2. Malaysia Economic Current Condition 09 Overview: Is it good or bad? Is this your current perception? 2
3. Malaysia Economic Current Condition 09 Overview: Is it good or bad? Our economy growth relies on export or demand of our goods mainly from the economic Giants of United States, Japan and Singapore (*1). So in layman’s term, If they were to suffer from a cold….is as contagious as H1N1 Flu. 3 1. BNM-Quarterly BOP Statistics, Aug 09
4. Malaysia Economic Current Condition 09 Overview: Is it good or bad? To understand better of our current economic situation. Lets take a look at our national economic indicators : Unemployment Rate GDP Growth FDI and DI Growth Purchasing Power Parity Business / consumer confidence 4
5. Malaysia Economic Current Condition 09 1. Unemployment Rate News Flash: Unemployment rate 2008 – 3.7% Projected rate 2009 – 4.5% The highest rate ever recorded. July 2009 – 38,732 retrenched. 40,662 took pay cut. 4,112 temporary lay off. What about the unrecorded data? 5 2. The Star Online – August 14, 2009
6. Malaysia Economic Current Condition 09 1. Unemployment Rate U.S. Employers Cut More Jobs Than Forecast US Employers cut more jobs than forecast last month and the unemployment rate rose to a 26-year high, calling into question the sustainability of the economic recovery. The unemployment rate rose to 9.8% (*3) , the highest since 1983, from 9.7 percent in August, the Labor Department said today in Washington. Federal Reserve Chairman Ben S. Bernanke yesterday said the expansion may not be strong enough to “substantially” bring down unemployment, indicating that the US central bank will be slow to drain the trillions of dollars it’s pumped into the economy. US-based and multinational companies operating in Malaysia may take similar action to their counterparts, responding to the weak economy by cutting their expenditures. And this could mean cutting the size of the workforce, laying employees off – which is happening now. Thus the projected 4.5% unemployment rate by end of the year may hit us sooner than we thought. The figure predicted is not as bad compared to 4.8% given to our neighboring country, Singapore and 8.1% to Indonesia. 6 3. US Bureau of Labor Statistics – retrieved 3/11/09
7. Malaysia Economic Current Condition 09 1. Unemployment Rate Interestingly, Malaysia’s unemployment rate has been hovering between 3.0% and 3.8% since year 2000 (*4). Though the current report indicated the rate at 3.7% , it is wise for Malaysian now to be extra thrifty in the upcoming turbulence time ahead. 7 4. Department of Statistic Malaysia- retrieved 3/11/09
8. Malaysia Economic Current Condition 09 2. GDP Growth Malaysia GDP Growth Rate Malaysia Gross Domestic Product (GDP) contracted 3.90% over the last 4 quarters (*5). The Malaysia Gross Domestic Product is worth 195 billion dollars or 0.31% of the world economy, according to the World Bank 8 5. www.tradingeconomics.com retrieved 3/11/09
9. Malaysia Economic Current Condition 09 2. GDP Growth Malaysia GDP Growth Rate 9 5. www.tradingeconomics.com retrieved 3/11/09
10. Malaysia Economic Current Condition 09 2. GDP Growth Malaysia GDP Growth Rate A contracted growth means that demand for our products both local and internationally has fallen. Me and you has cut down on our spending. We suddenly find our disposable income starts to shrink due to escalating of price. Our exports has fallen over the months and ships are left idle at the docks (*5.1). 10 5. 1 The Star, 4/11/2009
11. Malaysia Economic Current Condition 09 2. GDP Growth Comparison to our neighbors Singapore Gross Domestic Product (GDP) expanded 0.80% over the last 4 quarters (*5). The Singapore Gross Domestic Product is worth 182 billion dollars or 0.29% of the world economy, according to the World Bank 11 5. www.tradingeconomics.com retrieved 3/11/09
12. Malaysia Economic Current Condition 09 2. GDP Growth Comparison to our neighbors Indonesia Gross Domestic Product (GDP) expanded 3.99% over the last 4 quarters (*5). It has a market-based economy in which the government plays a significant role by owning more than 164 state-owned enterprises. 12 5. www.tradingeconomics.com retrieved 3/11/09
13. Malaysia Economic Current Condition 09 2. GDP Growth Comparison to our neighbors Thailand Gross Domestic Product (GDP) contracted 4.90% over the last 4 quarters and is heavily export-dependent, with exports accounting for more than two thirds of gross domestic product (GDP) (*5). 13 5. www.tradingeconomics.com retrieved 3/11/09
14. Malaysia Economic Current Condition 09 2. GDP Growth Bank Negara Governor Dr ZetiAkhtar Aziz said at a media briefing in early June this year (*6) admitted that the financial crisis, which peaked last September and led to a general slowdown in economic activity, "had taken longer than expected to be resolved". Admitting that the contraction was "larger than expected", she said the outlook for the next quarter depend largely on external factors.Nevertheless, she expected the second half of the year to see a better economic performance (contracted to 3.9%). However she failed to mention solutions to counter these negating factors. According to statistics released by Bank Negara, all sectors, except for construction, recorded contractions year-on-year (*7). The vital signs don't look good. Thus, Nor MohamaedYakcop's statement that Malaysia’s domestic consumption market could help bolster the overall economy is also dashed. 14 6. The star online 2, June 09. 7. Malaysia Statistic Dept, Aug 09 Quarterly Report
16. Malaysia Economic Current Condition 09 2. GDP Growth Bank Negera disclosed that, in Q1/2009, manufacturing sector went down by 17.6%, export-oriented industries slumped by 23.1%, and the electrical and electronics (E&E) subsector plunged by a steep 41.4% (*9). Domestic-oriented industries also declined by 15.9%, and the services sector was flat with a 0.1% decline due to the impact from sub-sectors closely linked to the manufacturing sector. As an indicator of domestic consumption that supports an immense food-chain, the automobile industry failed to kickstart the momentum for economic recoverydespite the lowering of overnight interbank rates. Banks now imposed stricter loan approvals as well as interest rates. 8. The recent budget announcement saw a 1% reduction in tax (27%-26%) for those earning RM 100K per annum and a personal relief raised from RM 8,000 – RM 9,000 as means of stimulus to encourage domestic consumption does not reflect the true desire. 16 9. Malaysia economic indicators – Msia Stat Dept, Aug 09
17. Malaysia Economic Current Condition 09 3. FDI Growth FDI outflow exceeds inflow... Malaysia tops ASEAN in capital flights. According to the United Nations Conference on Trade and Development (UNCTAD)World Investment Report 2008, FDI outflow in Malaysia surpassed inflow by RM8.99 billion in 2007. Malaysian outflow had surged by 81.9% to RM38 billion in 2007 from RM20.89 billion the year before. On the other hand, Inflow increased by only 39% to RM29.07 billion versus RM20.91 billion in 2006. Interestingly, among the 10-member Asean countries, Malaysia was glaring as the only country to record a negative flow (*11). More interestingly, this took place despite the fact that the Southeast Asian region recorded its highest ever FDI inflow - which jumped 81.1% to RM209.2 billion in 2007 from RM115.5 billion in 2006. 17 10. UNCTAD – World Investment Report 2008 11. Malaysiakini, 25/9/2008
18. Malaysia Economic Current Condition 09 3. FDI Growth Foreign investment in Malaysia has plummeted this year, according to Trade Minister Mustapa Mohamed, "Foreign direct investment for 2008 was 46 billion ringgit (13 billion dollars and a record high) and for January to May this year we have only seen 4.2 billion ringgit,” (*12) The World Bank had estimated that FDI flows into developing countries will shrink to $400 billion this year from an estimated $580 billion in 2008, a drop of 31 percent, as most companies cut costs and investment due to the poor economic outlook. Malaysia's economy is under threat too as exports shrink and commodities prices like fuel and palm oil continue to fall. The top three sectors which attracted FDI were financial intermediation (RM2.1 billion), manufacturing (RM1.3 billion) and oil & gas (RM943.4 million). 18 12. Asean Affairs , 3/7/2009 .
19. Malaysia Economic Current Condition 09 3. FDI Growth Malaysia's net FDI outflow jumps to US$6b (Excerpt from UNCTAD- WORLD Investment Report dated 17 Sept 2009 ) (*13) Malaysia experienced a net FDI outflow of US$6.0 billion in 2008, more than double the US$2.7 billion net outflow posted in the previous year. Inward FDI fell to US$8.1 billion (18.4 per cent of GDP) in 2008 from US$8.4 billion (20.6 per cent of GDP) the previous year. Outward FDI, on the other hand, soared to US$14.1 billion from US$11.9 billion in 2007. In comparison, Indonesia experienced a net inflow of US$2.0 billion for 2008 while Thailand posted a net inflow of US$7.3 billion. The South-East Asian region as a whole saw a net inflow of US$27.8 billion. 19 13 UNCTAD- World Investment Report dated 17/9/2009 .
20. Malaysia Economic Current Condition 09 3. FDI Growth Based on the UNCTAD report, one cannot help but wonder whether the spike in 2008 FDI is due to Hot Money Investment? 20 14. The Sun 18/10/2007.
21. Malaysia Economic Current Condition 09 4. Purchase Power Parity The purchasing power parity (PPP) theory uses the long-term equilibrium exchange rate of two currencies to equalize their purchasing power. Using a PPP basis is arguably more useful when comparing differences in living standards on the whole between nations because PPP takes into account the relative cost of living and the inflation rates of different countries, rather than just a nominal gross domestic product (GDP) comparison. In a nutshell: With RM 3.50 I used to be able to buy a Happy Meal and the same equivalent will enable me to do so in the States. Today it cost me RM 5.95 to buy a Happy Meal and the States still remain at RM 3.50 (PPP), it means I am losing my RM value. So the more I lose out in my RM value, it indicates to me that the economic condition is no longer favorable. 21
22. Malaysia Economic Current Condition 09 4. Purchase Power Parity 1973, a 1.3 Litre Japanese car was RM 7000. Today, the equivalent islet's say RM 60,000 about 8.5 times higher. 1973 a double storey house was about RM 45,000. Today, the equivalent is approximately RM 300,000 , about 6.6 times higher. In 1973 a fresh graduate pay was RM1000. Today is at an average RM 2,000, about 2.2 times higher. 4. Msia McDonald waiter salary RM 3.00 ! x 8 hours = RM 24 per day... x 25 days = RM 600 per month Australia McDonald waiter salary (Perth) $ 14.00 ( @ 3.15 = RM44 per hour x 8 = RM352 per day !!! x 25 days = RM 8,800. 13.3 times more and where the pricing of a house is similar to KL and the price of car is 23% cheaper than here. 22
23. Malaysia Economic Current Condition 09 4. Purchase Power Parity 23 15. Indexmundi.com, retrieved 4/11/2009
25. Malaysia Economic Current Condition 09 5. Business / Consumer Confidence What does it means? Increased consumer confidence indicates economic growth where consumers like you and me are spending money. This translates to higher purchasing power. Decreasing consumer confidence implies slowing economic growth, and so consumers are likely to decrease their spending. (less money circulating in the market) The idea is that the more confident people feel about the economy and their jobs and incomes, the more likely they are to make purchases. Declining consumer confidence is a sign of slowing economic growth and may indicate that the economy is headed into trouble. Among the key variables that are used to gauge are ; a. Current employment condition b. Employment condition in the next 6 months c. Total family income for the next 6 months. 25
26. Malaysia Economic Current Condition 09 5. Business / Consumer Confidence Notice that the index has a weak negative co-relationship with employment rate. 26
27. Malaysia Economic Current Condition 09 5. Business / Consumer Confidence Comparison to the States 27
28. Malaysia Economic Current Condition 09 5. Business / Consumer Confidence Index Analysis 1. Our index has recovered and it has shown that it has bounced back stronger. 2. However the index may took a nose diving if the projected un-employment rate were to sky rocketed to 4.5% at the end of the year. 3. Still the best way to gauge is always a visit to Malaysia’s leading mall. A peek at the fancy restaurant in the Klang Valley, Johor and Penang reveals a lot of the consumer confidence. Consumers are still buying and the malls are still jam packed during Sundays. 4. Again this could be simply interpreted that Malaysian are oblivious to the impending times ahead or just “living the moment”. 28
29. Malaysia Economic Current Condition 09 6. Other measurements Other economic indicators: It will be even easier to anticipate our economic conditions if our Economic Planning Unit are able to update the following information from time to time. National Debt GDP vs. Debt per citizen Private Debt Credit card debt, Ah Long debt vs. private debt per citizen Balance of Trade Malaysia debt held by foreign countries. 29
30. Malaysia Economic Current Condition 09 7. Conclusion So what is going to happen in the next quarter? The current economic indicators are revealing that a. Unemployment may hit up to 4.5% US GDP growth is still in a descending mode. Our GDP growth is relatively slow in process of recovery. The projected growth of 4.1% next year could remain a wishful thinking (*16) Our ships are sitting in the docks. FDI are trickling out. We are losing out when the rest of the region is gaining more FDI. Perhaps its time for us to be extra cautious on our spending and to tighten our belt in the coming months. 30 16. bernama.com, retrieved on 4/11/09
