Running head: MALAYSIAN ECONOMY 1

Malaysian Economy

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MALAYSIAN ECONOMY 2

Economic Performance of Malaysia

Introduction

Malaysia is a country that occupies Malay Peninsula as well as Borneo Island.

This nation is known for beaches, mix of Malay as well as rainforests. The capital city is
known as Kuala Lumpur, which is a home of colonial buildings. Malaysia has a newly

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industrialized market economy and is also know n to be the biggest producer of palm
oil, tin and rubber (Lim, Barlow, & Thoburn, 1980). The Malaysian economy is

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considered to be the fourth after populous Philippines, Thailand and Indonesia. Based
on GDP per capita, Malaysia is the 3rd richest nation in Southeast Asia. Malaysia is one

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of the top 10 economy in ASEAN (Min, 2016).

Production output performance analysis

Malaysia GDP per capita ay

This is considered to be the measure of the total output of the nation that takes
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GDP and divided it by the number of people in the country. The per capita GDP is
normally useful when comparing with the other nation because it indicates the relative
performance of the nations. The GDP per capita in Malaysia was 10876 USD in the
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year 2015. The per capita GDP in Malaysia is equal to 85% when compared to the
worlds average. In the year of 2006 till the year 2015, the GDP per capita for Malaysia
is 4909.30 USD from reaching an all-time high of 10876 in the year 2015 and recorded
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low of 8245.98 USD in the year 2006 (Begum, Sohag, Abdullah & Jaafar, 2015).
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MALAYSIAN ECONOMY 3

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The per capita GDP is found by dividing the nation's GDP, adjusted by the total

and the past releases.

Malaysia GDP
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populace and by inflation. The graph above provides the current assessment for Malaysia
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The gross domestic product (GDP) is considered to be one of the main indicators
used to estimate the state of a country's economy. Other than showing the size of the
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economic, GDP also shows the total dollar worth of all goods and services produced.
The GDP in Malaysia was valued at 296.22 billion US dollars in the year 2015. In
addition, Malaysia GDP is 0.48% of the world economy (Trading Economics, 2016).
Gross Domestic Product in Malaysia around 296.67 USD Billion from 2006 till 2015,
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reaching an all-time high of 338.10 Billion USD in 2014 and a record low of 162.42
Billion USD in 2006 (Begum, et al., 2015).
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The GDP helps to measure of national income as well as output for a given nation's

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economy. The gross domestic product is equal to the total expenses for all final goods
and services produced within the nation in a specified year (Jomo, 2013). The chart offers
Malaysia GDP - real values and was last updated on December of 2016. GDP drop was
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also cause by the global collapse in crude oil prices (Chong, 2016).
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Malaysia GDP Growth Rate

In Malaysia their Gross Domestic Product extended 1.50% in the third quarter of
2015 during the preceding quarter period. In the world, Malaysia is considered to be have
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of the fastest growth rate in 7 quarters. GDP Rate of growth in Malaysia is around 1.20%
from 2006 until 2015, attaining an all-time high of 5.50% in the third quarter of the year
2002 and a registered low of -5.90% in the first quarter of 2006 (Begum, et al., 2015).
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Malaysia has been considered to be the rapidly economy in Asia. This nation is a

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middle-income nation that began its transformation since the year 1970s from production
of raw materials to an evolving multi-sector economy (Dr & Toukan, 2014). The Malaysian
government is continuing efforts to promote domestic demand to dissuade the economy
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off of its dependence on the exports. However, the exports specifically the electronics
remain the most important driver of the economy.
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Government measures adopted to achieve production output

Fiscal Policy Transitions -Diversify and widen the Economy-In reaction to the
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reality of declining reserves, Malaysia should diversify its collection of economic

development to the investments that expand its growth possibilities like regulatory
framework, human capital, industrial growth and infrastructure. Develop Public
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Administration: Future financial policy must consider possible room for trimming
operating expenses and reduce the nations footprint in the business sector in order to
open a path for the improved private investment.
Fuel Subsidy Validation-Improve the Communications Plan: create a
communication plan that expresses the expenses of fuel subsidies in several mediums
for example radio and television with specific consideration to Sarawak and Sabah.
Instantaneously Upsurge Values & Targeted Transferences: The government should
MALAYSIAN ECONOMY 6

strive to increase cash allocations for the poor timed with the intensification in values.
Offering targeted transfers discourses the loss aversion bias that makes subsidy
justification difficult (Jomo, 2013).

Labor Market Analysis

Malaysia - Unemployment Data

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2011 2012 2013 2014 2015

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Unemployment Rate 3.0 3.0 3.0 3.0 3.3

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The rate of unemployment is defined as the total number of the unemployed

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persons as % of the workforce. The workforce comprises the unemployed and the
employed for example those who do not have a job but they are actively looking for the
one. The workforce doesnt comprise individual who are not actively looking for the job,
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retired and the children. The unemployment rate rarely declines below 4-6 percent even
during the boom line times. There are normally people who move between different
sectors of the nation between towns. When the economy goes into recession, then
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unemployment can reach the highest numbers, sometimes in the double digits. The
unemployment rate status in Malaysia is averagely affected (Mohd Noor, Mohamed &
Abdul Ghani, 2007).
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Unemployment

Unemployment is considered to be the phenomenon that happens when an individual

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who is aggressively looking for employment is not able to find a job. Unemployment is
frequently used as the degree of the health of the economy. The most regular measure
of joblessness is the unemployment rate, which is the total number of unemployed
persons divided by the total number of persons in the workforce (Tang, 2009).
MALAYSIAN ECONOMY 7

Types of unemployment in an economy

Whereas the description of unemployment is perfect, economists divide unemployment

into several different groups. The comprehensive two classes of unemployment are
involuntary and voluntary unemployment. If unemployment is voluntary, it shows that an
individual has left his job freely in hunt of other occupation, while involuntary shows that

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an individual has been dismissed or fired and now must try to find another job (Mohd
Noor, et al., 2007). Examining deeper, unemployment, both involuntary and voluntary, is
divided into 3 categories.

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Frictional Joblessness: Frictional joblessness occurs if a person is in-between

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occupations. After an individual leaves a business, it obviously takes a lot of time to find
another work, making this category of joblessness short-lived (Tang, 2009).

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Cyclical Joblessness: Cyclical joblessness occurs due to the business sequence itself.
Cyclical joblessness increases during recession periods and drops during times of
economic development. Structural Joblessness: Structural joblessness occurs through
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technical developments when persons lose their occupations for the reason that their
services are non-operational (Tang, 2009).
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Types of unemployment in Malaysia

Frictional- from the statistics in Malaysia, many people are moving from one job
to the other. This type of unemployment is temporarily experienced while looking for the
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new job. Most of the interviewed people stated that they were not satisfied with what
they were doing. Structural- This is caused by the disparity between the location of the
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job seekers as well as jobs. The location could be geographical or in terms of skills. The
disparity comes due to unemployed are not willing or not ready to change skills or
geography. Cyclical joblessness also known as demand deficient unemployment occurs
if there is no adequate demand for labor caused by business cycle depression. In this
process, the companies go ahead looking for the staffs in Malaysia. Technological is
caused by the substitute of staffs by machines or the other advanced technology.
MALAYSIAN ECONOMY 8

Finally, seasonal unemployment occurs if the occupation is not in demand at particular

seasons for instance construction of workers in winter.

Governments measure to achieve full payment

Incentivizing jobseekers with children- the government should design a new

scheme in the yearly budget to help the job seekers, encompassing lone parents to

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return to work, encompassing self-employment. In that scheme, the job seekers
returning to work preserve the payment welfare which they acquire for their children.

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Incentivizing the employers and businesses- the employer incentive scheme works in
cooperation with the businesses to employ jobseekers from Live Registrar by offering

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monthly payment to offset wage costs (Mohd Noor, et al., 2007). Focusing on young
people-the government should respond to European Union recommendation for youth

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Guarantee to introduce reserved places on several training and employment programs.
Others include encouraging youths to start their business and improving skill and
education levels.
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Price level analysis

Malaysia: Inflation rate from 2006 to 2015

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In the year 2014, the average rate of inflation in Malaysia was about 3.14%
compared to the previous years. The rate of inflation is considered to be the yearly rate
of growth of a price index, usually the CPI over time. Normally, a low rate of inflation i s
sought by every nation, and a rate of 3%, as is projected for Malaysia in some years to
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come, is measured low. Though, there was a slight increase in Malaysias rate of
inflation, from close to 2 % in 2010 to about 3% in the year 2011. In the year 2012, it
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plummeted back down to its standard rate; nevertheless, forthcoming estimations

predict a slight upsurge once again. Maybe this upsurge has come from first worries
about the nations decelerating economy as the nations GDP growth from 7 percent in
the year 2010 to about 5.1% in the year 2011or its negative budget balance in
connection to GDP which was at its current worst in 2010 at -4.6 %. On the same time,
the nations national budget was as well rising. Yet the economic observation as well as
rate of inflation still remains stable for the future of Malaysia and the rate of inflation is
MALAYSIAN ECONOMY 9

below worldwide rate. Moreover, the nations GDP continues to grow and totalled to 326
billion US dollars in the year 2013.

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Inflation

In simple, inflation is considered to be a long-term increase in the prices of goods

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as well as services instigated by the deflation of currency. Whereas there are benefits to
the rate of inflation there are some of the negative aspects of inflation.
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Causes of Inflation

The Money Supply- Inflation is mainly caused by an upsurge in the supply of

money that outperforms economic development. Ever since the industrial development
the world has sway away from the gold standard, the value of cash is determined by the
amount of currency that is being circulated in the economy (Munir & Mansur, 2009). If
MALAYSIAN ECONOMY 10

the government inject money into the economy at the rate that is higher than the
economys growth rate, the value of money can fluctuate due to shifting public
perspective of the value as the underlying currency. As an outcome, the currency
depreciation will lead prices to increase because each unit of currency is worth supply
(Asari, Baharuddin, Jusoh, Mohamad, Shams din & Jusoff, 2011).

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The National Debt

It is known that high country debtis considered to be a negative thing, but it

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drives the nation growth to high levels over a time. The reason is that nations debt
increases, the national government opt for 2 options where firstly, they can raise taxes

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or secondly, print more cash. Alternatively, should the national government decide the
latter alternative, printing a lot of cash will lead to surge of money supply in the market

Demand-Pull Effect
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which will devalue the currency and increase the prices (Asari, et al,., 2011).
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The demand-pull effect draws that as when income increase in the economic
structure, individual will have more money to spend. This increase in liquidity, as well as
demand for consumer products, results to increase in demand for the products. As an
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outcome of improved demand, firms will raise the prices to the level the consumers will
bear to balance demand and supply (Munir & Mansur, 2009).

Government measures to stabilize the process

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Under the free market system, the prices of basic goods are determined by
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demand and supply conditions. Measures that promote therefore domestic production
helps to improve the access to foreign suppliers of the products that can assist to
stabilize the prices. This shows that more liberalized trade regime is valuable towards
price stability. The government should use various agencies in pursuing some of the
production programs and formulate policies to improve competitiveness, efficiency and
productivity (Munir & Mansur, 2009). These comprise shipping ports, post-harvest
MALAYSIAN ECONOMY 11

facilities and credit. The government can look into other business to improve
productivity and effectiveness.

Conclusion

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Malaysia in lagging behind in GDP growth. Malaysia is still growing in the
industrialized market economy. The Malaysian economy is considered to be the fourth
after Philippines, Thailand and Indonesia. To counter the poor growth in GDP, Malaysia

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government should look into other forms of business as it is too depended on palm oil
industry. As for Inflation rate, it is in a healthy zone and is in the acceptable range. They

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should look to keep it below 2.1%

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References

Asari, F. F. A. H., Baharuddin, N. S., Jusoh, N., Mohamad, Z., Shamsudin, N., & Jusoff,
K. (2011). A vector error correction model (VECM) approach in explaining the
relationship between interest rate and inflation towards exchange rate volatility in
Malaysia. World Applied Sciences Journal, 12(3), 49-56.

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Begum, R. A., Sohag, K., Abdullah, S. M. S., & Jaafar, M. (2015). CO 2 emissions,
energy consumption, economic and population growth in Malaysia. Renewable

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and Sustainable Energy Reviews, 41, 594-601.

Chong, P. K. (2016, November 11). Malaysia GDP growth beats estimates as private

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sector held up. . Retrieved from https://www.bloomberg.com/news/articles/2016-
11-11/malaysia-gdp-growth-beats-estimates-as-private-sector-held-up

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Dr, A. C. H., & Toukan, A. (2014). The Indian ocean region: A strategic net assessment.
Rowman & Littlefield Publishers.
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Jomo, K. S. (Ed.). (2013). Industrializing Malaysia: policy, performance, prospects.
Routledge.
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Lim, M., Barlow, C., & Thoburn, J. T. (1980). The natural rubber industry: Its
development, technology, and economy in Malaysia. The Journal of Asian
Studies, 40(1), 188. doi:10.2307/2055099
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Min, C. Y. (2016, January 19). Singapore remains worlds second-most competitive

economy. Straits Times Singapore. Retrieved from
http://www.straitstimes.com/business/economy/singapore-remains-worlds-
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second-most-competitive-economy

Mohd Noor, Z., Mohamed Nor, N., & Abdul Ghani, J. (2007). The relationship between
output And unemployment in Malaysia: does Okuns Law exist?. International
Journal of Economics and Management, 1(3), 337-344.

Munir, Q., & Mansur, K. (2009). Non-linearity between inflation rate and GDP growth in
Malaysia. Economics Bulletin, 29(3), 1555-1569.
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Tang, C. F. (2009). The linkages among inflation, unemployment and crime rates in
Malaysia. International Journal of Economics and Management, 3(1), 50-61.

Trading Economics. (2016). Malaysia GDP | 1960-2016 | data | chart | calendar |

forecast | news. Retrieved December 6, 2016, from Trading Economics,
http://www.tradingeconomics.com/malaysia/gdp

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