Q: Why are Malaysians remaining optimistic?

A: We have weathered a similar crisis that is now hitting industrialised countries.

There are, therefore, some grounds for optimism among Malaysians, especially those who have accumulated wealth and savings since the last crisis.

Q: Are Malaysians living under a false sense of security?

A: The perception that the economy is weak is borne out by slowing consumer demand and business activities.

But the key uncertainty is how fast the economy is slowing down and whether it will reach the point where some firms and businesses have to close down, downsize and retrench staff.

This is where Malaysians will be living under a false sense of security if they do not have the means to ride out a downturn.

Q: Who can afford to spend and who can't?

A: Those who are able to keep their jobs and those with adequate savings and low borrowings are the ones who can spend during this period.

At corporate level, companies with strong reserves and surplus cash will be better able to weather the weak demand and seek out acquisition and investment opportunities.

Finally, we have the government to backstop any downward spiral of the economy through a combination of spending increases, tax cuts and lowering of interest rates.

Q: What should we be cutting back on?

A: Non-essentials or spending that can be postponed until the economy sees more sunny days. What we call conspicuous spending; buying luxurious items should be axed for those who need to be prudent.

Impulse buying can be curtailed by sticking to the grocery list.

Q: Spending is important for the economy. How do we strike a balance?

A: When the buying stops, the economy grinds to a halt. If the cutbacks in spending are taken to the extreme, the economic downturn will be aggravated.

Herein lies what economists call the "paradox of saving", too much saving is bad for the economy on the whole.

We have to "spend right". Differentiate between "need" and "want" and if one can afford it, go ahead with major spending or investment decisions, such as buying a house.

Q: What can the average Malaysian do to ensure financial stability?

A: For employees, keep your job by working harder so that you are among the last to be "let go". Spend within your means and cut back on borrowings that can be postponed until stormy days are over.

(c) 2009 New Straits Times. Provided by ProQuest LLC. All rights Reserved.

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