Malaysia's RM4.3 billion stimulus package announced today to help counter fallout from the terrorist attacks in the US will not provide a quick fix, economists said.

Prime Minister Mahathir Mohamad's expectations the economy will still grow by one to two percent this year compared to an earlier projection of five to six percent were somewhat optimistic, the economists told AFP's financial subsidiary AFX.

The economists are maintaining their 2001 gross domestic product (GDP) forecasts, which range from 1.0 percent growth to a decline of 0.1 percent, because they expect greater fiscal policy measures to be announced in the 2002 budget on Oct 19.

No immediate impact

Of the total RM4.3 billion package, Mahathir said about 2.5 billion would cover select rural and urban development projects, construction, education and training and welfare activities.

The targets for the balance of about RM1.8 billion will be announced in the 2002 Budget.

Song Seng Wun, a regional economist at GK Goh Research, said the stimulus package "can at best cushion the slide" this year.

"There's a maintenance of a certain level of economic activity. Pump-priming will not have an immediate impact. It will only be felt 9-12 months down the road," he said.

An economist from a local brokerage pointed out that as of mid-2001, only RM200 million of the three billion ringgit package announced in March had been spent, with the government planning to spend RM500 million to one billion ringgit by year-end.

Dependent on exports

"The impact from this latest package will not spill into the economy until next year," the economist said, describing the package as an immediate response by the government to boost domestic demand.

He added he was maintaining his 2001 GDP forecast at 0.5 percent growth and 2002 at four percent growth.

GK Goh's Song, who is expecting Malaysia's economy to contract by 0.1 percent this year, said the domestic economy is still very dependent on exports.

Nizam Idris of IDEAglobal.com said global economies are expected to remain weak "well into next year," adding he had already anticipated that the 2002 budget would contain certain stimulus packages.

"I don't see it (the RM4.3 billion package) as a major economic stimulus package. It's just a bit more spending. This will add a bit more to the budget deficit, which should be about six percent of GDP," Nizam said.

He said he is maintaining his 2001 GDP forecast at 0.5-1.0 percent growth, adding he saw Mahathir's 1.0-2.0 pct growth as "too optimistic".

Nizam has estimated the economy next year to grow by 3.0-3.5 percent, but expects the forecast to be downgraded later in line with regional economies.