Malaysia needs to boost stimulus package-think tank

KUALA LUMPUR, Dec 2 - Malaysia needs to boost its 7 billion ringgit ($1.93 billion) economic stimulus package announced last month to avoid a possible recession in 2009, a leading think tank said on Tuesday.

"The magnitude of the impending crisis is simply too big to be contained by a stimulus package of this size," Malaysian Institute of Economic Research (MIER) said in a report.

The body currently has a 3.4 percent growth forecast for Malaysia in 2009, just below the official forecast of 3.5 percent. Leading investment bank UBS expects no growth while RHB expects growth of 1.5 percent for the South-East Asian country.

MIER also criticised the government's plan to reduce employee provident fund (EPF) contributions to 8 percent from 11 percent, which the government had said would encourage spending, as "very unwise."

MIER said studies indicated EPF savings would not be enough for retirees' finance in most cases.

"Putting more money in the pockets of workers at the expense of EPF savings is tantamount to trading off the future for the present," MIER said.

The think-tank said Malaysia, a net crude oil exporter, needs to shed its over-dependent on oil and gas revenue, which makes up more than 40 percent of total government revenue.

Falling commodity prices will hit revenues and the budget deficit will be above the government's forecast of 4.8 percent of gross domestic product (GDP) for 2009, MIER said.

MIER expects fiscal deficit to be 5 percent or more of GDP next year.