Economists employed by the Malaysian government have the task of collecting relevant information on recent economic activity in order to make an assessment of economic trends. It is important that they report their findings accurately, and that the public be given access to the truth of the situation so that prudent decisions may be made in preparation for any eventuality.

Collecting economic information takes time, and there is always some delay in making an analysis. Media editors must be counseled in order that any information likely to affect consumer confidence is filtered out. Many findings of reduced economic activity are re-interpreted to soften the disappointment. There is a failure to present the whole untinted picture to the public.

The prime minister now admits the present slowdown is somewhat more than anticipated. The Malaysian Institute of Economic Research (MIER) has gently reduced the expected gross domestic product (GDP) for 2001 from 5% to 4%. Forecasting always has some element of uncertainty, and one naturally hopes for the more positive outcome. This optimism is transmitted to the public in an effort to present a picture of stability.

What does the present picture actually show? The data tell us that the present GDP for the first quarter is low, perhaps even negative. The 4% figure given is an optimistic pie-in-the-sky projection based on a significant improvement to come in the second half of the year.

Unrealistic assessments

One notes the realistic expectation that the second quarter will also be low to negative. MIER states that the economy has taken a sharp nosedive. The Business Conditions Index indicating consumer confidence has fallen from 60.7 in the first quarter last year to 46.3 this year. That is a significant 23.7% decline.

The prime minister has begun to hedge on his earlier statement that Malaysia could maintain its economy without consideration of what might happen in Japan and the US. His reputation as an economic guru is in tatters. Future statements that he makes will be heard with this failure in mind.

Alan Greenspan, head of the US Federal Reserve Board, has just reduced the interest rate by half a percent, following closely an earlier reduction. The obvious reason for this is the seriousness of the situation in the US. Japan continues to fight stagnation, and even with a zero interest rate the Japanese economy is not responding. What does this mean for Malaysia?

The present situation is a serious one, and there are no signs that improvement will come soon. The hopeful projections given by the government are based on what happens in other countries, which is completely beyond Malaysia's control. There is no guarantee that conditions will improve, either in the US or Japan.

Negative impact

Dr Mohamed Ariff, executive director of MIER, gave a press conference on Tuesday. According to Bernama , Ariff made the following points:

1) MIER projects 4% GDP growth for Malaysia in 2001.

2) This expectation depends on the expectation that the United States' GDP growth will be about 1.5 percent.

3) If the US' GDP growth is lower than 1.5%, it would have a negative impact on Malaysia.

4) First half GDP growth for Malaysia is expected to be far below 4.0%. First quarter GDP is very, very low and could be close to zero or negative compared with last December.

5) The 4% figure is an [estimated] average for the whole year, based on MIER's projection for a [very substantial] recovery in the second half.

6) The first half of this year compared with the last half of 2000 will be much lower .

7) The Business Conditions Index for the first quarter fell to 46.3 points.

8) It is a decline of 6.9 points, to 46.3 from 53.2 recorded in the last quarter.

9) The slower pace of economic recovery over the past two quarters is showing signs of further slowing.

10) The difference the index is even more acute when compared with the 60.7 level registered in the corresponding period of last year [a 14.4 point decline, or 23.7%].

11) The data is taken from an executive summary prepared to report both the Business Condition Index and the Consumer Sentiments Index to the government for the first quarter.

12) Malaysia's ability to record 4.0% GDP growth depends on [positive] developments in its major trading partners - the United States and Japan.

13) The projection is based on two quarterly surveys. The MIER interviewed 600 manufacturing firms for the Business Conditions Index and 1,200 households for the Consumer Sentiments Index.

The "strains" mentioned by Ariff have been apparent for a long time. Previously it was possible to take things more lightly, making allowances for severity of the Umno-BN leaders. Sadly this is no longer the case. The time for personal sacrifice nears.

HARUN RASHID is a scientist avidly interested in the application of Islamic principles in international affairs. The promotion of goodwill through civilisational dialogue motivates his writing. His Worldview column is a personal analysis of Malaysian affairs from a global perspective.