At the numerous condominium projects around the Mont Kiara suburb of Kuala Lumpur, construction workers plod round the clock to complete multi-storey apartment blocks. Property developers in this popular neighbourhood are worried, though, that sales are starting to slow.
“Units that were previously sold are now coming back onto the market,” says a project manager of one unfinished condominium complex.
Shockwaves from the global financial meltdown are starting to pound on Malaysian shores and signs of a wider slowdown are already emerging in key props of the Malaysian economy, private economists say. That's spreading caution across the board, from potential homeowners to buyers of new cars.
Last week, the central bank kept the benchmark interest rate unchanged at 3.5per cent, but indicated it was ready to act swiftly if called upon.
“In the face of diminishing inflationary pressures, and in the event of heightened downside risks to growth, the bank will take swift monetary policy action to provide support to the economy,” Bank Negara Malaysia said in a statement.
Bank Negara's concerns are rising as the country's robust manufacturing sector is being hit by weaker export growth, while the softening in commodity prices has crimped incomes and resulted in less spending among consumers. On Nov 4, the government is expected to make an announcement lowering its growth forecast for next year from the 5.4 per cent currently projected.
Economists say the full brunt of the expected slowing down in economic activity is expected to be felt next year.
Deyi Tan of Morgan Stanley expects gross domestic product to grow by 3.3 per cent next year, down sharply from the 5.6 per cent expansion projected for this year.
Australia-based Macquarie is more bearish. In a recent advisory to clients, the securities firm said that it expects that the sharp drop in exports, coupled with falling commodity prices, will see GDP growth slow to 1 per cent next year.
The Malaysian government insists that the country is well-placed to weather the storm.
Datuk Seri Najib Razak, the Deputy Prime Minister and newly-appointed Finance Minister, said this week that the government will soon announce a slew of measures, including more liberal investment rules, to attract foreign funds and more government spending.
“The economic management is stable and our fundamentals are strong, so Malaysia is not in a crisis,” he told reporters last week.
But not all Malaysians are as sanguine.
In a posting last week on his widely followed blog, former premier Tun Dr Mahathir Mohamad said he had a “sneaking feeling that all is not well”. Trade-dependent Malaysia, he pointed out, relies heavily on the United States and European markets, both of which are slowing.
Dr Mahathir argued that the weakening exports to these market will hurt the country's manufacturers and, in turn, put pressure on Malaysia's financial system, which is exposed at home to the property sector and private lending in the form of credit cards, which he estimated amounted to RM20 billion owed to the banks.
To be sure, Malaysia is entering the global recession in a much better position compared with the regional crisis in 1998, when the economy went into a tailspin as a result of excessive lending to the property sector and the stock market.
That is because private and public debt levels are far lower than they were 10 years ago.
Economists say the country's foreign debt and public debt now stand at manageable levels of 33 per cent and 40 per cent of GDP respectively.
But many economists note that public confidence, already shaky because of spikes in inflation since early this year, is being hit by a slumping stock market and fear that a slowing economy could result in job losses.
The benchmark composite index for the Malaysian stock exchange has fallen by 37 per cent since the beginning of the year, and analysts say the government's plan to buy stocks of sharply undervalued blue-chip companies will only lead to more selling among foreign investors eager to exit the local bourse.
According to the financial weekly, The Edge, the country's top 30 tycoons have suffered paper losses in access of RM75 billion since January.
Robert Kuok, the country's richest man, is said to have lost billions in his corporate holdings in Hong Kong, Singapore and Malaysia as a result of the collapse in financial markets, the weakening of the China property sector and falling commodity prices.
Malaysia's bleak economic scenario is particularly worrisome because of the country's unsettled politics, which, since the general election in early March, has stumbled from crisis to crisis.
The chief bugbear is the unease sweeping through the country's ruling Umno that dominates the Barisan Nasional coalition government.
“The patronage style of management can work only in an expanding economy. When the pie is shrinking, like it is now, ethnic tensions are never far behind,” cautions a chief economist of a Western brokerage in Kuala Lumpur, who requested that he not be identified