Malaysia will be able to avoid a full-blown recession this year, but her economy is not expected to rebound until the second half of next year, said Malaysian Institute of Economic Research (MIER) executive-director Dr Mohamed Ariff today.

"The picture may not look pretty but it's not ugly either," he told reporters this when he was asked to comment on the Malaysian economy at the MIER National Economic Outlook 2002 Conference in Kuala Lumpur.

MIER predicted that Malaysia will continue to grow at 0.3 percent this year, 3.2 percent next year and 5.7 percent in 2003.

According to Mohamed, while gross domestic product (GDP) growth is expected to be positive, the second half is seen declining 1.2 percent year-on-year.

He added that the economic prospect next year may not be as promising as expected earlier this year. However, he believed that Malaysia will see a positive growth rate in the third and fourth quarters next year with the recovery in the manufacturing sector.

On the whole, the MIER chief said that Malaysia would do better than Singapore as Malaysia's economic activities are fairly diversified unlike the island republic which is largely dependent on the electronics sub-sector.

He also forecast a rise in the export of primary products such as palm oil to countries such as India and China, and a greater emphasis on the service sector and tourism industry in Malaysia.

Another electronics boom

Nevertheless, Mohamed maintained that Malaysia's investment in the electronics sector has not been misplaced despite the current slowdown in the demands of global electronics goods.

He said that there could be another electronics boom from the year 2003 onwards and, therefore, the government should not back away from that sub-sector.

He added that the government has been doing the right thing in retraining retrenched workers and the unemployed so that they would be ready to return to the workforce once the economy recovered.

On the issue of unemployment, Mohamed conceded that it does not look very encouraging.

He said that for October alone this year, 415,000 workers were retrenched in the United States, which is the highest in two decades.

"You can imagine what impact it can have on the rest of the world," he said, adding that the unemployment rate in the US can hit six percent next year.

More vacancies than jobs lost

Although the electronics sub-sector took a beating this year and many were retrenched, the government insisted that there are more vacancies available than jobs lost.

"If you look at these vacancies carefully, you'll find 80 percent of them are in the agricultural sector," Mohamed said.

"You can't divert these people (retrenched from the electronics industry) to this sector. They don't have the aptitude and they don't have the skills for it," he added.

However, on the whole, Mohamed was optimistic about the economy although it could be a U-shaped recovery.

According to him, the worst-case scenario would be for Malaysia to plunge into a recession and not see an economic recovery until 2003.

"I'm on the optimistic side that things would not go the way of the worst-case scenario," he said.