DAVOS, Jan 21 – International Trade Minister Datuk Seri Mustapa Mohamed today hits out at critics of the government’s revised 2015 budget, saying economic conditions leading to the revision is very different from that experienced by Malaysia during the 1998 economic crisis.
Government critics have for the past months been painting a grossly negative picture of the Malaysian economy, alleging the Prime Minister Datuk Seri Najib Razak’s administration is not doing enough to shore up the economy amid an overall weakened global environment.
Following sharp declines in oil and primary commodities prices and an unsteady European and American economy, critics said the economy was heading towards the 1998 crisis levels. The government on Tuesday revised the 2015 budget to more realistic levels, as the budget was earlier made on assumption that oil prices were at US$100 per barrel.
Mustapa who was Deputy Finance Minister II and one of the members of the National Economic Action Council established to defend the domestic economy in the 1998 crisis, highlighted three fundamental weaknesses in the economy then that are not present now.
During the 1998 crisis, he said the ringgit declined rapidly to as low as RM5 to US$1 following strong speculative attacks. He added that the banking sector was facing systemic risks as the corporate sector defaulted on major loans.
Malaysia eventually took drastic measures by imposing capital controls, halting trading of the ringgit in the international currency market while pegging the currency at RM3.80 to US$1. Agencies like Danaharta and Danamodal were then established to manage bad loans and weaknesses in the property sector.
Speaking to Malaysian newsmen here where he is attending the World Economic Forum, Mustapa said the current conditions are different. Malaysians banks, he said are in a strong capital and liquidity positions while the corporate sector, while still recording profits, are not as highly exposed to loans as they were then.
Mustapa pointed squarely at the opposition parties as being the strongest critics, saying all parties should forget the divide during this difficult time and work together to protect the domestic economy. He said investors remain confident in their outlook of the Malaysian economy and the government’s ability to weather the current downturn.