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Monday, January 19, 2015

NAJIB'S GOOSE IS COOKED! Malaysia vulnerable as forex reserves plunge, will he dare slash mega projects to cronies

 NAJIB'S GOOSE IS COOKED! M'isa vulnerable as forex reserves plunge, will he dare slash mega projects to cronies
KUALA LUMPUR - Malaysia is expected to experience two to three years of slower growth rate due to the current stifling economic conditions, says independent analyst Prof Dr Hoo Ke Ping.
Pointing out that Malaysia’s current foreign reserves had depleted significantly since the 2015 Budget was tabled, the government and its people must be prepared for the worst case scenario.
Just before the tabling of the 2015 Budget in October, Hoo said, the country’s reserves were estimated to be around US$130 billion (RM462 billion), but in four months’ time it had gone down to around US$100 billion (RM355.4 billion) due to the shortage of US dollars leading to “illiquidity crisis”.
This, he said, was due to the fact that Malaysia as an oil-commodity based nation was struggling to control the outflow of US dollars following the plunge in global crude oil prices.
Hoo said that as other analysts had predicted that crude oil prices could fall even further to a low of US$40 (RM142) per barrel in the next six months, national petroleum giant Petronas, which remains a key contributor to the government’s revenue, would contribute less to sustain economic growth.
“Malaysia’s foreign reserve earnings are through four main sources. The first is oil which is the main source, has suffered a huge loss. The second is palm oil, whose price has dropped to roughly RM2,600 per tonne, making earnings look stagnant and third is tourism.
“The lack of Chinese tourists may not necessarily make the loss bigger as the currency continues to dwindle, and this sector could be boosted by more tourists from other countries.
“While the fourth sector, involving electrical and electronics, remains sustainable due to a continued demand. It is sustainable despite the drop in exports to China by 3% in the last quarter,” he told The Rakyat Post.
Upon balancing all four sources together against variable factors, Hoo said that the country would take some time to recover to a healthy growth rate.
When asked on the measures that the government should address in the revised 2015 Budget on Tuesday, Hoo said the utmost priority was to slash projects involving the usage of foreign reserves.
The government, he suggested, should either cancel or postpone the high-speed rail project as it involved a lot of foreign currency expenditure.
Projects involving import of steel and other imported raw materials, meanwhile needed “absolute scrutiny”.
“The government must revert to internal spending to generate economic growth. For instance the building sources to be used for reconstruction of roads and buildings in the East coast should be best derived from within the country to generate income instead of facing losses.”
During the tabling of the 2015 Budget in October, last year, Prime Minister Datuk Seri Najib Razak allocated an expenditure of RM273.9 billion with a projected revenue of RM223.4 billion.
However, following the sudden plunge in global crude oil prices and the weakening Ringgit against the backdrop of the east coast floods, Najib has since said he would be unveiling the revised budget to address the situation. - http://www.therakyatpost.com/

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