ZETI: MALAYSIA WILL BOUNCE BACK

Nation has elements of resilience in economy and financial system

MALAYSIA has a resilient economy due to its strong economic fundamentals, which are backed by a sound financial system, said former Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz.

Speaking from her experience as the central bank head for 16 years, Zeti said Malaysia had demonstrated its resilience on several occasions by making unpopular but effective decisions during economic crises.

“We can survive in the current economic environment. Definitely we have demonstrated it (our ability to rebound) again and again.

“We will have setbacks, but we have always had the ability to bounce back because we have the elements of resilience in our economy and financial system.

“So yes, we may be affected by all these developments externally, and even on the domestic front, but we have demonstrated it before and we will demonstrate it again,” she said recently when asked whether Malaysia could survive the economic uncertainty on the local and global fronts.

On whether this is the worst economic crisis Malaysia is experiencing, Zeti responded with a “no”.

“No, not at all. We have seen worse.”

On whether the current political landscape is affecting investor sentiment, Zeti said the central bank has no control over the political landscape.

“When I was in the central bank, I always told my staff to take political developments as a given as we have no control over them.

“What we need to do, always, is to take the external developments as a given because it is not within our means to influence them but to build up our resilience.

“In our system, we have to build up our strengths and resilience, which means we have to build up strong institutions, buffers and internal capabilities not only in the public sector but also in businesses.

“This is the only way we will survive.”

One of the most significant events in history was the Asian financial crisis, which caused the country’s gross domestic product (GDP) to shrink from US$100.8 billion (RM419 billion) in 1996 to US$72.2 billion in 1998.

The GDP did not recover to the 1996 level until 2003.

However, Malaysia’s domestic economy recovered sooner than its neighbours.

In 1997, Malaysia refused economic aid offered by the International Monetary Fund and World Bank.

By refusing the aid and conditions attached, Malaysia was not affected to the same degree as Indonesia, Thailand and the Philippines.

Regardless, Malaysia’s GDP suffered a sharp 7.5 per cent contraction in 1998, and rebounded to 5.6 per cent in 1999.

Among measures taken by the government in response to the Asian financial crisis was the ban on short-selling, which was adopted by countries that had previously been critical of Malaysia.

In March 2006, Malaysia removed the ban on short-selling.

INFO BOX 5.6pc Rebound of Malaysia’s gross domestic product in 1999