'Malaysia's recovery hinges on US'

By Hamisah Hamid
Published: 2009/06/01

THE economic stimulus packages can only cushion the impact of the current global crisis, but the recovery of Malaysia's economy will depend on the US, according to an economist.This is because Malaysia is too dependent on trade for growth.

The US is also Malaysia's biggest trading partner."The stimulus package, ultimately, works only for a brief period," said Universiti Malaya Adjunct Professor Cheong Kee Cheok.He spoke to Business Times after giving a lecture in Sunway on Saturday.

Malaysia plans to spend about RM67 billion under two packages to spur economic activity. However, only a third is actual cash spending while the rest is in the form of guarantees.Cheong said there are suggestions for Malaysia to move away from the export sector.However, being heavily dependent on trade, this may not work for the country in the short term.But there are some good news.

Cheong, who spent 16 years at the World Bank as economist and then senior economist, said there are some signs of bottoming out in the US economy."My prognosis is it's going to be very long, it's going to take a couple of years," he said.China's economy is starting to recover and if China can sustain the recovery, it could provide support to the Malaysia's economy.

China is one of Malaysia's biggest buyer of palm oil.Cheong also cautioned that the country's stimulus packages should translate into actual spending of money with financial assistance directed to people affected most from the crisis.Providing loan guarantees to companies is not really putting real money into the economy."We need real money put into the economy. Like China, 80 per cent of their package is actual money spent," he said.