THE 6.2 per cent gross domestic product (GDP) growth of Malaysia’s economy in the third quarter of this year has many stories behind it. Primarily, it tells us that our economy is in a healthy shape, that it is resilient, robust and fundamentally strong. Malaysia, it seems, is on the right track to becoming a high-income nation in due course.
The fact is the economic pie is expanding. In other words, there are improvements in every sector of the economy (agriculture, industry and services) in terms of consumption, investments, government spending and trade. And with all these, jobs have been created, the purchasing power of the people has improved, business activities have flourished, government spending on infra-rakyat projects have been intensified and export activities have been boosted, among others.
But, more importantly, the GDP growth is a clear testament to Malaysia’s economic transformation agenda, or Najibnomics, with brave economic reforms, such as the implementation of the Goods and Services Tax (GST) and the rationalisation of subsidies, showing positive results. The economy is now more domestic-driven, innovation-led, services-oriented, well-diversified and fiscally-savvy. Already, the Gross National Income (GNI) per capita figure, which is the measurement of people’s purchasing power, stands at RM41,567.
If we use the latest conversion rate of the ringgit against the US dollar, which is performing impressively at 4.08, the best level ever in more than a year, the GNI per capita is recorded at US$10,114 (RM41,100). What this means is that we are now 16.7 per cent closer to US$12,235, the World Bank threshold of a high-income nation.
But, still, what really matters is not so much the GDP number per se, but its consequences and effects on the rakyat’s wellbeing, happiness and quality of life as a whole.
To get a sense of this, one cannot read the GDP figure in isolation. There are other indicators and indices developed to assess what this impressive GDP figure means to Malaysians as a whole.
For instance, the recent Malaysia’s Household Income and Basic Amenities Survey 2016 has shown that the median household incomes of Malaysians have increased by 6.6 per cent. In fact, this time, it is more inclusive. The share of income for the bottom 40 (B40) group has improved from 14.8 per cent in 2012 to 16.4 per cent last year. The report also showed how income inequality has been reduced from 0.401 in 2014 to 0.399 last year. It is interesting to note that the Gini number was 0.483 in 1984. The Gini coefficient index measures the level of income inequality, where 0 indicates perfect equality and one represents absolute inequality.
Another indicator is the 2017-2018 World Economic Forum Global Competitiveness Index (WEF GCI), which puts Malaysia’s ranking at 23rd, an improvement from last year’s 25th position among 137 countries.
The WEF GCI measures economic competitiveness based on 12 categories, which are more comprehensive than merely looking at the headline GDP figure per se, such as institutions, health and primary education. This report basically tells us that there is an improvement in our overall productivity level, although at a slower pace. Hence, more needs to be done in this regard.
Yet, another is the National Transformation Programme (NTP) annual report, which specifically explains how the level of wellbeing and quality of life of the rakyat have been improved by tackling the rising cost of living, raising living standards of low-income households, reducing crime rates, fighting corruption, improving public transport, enhancing rural development and elevating the quality of education. And, at the global level, the United Nation’s World Happiness Report is another valuable indicator to assess the state of happiness and wellbeing of Malaysians in terms of life expectancy, social support, trust (as measured by a perceived absence of corruption in government and business), freedom and generosity, and others. And, since its first publication in 2012, Malaysia’s ranking has continued to move upwards. This year, Malaysia is ranked fourth happiest country in Asia.
All this is possible only when there is a respectable level of GDP growth.
With the strong third-quarter GDP figure, and, the first nine months of this year registering 5.9 per cent, we can expect more people-centric initiatives in the future.
Dr Irwan Shah Zainal Abidin is the director of the Asian Research Institute of Banking and Finance, Universiti Utara Malaysia, and a visiting research fellow in Islamic Finance at OCIS, Oxford University.