Mier forecasts 6% fiscal budget deficit in 2009

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KUALA LUMPUR: The government’s much anticipated second stimulus package could stretch its fiscal deficit to over 6% of gross domestic product (GDP) this year, said the Malaysian Instiute of Economic Research (Mier).This is based on an estimated RM30 billion mini-budget which will be unveiled on March 10. In the long run, the economic package would translate into higher debts for the government, hence, possibly, higher taxes for the man on-the-street as the the government would need to boost its income to repay its loans.“The government can actually borrow domestically to finance (the stimulus package) as there is a lot of liquidity in the system at the moment. “The fiscal stimulus may only cushion the impact of the economic slowdown, not neutralise it. Transparency of the stimulus package is absolutely critical,” Mier executive director Professor Datuk Dr Mohamed Ariff said.He was speaking to reporters here on March 3 on the sidelines of a real estate seminar organised by real estate consultant Rahim & Co Chartered Surveyors Sdn Bhd.MIER’s RM30 billion estimate, according to Mohamed Ariff, is deemed reasonable as the figure translates into 4% of the country’s GDP, a fraction needed to reinvigorate the nation’s slowing economy.Deputy Finance Minister Datuk Kong Cho Ha recently said the second package could be worth RM30 billion to safeguard the local economy against the backdrop of falling exports and slowing domestic demand. The scheme comes on top of the RM7 billion initial package announced last November.The country had registered less than impressive economic data in recent months. The local economy grew a mere 0.1%  in the fourth quarter of 2008 from a year earlier amid falling exports, which in turn led to a contraction in the local manufacturing sector. The 0.1% expansion is a sharp contrast from the preceding third quarter’s 4.7% growth.  On the whole, in 2008, Malaysia’s economy expanded at a slower annual pace of 4.6% compared with the 6.3% posted in 2007.The nation’s December 2008 exports tumbled 14.9% to RM46.09 billion from RM54.2 billion a year earlier due to lower demand for electrical and electronic products, besides palm oil, and liquefied natural gas. Imports fell 23.1% to RM34.4 billion from RM44.8 billion a year earlier.For the whole of 2008, exports grew 9.6% to RM663.5 billion while imports expanded 3.3% to RM521.5 billion. This translates into a trade surplus of RM142 billion.