Gross Domestic Product Analyses

Malaysia Gross Domestic Product 2014 Commentary

KDNK MALAYSIA TUMBUH 6% BAGI KESELURUHAN TAHUN 2014 [12 Feb 2015]

https://www.youtube.com/watch?v=whGcwQ9fAYs

INFORMATION FROM VIDEO
Six per cent GDP growth compare to 4.7 per cent of growth 2013, Low inflation rate, High employment (2.8 unemployment rate), Low External debt, Adequate International reserve , and Unstable oil price.

COMMENTARY

1. A six per cent growth is does not measure the actual economic growth which is real economic growth should use for accurate measurement of economic growth. The Consumer Price Index (CPI) for the month of December 2014 increased by 2.7 per cent to 111.8 compared with 108.9 in the same month last year (Department of statistic Malaysia 2015). Which is 6 per cent growth minus inflation growth of 2.7 the actual economic growth is only around 3.3 per cent.

2. Low inflation 2.7 is near to 3 per cent reduce the purchasing power. According to Federal Reserve Bank of St. Luis the inflation—even at low levels—erodes purchasing power. Since the beginning of the decade, for example, relatively low inflation has already reduced the purchasing power of the dollar by almost 20 percent. Keep inflation growing at a 3 percent rate, and in a single generation a dollar will buy only half of what it can today! (Thomas C. Melzer, Federal Reserve Bank of St. Luis 2015). The headline inflation rate, as measured by the annual change in the Consumer Price Index (CPI) averaged 3.4% in the first quarter of 2014 (4Q 2013: 3.0%). The increase was on account of higher inflation in the housing, water, electricity, gas and other fuels and transport categories (BNM 2014).

3. High GDP growth is trade of between low unemployment rate and high inflation rate. If policymakers expand aggregate demand, they can lower unemployment, but only at the cost of higher inflation (N. Mankiw 2015). According to Mankiw (2015) the policy maker can expand the aggregate demand to lower the unemployment but will cost the high inflation

4. On Malaysia’s external debt, as of end-June 2014, the total liabilities under the newly defined terms stood at RM729bil or 67.6% of GDP over the threshold debt of 55 percent. Following this redefinition, non-resident holdings of ringgit-denominated debt securities, non-resident deposits, trade credits provided by foreign trade counterparts and other debt liabilities will now be included as part of Malaysia’s external debt (BNM 2014).

5. As 30 April 2014, the reserves position amounted to RM427.8 billion (equivalent to USD131.2 billion), sufficient to finance 9.4 months of retained imports and is 1.3 times the redefined short term external debt (BNM 2014).

6. Demand and supply of crude oil have a significant influence on total fuel subsidy. Total fuel subsidy surmounted an unsustainable trend since it is closely linked to world commodity prices, in particular the high side of crude oil prices. In addition, a recent study by the International Monetary Fund (IMF) revealed that some subsidies are not well targeted and largely benefit higher income groups (Economic Impacts of Subsidy Rationalization in Malaysia KHALID ABDUL HAMID, ZAKARIAH ABDUL RASHID, Malaysian Institute of Economic Research (MIER) 2011).