The Star quoted Mr Datuk Mohamed Ariff Abdul Kareem executive director of Malaysian Institute of Economic Research as saying that there is a 50% chance Malaysia will fall into a full blown recession in 2009.

He added that "Technical recession is almost certain. The 1.3% GDP forecast in January 2009 is considered optimistic and in fact, I think the best case scenario will be 0.5% growth this year. We forecast the first half year will have negative growth but hopefully the second half will show some positive figure, which will give us 0.5% growth and MIER would review again the GDP as a lot of development has taken place since the last forecast."

Mr Ariff said that "My fear is that we may be stuck there for sometime. Contraction may not be sharp but long and it could take three years before the local economy returned to normalcy."

He expected the fiscal deficit to increase to more than 6% of GDP if the second stimulus package was MYR 30 billion, which is about 4% of GDP. Financing the deficit budget was not a problem as there was a lot of liquidity in the local financial market, which funds 93% of the government deficit.

He further added that the greenback continued to be artificially strong now because central banks worldwide were continuing to fund the US deficit and thus increasing the demand for the dollar. He added that in the meantime, the ringgit would remain weak and volatile, but unlikely to cross 3.8 against the dollar.

(Sourced from www.thestar.com.my)