Should we be happy with a 5.6%?

The existing govt should admit that Malaysia has been stuck in a black hole since more than 15 years ago due to weak leadership 

MALAYSIA’s GDP recorded a growth of 5.6% in the first quarter of 2023 (1Q23). In any country, positive GDP growth becomes a yardstick for the health of its economy. 

The recent announcement (May 12) only confirmed that the country will not experience an economic recession this year. Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus insisted that the country is back on track vis-à-vis pre-pandemic. 

But before any party setting off fireworks to celebrate this good news, there are some unspoken realities about the country’s current economy. 

First and foremost, the value of Malaysia’s GDP growth in the 1Q23 is actually lower than the 4Q22. Based on reports, the size of the GDP cake in the 1Q23 is RM380.9 billion, lower than the 4Q22’s which was RM398 billion. 

This means that the Malaysian economy, quarter-on-quarter (QoQ), is slowing down and it has already been felt by the people and companies in Malaysia. 

Secondly, the economic growth in the 1Q23 is helped by private spending. Throughout the Covid period, particularly, and post-Covid, consumer spending managed to save this country including the RM140 billion unlocked Employees’ Provident Fund (EPF) money spent by its contributors. 

A fall in public spending will have an adverse effect on many sectors. What is certain is that the measure of economic health should not be measured by the length of the queue at restaurants. 

Thirdly, the GDP figure of RM380.9 billion is not broken down into the total real value due to the depreciation of the ringgit against many benchmark currencies. The devaluation of the ringgit against the dollar caused exports in American currencies such as oil and palm oil to yield greater returns in ringgit, even though the actual output of goods is the same or smaller. 

At the end of December 2022 the ringgit was trading at RM4.24 to the US dollar. Today (May 19, 2023), it is RM4.55. For every dollar, GDP got “jacked up” by 31 cents. 

Our foreign trade value in US dollars is worth billions of dollars. That is not yet accounting for the euro which in December 2022 is at RM4.51. Today (May 19), it is RM4.90. That’s nearly 40 cents in foreign translation gains that unnaturally expand the country’s GDP. 

Fourthly, Malaysia’s foreign direct investment (FDI) fell to RM12 billion in the 1Q23 compared to RM24.4 billion in the 1Q22. This is the lowest FDI since the 3Q21. 

Without FDI, employment opportunities will not increase, the ringgit will depreciate and the economy will not be able to move at a comfortable pace. We don’t have to go far, in neighbouring Thailand the ringgit is not accepted and the exchange rate reaches RM13.21 for every 100 baht. 

Two more economic challenges that should be paid attention to. 

The per capita income of Malaysian households has barely changed in 10 years. In 2013, it was US$5,131. In 2020, it was US$5,131. It is strange that in seven years there has been no improvement. China’s per capita income was US$3,721 in 2000. In 2022, it was at US$36,883. 

Likewise, the stock market index of Bursa Malaysia. It is about at the same level as in 2007. Now, it is sluggish and reflects the “excellence” of corporate Malaysia. 

Malaysia seems to be stuck in a black hole for so long. This problem has persisted because of the weak leadership since more than 15 years ago. The existing government should admit this is the reality. 

Sometimes to catch a tiger, one has to dare to enter the tiger’s den and that is what the government needs to do today. 

  • Mohamad Azlan Jaafar is the Group Editor of The Malaysian Reserve. 

  • This article first appeared in The Malaysian Reserve weekly print edition