SINCE independence, Malaysia has had three periods of major economic shocks.
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1. Commodities shock in 1985/86

Malaysia’s overall export price index fell 30% as tin and palm oil prices plunged. Malaysia fell into a recession in 1985, with its gross domestic product (GDP) contracting 1% that year. The unemployment rate rose to 5.6% in 1985 and 7.4% in 1986.

The non-performing loan (NPL) ratios of commercial banks hit a high of 30% in 1987 and 1988. The government then embarked on a contractionary fiscal policy and devalued the local currency

2. Asian financial crisis 1997/98

The Asian financial crisis in 1997/98 is deemed as one of the worst economic crises Malaysia has ever faced (until now, that is). Net portfolio investments shrank RM22 billion to a deficit of RM12.9B in 1997 from a surplus of RM10.3B in 1996.

The economy declined, with the GDP contracting 6.7% in 1998 from a growth of 7.7% previously. The ringgit fell to its lowest of 4.90 against the greenback in January 1998. To revive the economy, in July 1998, the government announced a RM2B fiscal stimulus package,

which worked out to about 1.5% of GDP at the time.

3. Global financial crisis 2008/09

The global financial crisis of 2008/09 that started in the US was caused by excessive lending by banks, especially housing loans. For Malaysia, the country suffered the impact in terms of financial and trade channels.

Exports fell 45% to RM38 billion in January 2009 from RM64 billion in July 2008. The economy fell into a recession, contracting 1.7% in 2009. The government unleashed two fiscal stimulus programmes amounting to RM67 billion, roughly 10% of GDP in 2008 and 2009.

The first stimulus (RM7 billion), the second stimulus package in 2009 was seen as the biggest in history at a massive RM60 billion. @faizwahab