What started as a sub-prime mortgage crisis in the United States of America in August 2007 has now spread quickly around the globe, melting down financial markets, crippling the banking system, eroding economic activity and slumping consumer confidence. The contagion is still spreading and the possibility of this global economic downturn morphing into a global currency crisis and/or political crisis cannot be discounted.

In the first half of 2008, economies around the globe faced intense inflationary pressures amidst high prices of oil, food and commodities. This gave way to turmoil in the international financial markets in the 2nd half of 2008, resulting in a sharp deterioration in global economic conditions.

Malaysia with an open economy has not been spared and we should all brace for a downturn. The Malaysian economy registered a growth of 4.6% in 2008, moderating from a respectable 7.1% in the first half year of 2008. Malaysia’s economy in 2008 was sustained by a robust domestic demand due to strong private consumption and strong public spending. The 2nd half of 2008’s economic performance was affected by the sharp and rapid deterioration in the global economic conditions as well as major contraction in our manufactured exports.

As the external downturn may not have bottomed, Malaysia GDP for 2009 may see a downward revision to
-1% to 1% growth.

In these uncertain times, change is inevitable going forward. Countries still need to trade with one another and cross border investments will continue to flow to where there are positive returns. I encourage members to “hang-in” and “hang-on” to your customers and investment partners in these difficult times and work out win-win solutions to ride through the turbulence. There will be opportunity in every crisis and after every downturn, there will be upturns.

In such unprecedented times, we should therefore, evaluate what are the short term and long term risks, where are these risks and how to identify and look for solutions to mitigate them. Our respective corporate goals should be aligned to these realities so that when the upturn returns, we will be able to reap from the pruning measures we painfully take today.

TAN SRI DATO’ AZMAN HASHIM
President