STIMULUS PACKAGE NO 2!

Recalling what I have said earlier about the stimulus package – that it should be at least 10% of the GDP – it seems that finally the cow has come home! With the announcements of RM60 billion package (about 9% of GDP), and admissions that we are finally facing massive economic challenges – with GDP almost 0% or negative 1%; exports has crumbled by 30% or more (both in terms of volume and value (due to low price of commodities)); investments has come to standstill; and so on.

What is appalling to me is that ALL these issues were so clear by end of last year (four months ago); and if you recall, most of the issues, I have raised it in my writings- and if the government has seek advice of many economists, they would have come up with the same conclusions (or even more – because they may have access to data and information that I don’t have). And if you recall, the Government (such as Finance Minister 2), were making statements denying that we will face these problems. Such are the testimonies to our economic and financial management.

Off course now you will hear all the critics that such Stimulus is insufficient, a little bit too late, etc; while of course pro-government media and parties will hail that such move are commendable. The devils are in the details, as some would say; and that is the real issue that we should analyze. First, it is important to note that only RM15 billion out of the total amount will be in “hard cash” forms, while others are actually “indirect” cash. The stimulus also comes with a term “special projects” – which are dubious and what their uses will be can be anyone’s guess! And to me, the real challenge would be, whether they will spend it accordingly to drive the economy to fill the slack that has occurred – will be the real test and measure. For now, it seems that the rhetoric of it, surpass any real intelligent action that I can observe.

Economic actions are always never worked alone on its own. It is the result of an aggregate of collective actions by all economic agents – the Governments, companies, investors, traders, merchants, businessmen, and the consumers. All must act together in unison and in the same direction to allow any effective measures to be successful. It requires clear message and direction, so that correct anticipations, leads to proper actions. As you can see today, the Obama economic team are all over the media and communication channels; to bring home a unified message for their economic stimulus to work. And even that is no guarantee for the success. What more if the message is murky; filled with rhetoric and absence of any real feat?

To bring this point across, let us take many “small” issues that are at hand: the toll hike, for example: why in the world that they would announce an increase (and subsequently called it off) at this moment in time? Similarly, why someone would became the “sole” supplier or “special” fish containers that the fish wholesalers refuse to use; and instead use the reason to hike up the prices of fish. The effects of such announcements, gave reasons for people to increase the prices – and after that, despite the cancellations or reversal of policies, still the price didn’t come down.

I am sure that in months ahead, the message that they will send to people will even murkier and confused. For that reason, my hypothesis is that the stimulus will not be able to ward off the recession that we are already in. Hence, brace yourself for tough and long economic predicaments ahead.

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