Malaysia’s economic fundamentals are sound, says Najib

Source TheStar

PUTRAJAYA: Malaysia’s economy has the capacity to weather the destabilising consequences of developments in the US economy and international financial markets, said Deputy Prime Minister Datuk Seri Najib Tun Razak.

He said the country’s economic fundamentals were strong and that Malaysia’s international reserves were high at US$119bil (RM410bil), with a large current account surplus.

Foreign direct investments also remained significant, amounting to RM31bil in the first half of the year, he said, adding that the banking system was sound and strong with buffers to withstand the current financial turbulence.

“The strengthened financial infrastructure and the more developed financial markets have increased the resilience of our financial system to external shocks.

“Liquidity in the banking system remains ample and funding to the private sector, which grew 13% in August, continues to expand,” Najib said, adding that non-performing loans, which were now at 2.5%, had declined steadily since 2003.

The close watch was on the drop in the stock market, he said, adding that it was less significant than the Dow Jones, London Stock Exchange and some Asean stock markets.

Najib, who is also the Finance Minister, was speaking to reporters at his office yesterday on global fears after Wall Street plunged overnight following the rejection of a US$700bil (RM2.4tril) financial bailout plan by US lawmakers.

As for interest rates, he said Bank Negara had maintained the correct posture by not raising the rates as it had anticipated the threat to economic growth to be worse.

“We are sure we can manage the situation although there is obviously concern with areas of growth.

“We are confident we will not be so bad compared to other parts of the world,” he said, adding that the gross domestic product stood between 5.5% and 5.7%.

Najib, however, said that if there was more bad news from the United States and the current situation led to a significant downturn, then Ma­­laysia would have to re-evaluate the situation.

He said Malaysia’s overall exports had increased from RM400mil in 2003 to RM600mil in 2007 with the proportion of exports to the United States declining from 20% to 16% over the same period, adding that Asean was becoming a more significant trading partner with China and India emerging strongly.

Japan and the non-OECD (Orga­nisation for Economic Co-operation and Development) countries have become more significant investors in Malaysia compared to the United States, he said, adding that rising intra-regional trade and new links with fast growing regions in the Middle East, Eastern Europe and Latin America had also supported the export sector.

Najib said there was no uncertainty over the country’s political situation as Barisan Nasional continued to be in power.

“Malaysians need to remain united and cohesive as the country prepares to face this global financial economic challenge.

“Now is not the time for politicking, speculation and political games by anybody,” he said, adding that the Government would act responsibly and fast to address any eventuality to safeguard the interests of the people and nation.

Najib also hoped that the United States would find an appropriate and timely solution to the current impasse between its lawmakers and the administration, adding that Malaysia had always called for an overhaul and re-examination of the global financial system.