The current economic crisis had its origins in the subprime credit problems in the United States of America which erupted in the second half of 2008 resulting in massive losses by major financial institutions. Credit markets seized up and unprecedented amounts of liquidity had to be injected into the global financial system to recapitalise major financial institutions and prevent systemic risks. Economic growth deteriorated sharply from the widespread effects of the financial crisis and the turmoil in financial markets impacted on business and consumer confidence in both developed and developing markets. Given these adverse developments, world output is projected to decline in 2009 as a whole and a gradual recovery is only expected in 2010.

The Malaysian economy was not spared from the global downturn and registered a decline in the first two quarters of 2009 after grinding to a halt in the fourth quarter of 2008. Major commodities including palm oil experienced sharp declines followed by substantial fluctuations in prices in line with the major commodities bust cycle exacerbated by the wild swings in demand and supply conditions. Activities in the domestic property market also slowed down in tandem with the decline in overall economic growth.