Further to the earlier press release, MIER has now issued their take of the upcoming Malaysian Budget 2010.According to MIER, expect Malaysia's budget deficit to reach 8-9 per cent of GDP in 2010 due to lower tax receipts and the possibility that more stimulus spending will be needed to revive growth.
Releasing its third quarter economic outlook, MIER revised its forecast for 2009 gross domestic product to a contraction of 3.3 per cent from 4.2 per cent and for 2010, GDP growth to 3.7 per cent from 2.8 per cent.
But it said more extra spending may be needed to prop up the economy given that two stimulus packages worth RM67 billion already in effect, will only start having an impact during the third quarter and beyond.
The government's 2009 GDP forecast is expected to be revised upwards from its previous forecast of a contraction of four to five percent when the 2010 budget is announced on Oct 23.
MIER's executive director, Dr. Mohamed Ariff, said however that growth would remain "tepid, fragile and shallow" at least until the start of 2012.
"This is why the government may need to introduce another fiscal stimulus package next year if it wants to really fuel the recovery. The recovery process still needs a lot of assistance," he told a news conference.
Ariff said if a third stimulus package worth RM8 billion was implemented, it would add about 2 percentage points to the budget deficit.
Malaysia, which heavily relies on exports and oil revenues, has forecasted a budget deficit of 7.6 per cent for 2009 and the 2010 shortfall is expected to come down marginally.
The MIER also saw no immediate inflation threat, but issued a warning caution that it could be "imported" in the future from other countries which have been printing money as a means to pull out of the financial crisis.
"There is also the fear that if the asset bubble in China
So do watch the danger signal flags as we cruise home on the last quarter of 2010.
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