Economists are divided on the size of the second stimulus package, with one saying larger is better while others say the country needs more stimulus but not a bigger package.
"Registering a GDP contraction of 0.5 per cent this year - the first since 1998 - is becoming more than a reality for Malaysia's economy as economic conditions deteriorate and the inflexion point of recovery continues being a moving target," said Mottain.
He expects the second stimulus package to be worth between RM10 billion and RM15 billion, and will involve maintenance jobs for schools, roads, mosques and temples and building more low-cost homes as well as tax breaks to small business.
Focus will also be directed on creating more jobs as well as retraining facilities for those retrenched people.
"It would be more effective if the government were to consider one-off cash vouchers or a cash-bonuses system for middle- and low-income workers and families, children going back to school, farmers in hardship and people undergoing training as well as a tax-free year for 2008, which we need to file by April and June this year," he said.
Including both the stimulus plans, Mottain expects the country's budget deficit to swell to more than RM55 billion, which would translate into a higher GDP of 7.5 per cent in 2009, from 4.8 per cent in 2008 and 3.2 per cent in 2007.
Mottain also expects some monetary policy measures to support the fiscal measures.
He expects Bank Negara Malaysia, which slashed its benchmark interest rate by 75 basis points last month, to cut another 50 basis points and also reduce the statutory reserve requirement by 100 basis points.
Other economists said a stimulus package that is about 2-3 per cent of the GDP should be sufficient to cushion the economy from the adverse impact of the global financial crisis.
RAM Consultancy Services chief economist Dr Yeah Kim Leng said Malaysia is not directly hit by the crisis to mount a much larger stimulus package.
"We are not at the epicentre ... our financial system has remained relatively healthy. What is important now is to sustain consumer and investor confidence," he told Business Times yesterday.
Last November's RM7 billion stimulus package was about 1 per cent of the GDP, said Yeah, expecting an additional 1-1.5 per cent for the upcoming second stimulus package.
He added that a stimulus package of such magnitude raises another concern, that is the speed and efficiency of the government in executing the plan.
Yeah said the government needs to mitigate the impact of the current situation to both the corporates and individuals.
"The package must be able to address companies that are facing liquidity but not solvency problems, and individuals who have been retrenched but are prepared to be retrained," he added.
National Economic Action Council adviser and economist Datuk Dr Zainal Aznam Yusof said a second stimulus package of between RM12 billion and RM14 billion will be sufficient to keep the economy humming.
"When you add on the various tax deductions and the cut in Employees Provident Fund (EPF) contributions, total stimulus package would be about RM24 billion and that is not too bad," he said.
Zainal Aznam wants the second stimulus package to consist of more tax benefits and a larger EPF cut to entice more people to opt for lesser contribution to the EPF.
"The government should think of more ways to put the money in the hands of the people to encourage spending and also a bigger reduction in corporate tax," he said.
Zainal Aznam also said the social safety net programme should not be left out in the mini-budget, while the fate of the retrenched workers needed to be properly addressed.
AmResearch Sdn Bhd senior economist Manokaran Mottain said Malaysia will need at least RM40 billion or five per cent of the gross domestic product (GDP) to remain in positive growth.
He said compared with the stimulus plans announced by the US, Singapore and China, Malaysia's package per GDP ratio may not be sufficient to prevent a potential recession.
"But while the increased public spending is in the right direction, we are of the view that more money should be injected into Malaysia's system, especially at a time when external demand is terminally ill and rising unemployment is impacting domestic demand," he wrote in a report yesterday on the mini-budget to be tabled on March 10.
Mottain expects Malaysia to slip into two to three quarters of negative growth this year, with a technical recession to be confirmed by May 2009.
He expects the second stimulus package to be worth between RM10 billion and RM15 billion, and will involve maintenance jobs for schools, roads, mosques and temples and building more low-cost homes as well as tax breaks to small business.
Focus will also be directed on creating more jobs as well as retraining facilities for those retrenched people.
"It would be more effective if the government were to consider one-off cash vouchers or a cash-bonuses system for middle- and low-income workers and families, children going back to school, farmers in hardship and people undergoing training as well as a tax-free year for 2008, which we need to file by April and June this year," he said.
Including both the stimulus plans, Mottain expects the country's budget deficit to swell to more than RM55 billion, which would translate into a higher GDP of 7.5 per cent in 2009, from 4.8 per cent in 2008 and 3.2 per cent in 2007.
Mottain also expects some monetary policy measures to support the fiscal measures.
He expects Bank Negara Malaysia, which slashed its benchmark interest rate by 75 basis points last month, to cut another 50 basis points and also reduce the statutory reserve requirement by 100 basis points.
Other economists said a stimulus package that is about 2-3 per cent of the GDP should be sufficient to cushion the economy from the adverse impact of the global financial crisis.
RAM Consultancy Services chief economist Dr Yeah Kim Leng said Malaysia is not directly hit by the crisis to mount a much larger stimulus package.
"We are not at the epicentre ... our financial system has remained relatively healthy. What is important now is to sustain consumer and investor confidence," he told Business Times yesterday.
Last November's RM7 billion stimulus package was about 1 per cent of the GDP, said Yeah, expecting an additional 1-1.5 per cent for the upcoming second stimulus package.
He added that a stimulus package of such magnitude raises another concern, that is the speed and efficiency of the government in executing the plan.
Yeah said the government needs to mitigate the impact of the current situation to both the corporates and individuals.
"The package must be able to address companies that are facing liquidity but not solvency problems, and individuals who have been retrenched but are prepared to be retrained," he added.
National Economic Action Council adviser and economist Datuk Dr Zainal Aznam Yusof said a second stimulus package of between RM12 billion and RM14 billion will be sufficient to keep the economy humming.
"When you add on the various tax deductions and the cut in Employees Provident Fund (EPF) contributions, total stimulus package would be about RM24 billion and that is not too bad," he said.
Zainal Aznam wants the second stimulus package to consist of more tax benefits and a larger EPF cut to entice more people to opt for lesser contribution to the EPF.
"The government should think of more ways to put the money in the hands of the people to encourage spending and also a bigger reduction in corporate tax," he said.
Zainal Aznam also said the social safety net programme should not be left out in the mini-budget, while the fate of the retrenched workers needed to be properly addressed.
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