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New Straits Time 28 mac 2001

Central Bank chief: We're ready to face global economic slowdown

KUALA LUMPUR, Wed. - Malaysia is well-prepared to cope with any deterioration of the world economy as it has strengthened its fundamentals and drawn up its strategies ahead of time, Bank Negara governor Datuk Dr Zeti Akhtar Aziz said.

We recognised the magnitude of the stronger than expected US economic slowdown and drew up our stimulus measures even before the US has put together its own fiscal package, she pointed out.

It is very important to do the diagnosis early - and to get it right, she told the media when releasing BNM's Annual Report for 2000 today.

Zeti explained that Malaysia took advantage of its economic recovery programme after the regional financial crisis of 1997-1998 to ensure all-round strengthening of the economy.

This has resulted in quality growth of 8.5 per cent last year, and this quality remains even though the pace slows to between five and six per cent this year. BNM estimates five per cent growth for this year, going up to six per cent if the stimulus package bites.

There is job security, the people have earning power, the banking sector has been strengthened.

But most importantly, the Government has flexibility in responding to situations with policies, and has the decision-making machinery.

All this means the Malaysian economy is being compared with the stronger economies of the region - South Korea, Singapore, Taiwan and China.

The economy has been developed such that its exports and markets are more diversified. Even in the electronics and electrical sector, the products are diversified enough so that the reduced demand from the US has less impact, Zeti added.

The external sector remains fundamentally strong despite the high deficit level in services.

Zeti said the monetary policy stance will continue to remain accommodative to support economic growth.The current account position in the balance of payments this year is expected to remain in surplus accounting for 6.8 per cent of Gross National Product.

Inflows of long-term capital such as foreign direct investment (FDI) is also expected to be sustained, and together with the continued current account surplus will be able to cushion outflows.

She also stressed that the days of large-scale FDI are over. Long-term investments now will be on a smaller scale because new projects no longer need such vast capital inputs from abroad.

Despite all the pre-emptive measures introduced by the Government to ensure sustainable economic growth, Zeti cautioned that it was important for the private sector to also contribute to this process by responding positively to these initiatives.


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