Malaysia has announced an additional 60bn ringgit (USD$16bn) in spending and tax incentives over the next two years as new figures predict its economy may contract for the first time in a decade.

Najib Razak, the Malaysian deputy prime minister and finance minister, announced a second stimulus package in Kuala Lumpur on 10 March, as part of a speech where he revealed the economy may shrink as much as 1% this year.

The plan was much higher than earlier predictions at more than eight times the size of the package announced in November and will increase the budget deficit this year to 7.6% of gross domestic product. The Government also promised 25bn ringgit to help businesses suffering from the collapse in the exports market, a 5bn-ringgit loan- guarantee program, and a new state-owned 'Financial Guarantee Institution' is expected to help firms raise 15bn ringgit in corporate bonds.

A report from Standard Chartered warned that while Malaysia may emerge from the present global downturn in better shape than Singapore, Thailand and Hong Kong, the package is unlikely to mean it will escape a period of rapid deterioration in the first half of the year.