and the Oxford Business Group.
We are certainly a long way from Europe’s austerity policies that are crippling their economies. This is a reminder of why we should ignore attacks from the likes of Tony Pua and Lim Guan Eng who continually try to scare the rakyat by claiming that Government spending is out of control and the nation is somehow heading for bankruptcy.
It’s clear to everyone else that the Government’s policies will help Malaysia survive the external shock that may come next The alternative is on show for all to see and it isn’t pretty.
The WSJ identifies the biggest eurozone threat as coming indirectly via our biggest trading partner China. As a commodity exporter, Malaysia is exposed to a slowdown in the world’s second largest economy.
“If China doesn’t open the stimulus floodgates, that would mean less of a boost for its neighbours, including commodity exporters such as Australia and Malaysia,” it said.
China has deep pockets to launch another round of big-bang stimulus in the event of a domestic slowdown, but Beijing has recently demonstrated it would take measures to stimulate its economy by taking the unusual step of lowering interest rates.
The WSJ’s verdict is that India, Vietnam and Japan would be worse hit by a eurozone break-up, while other nations are in varying degrees of preparedness.
Richard Jerram, chief economist at the Bank of Singapore sums it up: “Asia is very well positioned for a muddle-through scenario in Europe. A moderate recession in Europe doesn’t pose serious hazards here.”
No one should be fooling themselves that we can be immune from what goes on the other side of the world, but we can take comfort that as a nation of hard-workers and savers we are better prepared than most.
While the Opposition shouts populist slogans that make no economic sense and threaten to bankrupt Malaysia, Prime Minister Datuk Seri Najib Razak has been making sure our economy is in a good position to weather the global storm.
By ensuring we all have ringgit to spend, he has made sure that Malaysia doesn’t see the collapse in consumer spending that has blighted so many Western nations that have embraced austerity measures.
Najib has also made sure we keep building Malaysia’s infrastructure for both our long-term development and short-term economic health.
And he continues to show the world that we are a nation that welcomes foreign investment through good times and bad.
That’s the difference between BN and Pakatan Rakyat.