As a result of the currency depreciation, the increasing costs of imported goods and components will result in a higher price level. Unemployment The unemployment rate is expected to rise from 2.7 per cent in 1997 to 6.4 per cent in 1998. The number of unemployed workers is expected to rise from 229,700 persons in 1997 to 564,200 persons in 1998. The manufacturing and construction sectors will face rising retrenchments. There are downside risks to the projections that can result in a much lower economic growth rate and bring the economy to a recession.
Investor sentiments remain weak or worsen, while the inflow of foreign direct investment slows down.
Continuing lack of confidence Continuing tight liquidity conditions for the private sector Slow response to the measures introduced by the Government Bureaucratic delays in policy implementation by government agencies that lack a sense of commitment and urgency. Depreciation of the yuan Japan fails to reflate its economy and the yen continues to depreciate A large market correction of the Dow Jones The US adopts a protectionist policy as a way of arresting deteriorating trade balances with Asian countries. It may be necessary to make some qualifications with regard to the economic growth projections. The Baseline Outlook real GDP growth estimate of -1.0 per cent for the 1998 takes into account an increase in public expenditure of RM7 billion fiscal stimulus as well as bank recapitalisation from the Asset Management Company. It is also premised on the speedy implementation of the Recovery Plan.