Malaysia on brink of recession

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KUALA LUMPUR, Mar 4 (AFP): Malaysia stands on the brink of recession as falling demand hits exports and manufacturing with growth expected to reach just 0.5 percent for the year, an independent think tank said today.

"We forecast the economic growth for the first half of the year will be negative which will put us in a technical recession but show positive figures in the second half," Mohamed Ariff Abdul Kareem, head of the Malaysian Institute of Economic Research told AFP.

"Overall, it will be 0.5 percent growth for this year in the best-case scenario. The worst-case scenario is there is a 50 percent chance of a full-blown recession this year," he warned.

In January, the institute slashed its gross domestic product growth forecast to 1.3 percent from an earlier 3.4 percent prediction while the government is sticking to its 3.5 percent growth for 2009.

Mohamed Ariff said the fiscal deficit could surge to eight percent of GDP if a second economic stimulus package to be unveiled by the government on March 10 was more than 30 billion ringgit (8.1 billion dollars).

"It could be between six and eight percent depending on the size of the stimulus package," he said.

Malaysia last year unveiled a 2.0 billion dollar stimulus package to help boost the economy and keep the country out of recession but Deputy Premier Najib Razak said the second package would be bigger and more comprehensive.

The government has already widened its deficit forecast for 2009 to 4.8 percent, from the 3.6 percent predicted in August, due to the additional government spending.