Malaysia's central bank chief indicated the government may need to spend more to prevent the country from slipping into recession if the global economic crisis worsens next year, a report said Wednesday.
Malaysia has cut its 2009 growth target to 3.5 percent from 5.4 percent, but some economists have warned growth could fall below 2 percent.
The government has said it would inject 7 billion ringgit ($2 billion) into the economy next year to boost spending, with funds coming largely from savings on fuel subsidies.
Bank Negara Malaysia Governor Zeti Akhtar Aziz told the New Straits Times that she did not rule out the possibility of a second round of stimulus measures to prop up the economy.
"If conditions in the major economies worsen, then further stimulus will definitely be necessary to prevent our economy from slipping into negative territory," Zeti said in the report.
"The key to achieving domestic demand is sustained private consumption and increased government expenditure ... these are the times, during low level of indebtedness, that the government has to step in," she said.
Further spending may widen the government's budget deficit _ targeted at 4.8 percent of gross domestic product next year _ but it will only be temporary, she said.
With inflation expected to fall to below 3 percent in the second half of 2009, Zeti said the central bank also has room to further cut interest rates to support growth. She didn't elaborate.
Bank Negara in November cut its overnight policy rate by a quarter point to 3.25 percent _ the central bank's first rate cut since for the first cut since 2003.