ID :
75174
Thu, 08/13/2009 - 20:25
Auther :
Shortlink :
https://oananews.org//node/75174
The shortlink copeid
US ECONOMY TO RECOVER BY 2012, SAYS MIER
By Tengku Noor Shamsiah Tengku Abdullah
KUALA LUMPUR, Aug 13 (Bernama) -- Recovery of the United States' economy, the
key to the world economic revival, will probably happen in 2012, says Prof
Emeritus Datuk Dr Mohamed Ariff Abdul Kareem, Executive Director of the
Malaysian Institute of Economic Research (MIER).
"Recently, there were some signs indicating the crisis is easing, but the
crisis is still on. What I am saying is the world economy is still contracting
at a slower pace.
The US, in particular, showed some signs of let-up in the sense that the
second quarter registered a much lower contraction than expected, he told
Bernama in an interview.
The forecast was -1.5 per cent growth in the US but it turned out to be -1
per cent but the fact remains that the economy is still contracting.
Mohamed Ariff said the story was pretty much the same every where else.
"Europe is also contracting, still contracting albeit at a low and slower
pace. The situation is the same in Japan, South Korea and many East Asian
countries.
"This has led some people to say the worst is over and that there are also
the so-called "green shoots" (indicators of economic recovery) here and there
which are very promising.
"But to me, the worst will be over when the economy stops contracting.
(Currently), the global economy is still contracting.
"Of course, there are a few cases like India and China, where growth is
positive. Indonesia is also having positive growth but their growth is way
below the big crisis level," he said.
Mohamed Ariff said China showed some improvement in the second quarter,
registering 7.9 per cent growth, above the seven per cent growth forecast.
"But that may be just a spike meaning that the impressive growth that China
put up in the second quarter may be shortlived and may be attributable largely
to the huge fiscal stimulus package that China has put in place.
"China's exports are declining at 25-30 per cent, which is very bad, and the
country cannot recover until and unless the US recovers.
"What I am saying is that China's recovery means not going back to the
growth trajectory of 10 per cent and above but double digit rate.
"There are no signs that this is going to happen any time soon. When you
talk about South Korea and other East Asian countries, they are all in a similar
predicament and (their economies) are still contracting. that's not good news.
"So, the end of recession, which people expect to take place some time
around the third quarter of this year, does not necessarily mean the beginning
of the recovery," he said.
Mohammed Ariff said the recession may end but the recovery will not begin.
"The economy may settle in a very low equilibrium, meaning that growth is
close to zero but positive. To me that is not a recovery.
"A recovery to me is getting back to growth trajectory which I think
probably will take two to three years. So 2012 is probably the best bet for the
world economy to be back on track.
"Now, there are some individual countries which have shown positive growth.
Even recently like Singapore, for example. It is attributable largely to
Singapore's massive fiscal stimulus package, but some of these so-called
recovery signs may not be sustainable," he said.
In fact, even countries like China, are now thinking of another stimulus
package to maintain the momentum, Mohammed Ariff said.
"But there are limits to these countries to come up with stimulus
packages as it will lead to a huge fiscal deficit and they will have to borrow
heavily, incurring huge external and internal debts.
"All these things will probably create another problem later on..another
crisis later on," he said.
Mohammed Ariff said there are serious limits to stimulus packages that a
country can put up and there are also interest rates that have been pushed down.
"Therefore, there is no way that one or three fiscal policy can be used to
further reflect the global economy.
"So to me the picture is still murky. We may have positive growth in the
third quarter in the US but the positive growth may be very small and very
marginal.
"It may not be followed by substantial and significant improvement in
subsequent years because to me whatever recovery that we see now may not last
long," he said.
He also said there was a danger of "double dip" because the causes of the
current economic crisis still remained unaddressed and unresolved.
"So you have to face a fiscal deficit and a huge balance of payment deficit
are still there and the US consumption is still debt-based," he said.
He said the US had not got into huge internal debt problem and the financial
sector was still not out of the woods.
"So many of the problems that triggered the crisis are still unresolved.
This is why I think this kind of recovery engineered by fiscal stimulus packages
may not last long.
"There is a danger. To me, there is 50 per cent chance of double dip...
meaning you can see a spike. You can see some positive growth in the third
quarter, fourth quarter again a relax to a negative growth.
"I think this is a possibility...We cannot rule out the possibility of a
triple dip...meaning that a rocky bumpy road all the way to real recovery," he
said.
Asked where Malaysia fit in this kind of a global picture, Mohammed Ariff
said Malaysia was a trade dependent country.
"Our exports are declining at a pace of about 25-30 per cent per annum.
Our export recovery hinges very critically upon US recovery.
"Even China's exports are on a downward trend. Our exports to China are also
on a slide but China cannot move the imports from the US unless it can export
more to the US.
The bulk of Malaysia's exports to China consists of parts and components
meant for re-export to some where else after some processing," he said.
Mohammed Ariff also said three per cent growth in the US would do a lot
more to Malaysia to "help our economy a lot more than the double digit growth in
China."
"This is because China's growth does not spillover to the rest of the world
like US does. So this is why I think China's growth is largely internalise.
"It is not externalise like in the case of the US. This is why I think we
really have to wait until the US economy recovers," he added.
-- BERNAMA
KUALA LUMPUR, Aug 13 (Bernama) -- Recovery of the United States' economy, the
key to the world economic revival, will probably happen in 2012, says Prof
Emeritus Datuk Dr Mohamed Ariff Abdul Kareem, Executive Director of the
Malaysian Institute of Economic Research (MIER).
"Recently, there were some signs indicating the crisis is easing, but the
crisis is still on. What I am saying is the world economy is still contracting
at a slower pace.
The US, in particular, showed some signs of let-up in the sense that the
second quarter registered a much lower contraction than expected, he told
Bernama in an interview.
The forecast was -1.5 per cent growth in the US but it turned out to be -1
per cent but the fact remains that the economy is still contracting.
Mohamed Ariff said the story was pretty much the same every where else.
"Europe is also contracting, still contracting albeit at a low and slower
pace. The situation is the same in Japan, South Korea and many East Asian
countries.
"This has led some people to say the worst is over and that there are also
the so-called "green shoots" (indicators of economic recovery) here and there
which are very promising.
"But to me, the worst will be over when the economy stops contracting.
(Currently), the global economy is still contracting.
"Of course, there are a few cases like India and China, where growth is
positive. Indonesia is also having positive growth but their growth is way
below the big crisis level," he said.
Mohamed Ariff said China showed some improvement in the second quarter,
registering 7.9 per cent growth, above the seven per cent growth forecast.
"But that may be just a spike meaning that the impressive growth that China
put up in the second quarter may be shortlived and may be attributable largely
to the huge fiscal stimulus package that China has put in place.
"China's exports are declining at 25-30 per cent, which is very bad, and the
country cannot recover until and unless the US recovers.
"What I am saying is that China's recovery means not going back to the
growth trajectory of 10 per cent and above but double digit rate.
"There are no signs that this is going to happen any time soon. When you
talk about South Korea and other East Asian countries, they are all in a similar
predicament and (their economies) are still contracting. that's not good news.
"So, the end of recession, which people expect to take place some time
around the third quarter of this year, does not necessarily mean the beginning
of the recovery," he said.
Mohammed Ariff said the recession may end but the recovery will not begin.
"The economy may settle in a very low equilibrium, meaning that growth is
close to zero but positive. To me that is not a recovery.
"A recovery to me is getting back to growth trajectory which I think
probably will take two to three years. So 2012 is probably the best bet for the
world economy to be back on track.
"Now, there are some individual countries which have shown positive growth.
Even recently like Singapore, for example. It is attributable largely to
Singapore's massive fiscal stimulus package, but some of these so-called
recovery signs may not be sustainable," he said.
In fact, even countries like China, are now thinking of another stimulus
package to maintain the momentum, Mohammed Ariff said.
"But there are limits to these countries to come up with stimulus
packages as it will lead to a huge fiscal deficit and they will have to borrow
heavily, incurring huge external and internal debts.
"All these things will probably create another problem later on..another
crisis later on," he said.
Mohammed Ariff said there are serious limits to stimulus packages that a
country can put up and there are also interest rates that have been pushed down.
"Therefore, there is no way that one or three fiscal policy can be used to
further reflect the global economy.
"So to me the picture is still murky. We may have positive growth in the
third quarter in the US but the positive growth may be very small and very
marginal.
"It may not be followed by substantial and significant improvement in
subsequent years because to me whatever recovery that we see now may not last
long," he said.
He also said there was a danger of "double dip" because the causes of the
current economic crisis still remained unaddressed and unresolved.
"So you have to face a fiscal deficit and a huge balance of payment deficit
are still there and the US consumption is still debt-based," he said.
He said the US had not got into huge internal debt problem and the financial
sector was still not out of the woods.
"So many of the problems that triggered the crisis are still unresolved.
This is why I think this kind of recovery engineered by fiscal stimulus packages
may not last long.
"There is a danger. To me, there is 50 per cent chance of double dip...
meaning you can see a spike. You can see some positive growth in the third
quarter, fourth quarter again a relax to a negative growth.
"I think this is a possibility...We cannot rule out the possibility of a
triple dip...meaning that a rocky bumpy road all the way to real recovery," he
said.
Asked where Malaysia fit in this kind of a global picture, Mohammed Ariff
said Malaysia was a trade dependent country.
"Our exports are declining at a pace of about 25-30 per cent per annum.
Our export recovery hinges very critically upon US recovery.
"Even China's exports are on a downward trend. Our exports to China are also
on a slide but China cannot move the imports from the US unless it can export
more to the US.
The bulk of Malaysia's exports to China consists of parts and components
meant for re-export to some where else after some processing," he said.
Mohammed Ariff also said three per cent growth in the US would do a lot
more to Malaysia to "help our economy a lot more than the double digit growth in
China."
"This is because China's growth does not spillover to the rest of the world
like US does. So this is why I think China's growth is largely internalise.
"It is not externalise like in the case of the US. This is why I think we
really have to wait until the US economy recovers," he added.
-- BERNAMA
