Economic Growth Rate of Malaysia

After world recession the rates of growth were changed from last years the same as Malaysia (graphs bellow). Malaysia has been feeling the result of global economic decline, principally in the last quarter of 2008. Exports and investment had focused during the time that consequently caused real GDP growth to decelerate sharply to a marginal 0.1%.In the face of increasing global economic complexities, the Government had reported the second Stimulus package of RM60 billion in March 2009 in order to prevent the domestic economy from reducing and fall into a deep recession. Over 2009 and 2010, the package implemented that also help employment, private division investment and consumption as well as providing social safety net. In November 2008, the Government had announced the first stimulus package amounting to RM7.0 billion. The fiscal stimulus packages are to compliment expansionary monetary policy to help support domestic spending and overall economic growth. The Government recently revised downward the country’s GDP predict for 2009 to between minus 5.0% and minus 4.0% from its earlier projection of minus 1.0% to 1.0%. The revision was made after first quarter 2009 GDP shrank a worse than expected 6.2%. This is the first decline since third quarter of 2001 (-0.4%). Whole the world was found a bad circumstances in recession and inflation, and this data demonstrated the responsibilities of Malaysia government for prevent its country in against of inflation and its affection on life’s quality.

In short, The Malaysian economy recorded a moderation in 2008 affected by the sharp deterioration in global economy as the US sub-prime mortgage problems evolved into a full-blown global financial crisis. The deterioration in external demand had adversely affected the country’s export and investment performance, while slowing down spending on consumption.

As an open economy, Malaysia is experiencing the stronger impact of global economic crisis this year and the country’s real GDP could also slip into recession after posting a moderate 4.6% growth last year. A number of monetary and fiscal policy measures have also been announced by the Government to help support the economy. While the fiscal stimulus involves high budgetary cost to the Government, and the fiscal deficit will significantly expand, the expansionary policy responses are necessary to help prevent the economy from sliding into a deeper downturn. However, the positive effects of these policy measures can only be achieved following their quick and effective implementation.

Economic growth take places whenever people take resources and reorganize them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix low-cost ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. We learn from human history that, however, economic growth springs from better recipes, not just from more cooking. New recipes usually produce less unpleasant side effects and produce more economic value per unit of raw material.

Every generation has perceived the limits to growth that limited resources and undesirable side effects would pose if no new recipes or ideas were discovered. Moreover, every generation has underestimated the potential for finding new recipes and ideas. We constantly fail to grasp how many ideas remain to be discovered. The difficulty is the same one we have with compounding: possibilities do not merely add up.

In 1997, Malaysia suffered from a harsh blow by the Southeast Asian financial crisis, the exchange rate of Malaysian currency ringgit against the U.S. dollar has decreased 46%, the composite index of stock market fell more than half. In 1998, Malaysia’s economy first, started the negative growth (-7.5%) since last 13 years, after that unemployment and inflation rates increased. In September 1998, Malaysian Government adopted the expansionary monetary policy, then the introduction of selective capital and currency control calculates came out. The major content concentrated on the regulation of short-term foreign investment, the Ringgit Malaysia against the U.S. dollar exchange rate will be fixed at the level of 1:3.8, and then government announced the prohibition of offshore ringgit transactions. After that, Malaysia financial situation was being stabilized, the stock market had also been gradually recovered, and an annual economic average growth rate has remained above 8% since that year.

In recent years, Malaysian saw the stable exchange rate of currency, restructuring of bank corporate debt, expanding demand of domestic and new export policies, the economy of Malaysia has maintained a rapid growth. Government had stressed some important implementations to fiscal deficit, for example, the abolition of a number of costly image projects, especially focusing on the construction and other basic industries such as agriculture. Government recommends the consuming and investing behaviours, so now the private sectors are as the country’s new economic growth pillars. At the same time, government encourages the development of tourism, education and achieves economic diversification.

To increase the economic growth rate, first, must minimize the costs and absorb more investment. Now we can see there are many countries are competing with each other, they fight just because they want more investment, but this behavior may lower the standard, as well as reducing the variety of requirements. So, all of these are losses to us. Malaysia can do something to avoid this situation. For example, help Malaysian tourism to be revitalized. In addition, Malaysia government also does not want to lower the standards. Otherwise, they must further maintain a high standards and own brand. Malaysia government needs to have some of their own methods and measures, not just to say that they refuse all the recommendations from west, but in fact, they just need to achieve a balance. We may feel that the west measures depend on the transparency and accountability. However, the fact in Asian countries, this has been a weakness, they always say that there would be many stimulus packages, and the unnoticed part is not fully utilized or the part of measures we want from west for focusing on the accountability, which was mentioned above, while strengthening auditing the standards. By this way, Malaysia government can help the people, not by a number of external affairs of the harm and impact, these things are already not aware by them, and no longer their responsibility.

If Malaysia attempts to achieve a faster economic growth rate according to the current global situation, I think, compare with the advantages obtained already, Malaysia citizens will burden more disadvantages once government makes this decision. For example, unemployment and economic growth are negative correlation, that is, economic growth rate rises, unemployment rate declines; on the contrary, economic growth rate declines, unemployment rate rises. On the other hand, inflation and economic growth is related so closely, it means that the high economic growth rate has generally been accompanied by a high rate of inflation. First, the rapid economic growth, will further stimulate the growth of investment, but also increase a substantial demand in aggregate, thus contributing to a increase in prices which leads to the inflation; if Malaysia government lower the speed too fast, although the prices may be stabilized for a while, but also will bring problems—–supplies are reduced, and many companies will be in cut-off, semi cut-off state, even some workers will lose their livelihood security which also causes the social instability(this is already happened on Malaysia export industries a few years ago). Nevertheless, if the economy is growing too fast, obviously exceeded the scope of resources, which will cause a serious inflation. About the rising prices, especially the sharp rise in prices will affect the economy continues to grow rapidly. Because prices rise sharply is so harmful, the state will adopt austerity measures to curb inflation. The contraction speed will lead a sharp declining in economic growth rate or even sustaining a slow economic growth rate.

Therefore, during the economic restructuring process of Malaysia, although her economy runs its own complexity and uncertainty, the relevant departments in government must implement the tasks, which are assigned by the citizens to maintain the economic stability of Malaysia.