Malaysia may face double-dip recession, most probably during the second half of this year. Former Prime Minister Tun Dr Mahathir Mohamad, who just returned from England said should it happens, the impact on the domestic economy would be severe (read here).
As there were already such signs hitting most parts of Europe, Malaysia would also be 'infected', he said, commenting on predictions made by economists and analysts that a double-dip recession may occur in the second-half of this year and whether Malaysia would suffer the same fate.
While saying the government had in place several economic plans and adopted progressive measures like the New Economic Plan, Dr Mahathir said it would, however, be difficult to predict the future as whatever occured overseas would have repercussions on Malaysia.
However in Hong Kong, the IMF chief economist Olivier Blanchard said the global economy is unlikely to slip back into recession over the next few years, although such a scenario is not impossible (here).
Any country, he said needed to return to a sustainable level of fiscal spending. The IMF revised upward its 2010 world GDP forecast but said there were significant risks to the global recovery stemming from Europe's debt problems. The IMF lowered its 2011 GDP growth forecasts for Britain, Canada, the euro zone, emerging economies and Japan.
In the United States, debate is brewing about whether the bond curve can be a trusty gauge in a post-bubble, deleveraging environment that many key industrialized economies face (here).
The yield curve, or the spread between yields on short-term and long-term US. treasuries, has contracted through the recent market turmoil, beginning in April — a sign, pundits argue, that the economy is beginning to price in a weaker economy. But recent research from the US Federal Reserve Bank of Cleveland, based on the yield curve, puts the chances of the US economy falling back into recession at only 12.4 per cent.
However, this report here should be well read and understood. It says high debt and slowed growth - the nasty cold bug plaguing developed markets - spread to emerging economies in the second quarter, and significantly decreased output as a result, according to HSBC.
The bank’s Emerging Markets Index report, released Wednesday, shows that manufacturing growth in emerging markets (like Malaysia) contracted sharply in the second quarter from the record pace set in the first. "Although output remains above the long-term average, it is below the average seen before the financial crisis,” the report says.