2H Economic Report

I dread this moment of the year even though I'm having a cup of my favourite "Teh Boh" now.

The first half of the year is about to be over and I have to get the second half economic report ready by the 30th June. I really don't know how to put the presentation. I have cracked hard my head what to say after reading numerous reports lately and nothing seems good to be reported. Hmm.... have to start like saying GDP will still grow at 5.7 % as predicted by the gomen, less than 7.1 & last year.

The last 6 months saw growth momentum slowing, and inflation is accelerating faster than expected. The increase in petroluem and the foreseeability that crude petroluem would maintain its high price does not augur well. Conversations with the man in the street tells us that despite the reported strong headline growth and those CEOs' positive comments in the STAR Saturday papers, there is a sense of disbelief. Their prime grouses are that either the strong headline glosses over the real situation or they are left out in this boom.

Actually it is frightening to see what's ahead. You see, inflation has already set in at its highest since 1998, at 3.1% last month as reported by Dr Zeti, which is higher than the bank savings rate of 2.6 %. Economically speaking, this is bad for a person with money saved in the bank as his interest is not enough to cover the rising cost. His savings in the bank is getting less in real term, as inflation eats into his savings. See, Pos Malaysia is now charging a mail from 30 sen to 50 sen. Busmen want to charge sur-charge like airplanes in view of petroluem price uncertainty.Even the kacang putih man wants an extra 20 sen per pack realising the wantanmi man adds 50 sen to a bowl of noodle. And yet the gomen CPI is 3.1 %.

Contractors are complaining about the lack of contracts and investors are are licking their wounds after the recent small capital stocks and employees are seeing an erosion of their purchasing power. The people have indeed a fragile confidence underlying the announced growth. Manufacturing sectors are seeing limited upside for their exports as trhere is considerable slack in Europe and Japan. For an example, price of electronics chips, which becomes a main export item has plunged almost 40 % this year due to over-supply. Then there is a fear of the ringgit re-pegging which will result Malaysian exports more expensive, resulting exporters as unworthy competitors.

House builders are also feeling the concerns. Signs of a slowdown in the lower end segment are beginning to surface which is clearly accentuated by the collapse of share prices in some property companies in the stock market. The potential changing interest rate definitely will not bode well for house purchasers and the housing industry. What more damage will the interest rate hike have on the car purchasers, credit-card holders and the businessmen. And the Ah Longs, will also increase their rate too. The banking industry is in for another restructuring exercise and bank employees are seeing themselves redundant. We have seen thousands of fresh graduates are still jobless and many more workers retrenched lately.

Now there is the only hope for more private consumption in the country to instill growth. The gomen may have started the ball rolling by giving the gomen servants 5 working days a week and COLA allowance with hopes that they will travel more cuti-cuti Malaysia tours and purchase more thereby creating more private consumption. The tourist industry is requested to stir in more tourists to bring in cash to spend here too. Meanwhile the gomen is seriously putting more actions to the agriculture industry sensing the price of rubber and palm oil have bottomed out and now crawling upwards. There is hope in the robust telecommunication sector especially in the rising usage of mobile data suppport. On the street Ali, Ah Beng and Lingam are encouraged to save less and spend more to instill consumption. And the bankers who feel that everyone ought to have their bank credit cards are at every strategic places in plazas and malls promoting.

I hate to prepare a report as above simply because the top management likes the contrary and hears the good prospective news. I'm going to have another cup of the "Teh Boh" .....