The 2008:04 GDP and January MSB release last Friday basically confirms what everybody knew - a deep fall in trade was the primary channel for the slowdown in growth. Both exports and imports fell off a cliff into double-digit declines. Paradoxically, the net effect was still a positive for the Malaysian economy, with (X-M) at around RM10.6 billion, although lower than the RM19 billion plus in 2008:03 (now tell me that exports and imports aren't cointegrated!).
The real killer though was the consequent sharp fall in investment with capital formation falling to the lowest level since 2006:01 and the worst growth reading since 2001:03 (chart shows log percentage change y-o-y):
The net rGDP growth figure is sure to be revised downwards, and we may find that Malaysia entered a technical recession at this point. Trade data for January is so far not very encouraging, and the RM7 billion stimulus package does not seem to have been fully implemented yet from what I'm hearing. So fiscal policy has yet to gain traction. Monetary easing? Despite the 150bp cut in the OPR, money supply growth is also dropping:
The worse is yet to come? You bet. To be fair, there's not much that BNM could have done in 2008:04 to expand the money supply. Net portfolio investment (BOP data) fell a whooping RM 56 billion in 2008:03, and I can't imagine the fourth quarter to be any better, if the depreciation of the Ringgit is any indicator.
The Balanced Budget silly season is upon us again
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