State of Denial?

The US markets have been tumbling due to the crumbling of mega financial institutions.  Their government has taken swift action to shore up the impact.  The European markets are having the tremors.  The Asian markets are significantly impacted.  Even Singapore announced that they are in a technical recession.  But our Malaysian Government says we are still well protected and we will not be hit as bad as other countries.  What other countries?

Is this true or are we too busy with party elections?  Are we in a state of denial that our economy won’t be impacted much and is still very resilient?  Certainly, we want to believe that to be true.  But is it?

When we look at our country from the view of an ordinary citizen, we find that our money is shrinking fast.  The same Ringgit we had four months ago can’t pay for the same things anymore today.  Although the price of petrol has come down 40 sen since it was raised by 78 sen earlier in June, none of the consumer items have come down in price.  The damage is already done by the earlier historic rise of petrol prices and pushed inflation up beyond 8%.

Pak Lah has urged retailers to reduce their prices but we can be sure no prices will come down.  Seems like nobody listens to Pak Lah these days.  They have been given the liberty to increase and up there it will stay.  The supply chain costs to them has not come down and is not expected to come down.  Electricity rates as well as water rates have gone up.  So how can any retail prices come down?

Now that Pak Lah is stepping down, whether next March or this December is now an open discussion, he will have little attention nor power to do anything except talk about reforms.  Pak Lah has never been able to introduce any economic strategies that had any material effectNajib at this time is too busy reinforcing his position in Umno to become the next President which will inadvertently allow him to become the next PM.  He is not sure of his position just yet so he will have no time for us.

The government keeps telling us our economy is ok, we don’t have to worry too much but yet we don’t see them doing anything material.  Then we see our stock market come down from above 1300 to below 1000.  Our market is coming further down and affected by the rest of the bourses around the world.  Malaysia is not immune to the world’s problems.  And if we say we are not going to be affected much, then we are really in a state of denial.

Our disposable income buys less today.  Our stock market is below the 1000 mark.  The businesses are slower and quieter.  The projects are less.  Companies are not paying their bills on time.  Retrenchments are on the table.  Recession is definitely around the corner, if not Q4, it will be soon early next year.  All the forecasts show Malaysia is surely slowing down in growth.

Behind the scenes, the banks have probably been instructed to push out personal loans and to encourage public spending to boost the market.  We have all be inundated by a flurry of agents calling to offer easy personal loans with few questions asked.  Why?  To try to excite consumer spending but if you spend such money now, there will be more impact on us in the near future when the loans are called back.  Cheap loans is not the way forward.  Credit card offers are all over but few qualify though.  Many people are already struggling with repayment.

Property glut has happened and will continue to be a buyer’s market into the forseeable future.  Next year, we will see serious challenges to the home property market.  The glut of office space is already happening and will get worse next year.

So all signs point to a challenging 2009 even at this point in time.  The man on the street is feeling it.  The retailers are feeling it.  The Small Businesses are feeling it.  The big corporates are feeling it.  Yet the Government tells us we are doing well and nothing to worry.

Are we still in the state of denial?

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