Abstract
We have revised down our 2009 growth forecast for Malaysia from 3.1% to 1.4%
after the latest
industrial production data revealed that factory output
contracted at its fastest pace in seven years in
November. Moreover, with
the global economy unlikely to pick up until the first half of 2010, we
have
also revised down our 2010 growth forecast from 4.6% to 3.2%. While
planned fiscal stimulus and
anticipated interest rate cuts (we are
expecting Bank Negara Malaysia (BNM) to follow up its 25bps
interest rate
reduction on November 24 2008 with a total of 50bps worth of cuts in 2009)
should help to
keep growth propped up in 2009, we do not believe that they
will be enough to protect the economy from
a weakening external
environment and its knock-on effects on private consumption and
investment.
Defence Minister Datuk Seri Abdullah Ahmad Badawi has
indicated that a portion of Malaysia' s
MYR7bn economic stimulus package
would go to the Defence Ministry for additional development
projects.
Major defence procurements at the start of 2009 included two contracts
totalling MYR603mn
with two companies supplying parts and components to
the Royal Malaysian Navy (RMN) for five years.
It was also announced at
the start of 2009 that the country' s first submarine, a French-made
Scorpeneclass
KD Abdul Rahman, is scheduled for delivery in July 2009. The
Sepanggar Naval base, a 190ha
naval base project costing MYR636mn, is also
scheduled to be completed in July. The submarine will be
housed at the new
naval base. A second submarine KD Tun Abdul Razak, is expected to arrive at
the end
of the year.
In February 2009 the Malaysian government
announced that military assets and resources of ASEAN
member countries
would be used in tackling non-traditional threats such as providing natural
disaster
relief and curbing crime in border areas such as human and
drug-trafficking. Malaysian Prime Minister
Datuk Seri Abdullah Ahmad
Badawi said such assistance, however, would only be provided after the
country affected by the natural disasters, such as the cyclone or tsunami,
requested it. He said agreement
on the use of the military assets was a
follow-up to the decision of the ASEAN Defence Ministers'
Meeting (ADMM)
in Kuala Lumpur in 2005 which called on the defence sector to also participate
in the
realisation of ASEAN' s goal of forming a regional community that
was happy, peaceful, safe and stable.
We continue to expect that the
Malaysian government will increase defence spending by 4% annually, in
real terms, over the coming years. Absolute increases will depend in part on
how the country' s economy
fares in the face of the global financial
crisis.
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