Malaysian last quarter growth in 2008 was 0.1%. I expect the 1st quarter to be in the negative territory. The second quarter will probably be worse. That would mean that we are going into recession, since by definition, a country is deemed to be in recession with 2 consecutive negative growth.
Negative growth can be compounded just like positive growth. The effects will be cumulative. And it is more difficult to go up than go down.
If the economy is worth RM1000, for example, and suffers a contraction of 50% in a quarter, it will become RM 500 only. If the next quarter , it suffers another contraction of 50%, the economy would only be worth RM 250.
For this RM250 to go back to RM500, you need to have 100% growth. For RM500 to go back to RM1000, it needs another 100% growth. In other words, it needs 2 consecutive growth rate of 100% to gain back what was lost during the 2 consecutive contraction of 50%.
So much is the truth behind the figures. The classic example is Japan which has taken more than a decade to climb out of deflation.
China’s (and to a smaller extent India) is the only one showing a more than 6% growth at the moment, but its economy is only one quarter of that of the US, which is in deep recession now. As an export orientated country, it is inevitable that our economy will slide backward.
Much will depend on the US and how OBAMAtackled the economy. Much will depend on how fast the housing sector finds its bottom in the States.
I am afraid that because so much expectations were on OBama, just like Malaysians had in 2004 on Pak Lah, it would be a disaster if Obama cannot deliver in a year or so. Lee Kuan Yew said in a New Year speech on 6 February that in 9 months, the world would know how Obama’s economic plan is doing.
This speech of Lee Kuan yew reminded me of Winston Churchill, one of the greatest British statesmen . When all seemed lost in the 2nd World War after the fall of France, it was Winston Churchill who, by several of his motivating speeches, lifted the spirits of the British, and they fought courageously to win the Air Battle of Britain, and stalled Hilter’s invasion of Great Britain. His speech of “ we shall fight on the beaches” galvanised a whole nation to fight.
Exceptional times need exceptional leaders. Winston Churchill was one. Lee Kuan Yew has proven to be one. Singapore is indeed lucky that he is still around to galvanise the nation. Obama may yet to prove to be one (for the sake of the world’s poor, I hope he can be one).
Looking around us, do we have any of these leaders with calibers to turn the direction of a nation?
I will post part of Lee’s speech here and see how the government of Singapore has prepared the people for the recession:
Everyone in the world is poorer. US$7 trillion has been wiped off the world’s stock markets. According to a BBC report from Davos, the world’s assets (stocks, properties, pensions, gold, jewellery, etc) have lost 40% of their value. Rupert Murdoch speaking at Davos said personal wealth in the world has fallen by US$50 trillion. Forbes estimated that in Hong Kong , the 40 richest billionaires and millionaires have lost half their combined wealth