Malaysia is one of the most vulnerable Asian economies should a “perfect storm” of a disorderly debt default in Europe, a slowdown in China and the US, and rising tensions in the Middle East materialise, Roubini Global Economics (RGE) has said in a recent report.
Nouriel Roubini, who predicted the collapse of the US housing market and the 2008 global financial crisis, said that Malaysia had the highest exposure to a pullout of capital as its eurozone and US bank claims amount to more than 25 per cent of GDP. Malaysia's domestic debt almost doubled in the space of less than 5 years, from RM247 billion in 2007 to an estimated RM421 billion in 2011, far outpacing its revenues which only grew 31% or from RM140 billion to RM183 billion during the same period.
Signs of trouble ahead. Let's see if Bank Negara will act decisively by reducing interest rate instead merely stating "we are monitoring the situation closely".
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