Malaysia: From Crisis to Recovery
Occasional Papers, August 27, 2001
Source details
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- Malaysia: From Crisis to Recovery
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Bibliographic details
- Authors: Yougesh Khatri, Il Houng Lee, . O. Liu, Kanitta Meesook, Natalia T. Tamirisa
- Published: August 27, 2001
- Series: Occasional Papers
- DOI: https://doi.org/10.5089/9781589060470.084
Summary
- This paper discusses how Malaysia can better protect itself from future shocks and avoid another crisis while it seeks to regain its position as one of the fastest growing economies in the world.
- Recommended strategy elements:
- Continued structural reforms to achieve healthy balance sheets of the banking and corporate sectors.
- Further deregulation to promote competition and efficiency.
- Consistent macroeconomic policies to maintain financial stability and sustainable fiscal and external positions.
- Malaysia's economic structure and performance were relatively strong prior to the crisis.
- Malaysia’s initial low level of short-term external debt enabled it to maintain foreign reserves at a reasonably high level, contributing to relatively robust external and domestic confidence early in the crisis.
- Prudential regulation of capital movements helped contain the exposure of the financial and corporate systems.
- Stock market capitalization in Malaysia grew to an extremely high level prior to the crisis, reflecting both the fast expansion of the capital market and a liberal capital account regime.
Key findings and analysis
- Financial vigilance through prudential regulation limited financial and corporate sector exposure during the crisis.
- Low initial short-term external debt supported reserve adequacy and confidence.
- Rapid expansion of capital markets led to extremely high stock market capitalization pre-crisis.
Policy recommendations
- Strengthen banking and corporate sector balance sheets through continued structural reforms.
- Implement further deregulation to enhance competition and efficiency.
- Maintain consistent macroeconomic policies aimed at financial stability and sustainable fiscal and external positions.
Context, scope, and subjects
- Subject areas: Balance of payments; Banking; Capital controls; Corporate governance; Corporate sector; Economic sectors; Financial institutions; Fiscal policy; Nonperforming loans.
- Keywords: Africa; Asia and Pacific; Capital controls; Corporate governance; Corporate sector; crisis; crisis economy; East Asia; export base; Global; implied output gap; inflation equation; market confidence; Nonperforming loans; OP; reviews fiscal policy management.