"Financing the Fourth Malaysia Plan"

Abstract

At the very outset, it is necessary to briefly sketch the economic environment in which the Fourth Malaysia Plan was launched. 1980 saw the international economic situation deteriorating. Output growth decelerated while inflation accelerated and continued to be the major economic problem for all the industrial countries. Against this background, the volume of world trade declined sharply during the year. Unemployment continued to rise and interest rates have increased steeply. No major relief is expected in this adverse economic scenario although some improvements towards pursued by the major industrial countries are continued. These developments had an adverse impact the later half of 1981 could materialise provided that the present demand management policies government undertook countercyclical fiscal and monetary policies to provide significant stimulus to on the economies of developing countries including that of our country, Malaysia. However, the private sector expansion. With such policy supports the economy continued to grow at a very healthy rate of 8% per annum in real terms with prices inflating at a moderate 7% reflecting mainly the sharp jump in import prices. Our Balance of Payments position continued to be strong although the Current Account registered a small deficit of $412 million which was more than offsetted by capital inflows resulting in an overall surplus of $1 billion. Foreign exchange reserves remained at a comfortable level. With external economic conditions dampened, the emphasis for economic consolidation for Malaysia must be based on an aggressive export promotion policies and economic diversification as well as expand domestic demand for locally produced goods and services. Not only has external economic conditions been adverse but the external political situation has likewise been volatile and as such our socio-economic development must also entail the assurance of our national security.