Malaysia has a population of 29.8 million people and its capital is Kuala Lumpur. Its GDP was $190.31 billion in 2011, making it the 3rd largest economy in Southeast Asia. Malaysia has a highly open economy that exports electrical appliances, electronics, palm oil, and natural gas. Its major trade partners are China, Japan, the US and Singapore. The Malaysian Ringgit is the national currency. The economy has diversified from primarily producing tin, rubber and palm oil to include industries like electronics manufacturing and tourism. Services make up the largest sector of the economy at 46.8% of GDP, followed by industry at 41.2% and agriculture at 11.9%. The economy is

2. Macro Economics – Principles and
Policies:
Economy of Malaysia
Group 9
Poornima Sharma (1301-548)
Dhiraj Bonda (1301-067)
Sounak Basu (1301-221)
Praveen Shrivastava (1301-386)
Oli Ghosh (1301-144)
Jai Shankar Rai (1301-348)

3. INTRODUCING MALAYSIA
 Population of 29.8 MM, Capital city: Kaula lumpur, Exchange rate: 3.13 RM
 Real GDP: $190.31 billion, 3rd largest economy in Southeast Asian countries.
 2011 world rank 35th by GDP : United Nations Statistics Division
 Ringgit is the national currency of the Federation of Malaysia
 It is a highly open economy and a leading exporter of electrical appliances, electronic
parts and components, palm oil, and natural gas
 China, Japan, the US and Singapore are major Malaysia trade partners.
 Ranked 10th : IMD World Competitiveness Yearbook 2010
 World Bank Doing Business Report
Year Rank
2013 12
2012 14
2011 21

4.  Rated as Upper Middle income country with a gross national income of USD 8,770
per capita (2011)
History:
 1970s Malaysia used to be world’s largest producer of tin, rubber and palm oil
 Till 1995 huge investments in the Industrial sector led the growth of the economy
 economy started to diversify and make it less dependent on the exports
 encouraged new sectors like tourism, real estate, exports in electronic devices and
 technology services which attracted investments into the country

5. Gross Domestic Product: value of all final goods and services produced in
the country within a given period. Base year 2000
The annual growth rate averaged 4.6 percent from year 2000 to 2012
In the year 2009 which saw the negative growth due to the global economic
turmoil the economy was hit by the sluggish growth or no growth in the
exports.
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
GDP Growth Rate
GDP Growth Rate

6. 11.9
41.2
46.8 Agriculture
Industry
Services
FY2012
 From 1988 to 1997, the economy
experienced a period of broad
diversification and sustained rapid
growth averaging 9% annually
 Manufacturing grew from 13.9% of
GDP in 1970 to 30% in 1999,
while agriculture and mining which
together had accounted for 42.7%
of GDP in 1970, dropped to 9.3%
and 7.3%, respectively, in 1999
Labour force 12.92 million (2012)
Labour force
by occupation
agriculture: (13%), industry: (36%),
services: (51%) (2005)
Unemployment 3.2% (2012)

7. 0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Household / Private Consumption in billion USD
Household /
Private
Consumption…
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Consumption as % of GDP
Consumption
as % of GDP

8.  Between 2004 and 2009, nominal per capita GDP increased by 6.8% annually, with
mean monthly gross household income rising by 4.4% annually from RM3,249 in
2004 to RM4,025 in 2009.
 During the period 2000-2009, household debt grew at an annual rate of 13.5%.
Household debt-to-GDP ratio increased from 46% in 2000 to 76% in 2009.
 Credit disbursed for consumption, which consists of loans for personal uses, credit
card spending and the purchase of consumer durable goods, expanded by 20.5%
annually between 2000 and 2009.
 Similarly, total loans disbursed to households for purchases of residential property
and passenger car increased by 13.4% annually.
 The strong performance of these loans is indirectly translated into higher consumer
spending as purchases of residential properties and passenger car are closely
linked to spending on housing and transport-related items, which include
furnishings and the maintenance of transport equipment

9. 2005 2006 2007 2008 2009 2010 2011
Exports of Goods and Services 117.0 116.6 106.2 99.6 92.1 93.9 91.6
Imports of Goods and Services 94.7 93.9 86.3 77.4 71.6 76.8 75.6
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
%ofGDP
 Malaysia mainly exports the
following commodities:
Electronic equipment, Petroleum
and liquefied natural gas, wood
and wood products, Palm oil,
Rubber, Textiles and Chemicals
0 5 10 15
% of Exports
Australia
India
Hong Kong
Thailand
Japan
USA
China
Singapore

10. Investments:
 Malaysia was able to attract RM 162.4 billion in 2012 in the form of direct
investments
 The inflow of FDI to Malaysia increased from US$9.1 billion in 2010 to US$11.9
billion in 2011, registering a growth of almost 31%.
0 5 10 15 20
South Korea
Indonesia
Thailand
Singapore
USA
Japan
China
% of Imports
8.5 7.3 8.0
12.9
15.1
20.7
26.2
29.7
39.4
31.4
27.1
33.5
18.6
10.9
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
BillionsofUSdollars
Years
Current account balance

11.  Economic Transformation Program (ETP) :
Malaysia has to attract total investments worth RM1.4 trillion during 2011- 2020.
Private investments (92%) and the rest through the public sector (8%). In private
investments, 73% from Domestic Direct Investments and 27% from Foreign Direct
Investments
 FDI inflows in Malaysia have seen a major dip in the year 2009 due to economic
turmoil but the conditions improved in the subsequent years
 2011 As far as the total investments in the country are concerned services attracted
nearly 43.3 percent followed by manufacturing with 37.8 percent
 Domestic direct investments form more than half of the total investments made in
the country

12. Index of Industrial Production
Year Overall
Index Mining Manufacturing Electricity
2000 78.8 86.9 77.3 68.9
2001 76.2 89.6 72.3 74.9
2002 79.7 91.1 76.1 82.6
2003 87.1 96 84.4 87.4
2004 96.5 101.7 95.1 94.6
2005 100 100 100 100
2006 104.8 96.2 108.9 105.1
2007 107.3 98.3 111.4 109.2
2008 108.1 99.1 112.2 110.5
2009 99.9 95.5 101 111.4
2010 107.1 93.9 112.2 121.2
Industrial Activities:
 According to the Government of
Malaysia “the Index of Industrial
Production (IIP) covers the Mining,
Manufacturing and Electricity sectors.
The main objective of the IIP is to
measure the rate of change in the
production of industrial commodities in
real terms over time”
 The overall industrial index improved in
the decade fuelled by high exports of
commodities and also the electrical,
electronic devices and components

13. 0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Inflation Rate
Inflation Rate
 Malaysia, the most important categories in the consumer price index are Food and
non-alcoholic beverages (30 percent of total weight) and Housing, water, electricity,
gas and other fuels (23 percent of total weight). Others include: Transport (15
percent); Communication (6 percent); Recreation and culture (5 percent) and
Furnishings, household equipment and routine household maintenance (4
percent). The remaining components are Restaurants and hotels at 3.2 percent and
miscellaneous goods and services at 6.3 percent.

14.  Factors caused the low inflation rate:
decline in domestic fuel prices, increase in favorable conditions for supply side,
moderate food prices, domestic industries employees’ wages raised, capacity of
economy was expanded, strong domestic demand, subsidies by the government
kept the commodity prices at low, regulations for price controls, foreign workers
to reduce costs in some sectors

15. Exchange Rate

16. Central Bank – Bank Negara Malaysia
Currency – Malaysian Ringgit
History of Monetary Policy:
 Followed Fixed exchange rate policy till July 2005.
 The exchange rate was driven down by short selling of MYR on speculation
(0.4 USD/MYR to 0.21 USD/MYR) during 1998 Asian Financial Crisis.
 Banned short selling of currency on speculation.
 Adopted Flexible exchange rate in July 2005, the ban on short selling of currency
was removed in Mar 2006.
 Since 2005, Exchange rate appreciated from 0.26 USD/MYR to upto 0.34 USD/MYR.
 Reasons for Appreciation in Exchange rate:
 Trade surplus every year in last decade ($50 billion in 2012)
 Ease of doing business – Ranked 12th by World Bank
 Comparatively higher interest rates

17. 0
1
2
3
4
5
6
7
8
2010 2011 2012 2013 2014 2015 2016 2017 2018
Projected GDP Growth Rate
Projected GDP Growth Rate
Source:
International Monetary Fund
0
0.5
1
1.5
2
2.5
3
3.5
2010 2011 2012 2013 2014 2015 2016 2017 2018
Projected Inflation Rate
Projected Inflation Rate
Source:
International Monetary Fund
Projections

18. Thank You