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Malaysia is the 66th largest country in the world with a population estimated to 30.33 million. The economy of Malaysia is the 38th largest economy in the entire world and is the 3rd largest in the Southeast Asia. 

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USE THIS ARTICLE FOR INFLATION!!!! THAT ONE CANNOT

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PETALING JAYA: An economist has sought to explain why the cost of living in the country is still high despite the "benign" inflation of 1% last year.

Speaking to FMT, Yeah Kim Leng, who lectures at Sunway University, said the inflation had not caused a contributing decline to the cost of living.

"If you take the example of fish, there are a number of variables that determine its price.

"Given that fuel is part of the cost of transportation, which will ultimately be lower, the scarcity of fish and the strength of the demand will ensure that prices remain stubbornly high," he said.

He also cited prolonged depressed wages as a major factor in people's inability to cope with the rising cost of living.

"Even the World Bank has affirmed this," he said. "However, employers attribute the low wages to the low productivity of Malaysian workers."

When asked what could be done to mitigate the rising costs, he said the people would have to make lifestyle choices.

For example, he said, if fish was expensive, consumers should switch to cheaper sources of protein such as chicken.

He also attributed the high prices of goods to the absence of many items from the basket of goods which measure the Consumer Price Index (CPI).

He said food inflation was at a worrying level as the majority of the B40 or Bottom 40 group spend a large part of their income on essential items.

"We have to emulate the developed economies in how they manage their agricultural practices, which has managed to keep food costs low.

"The main reason for this is their high level of productivity," he said.

Asked what the Malaysian agricultural sector could do to enhance output, which would ultimately lead to lower prices for consumers, Yeah said focus must be placed on best practices and cost-efficient methods of production.

Adding that Malaysia had yet to achieve self-sufficiency in food production, he said the import of food items, which was subject to the vagaries of currency fluctuations, had also led to the spiralling cost of living.

"If the ringgit weakens, the food import bill increases," he said.

Yeah said the institutional reforms undertaken by the Pakatan Harapan government, such as combating corruption and enhancing transparency, would help mitigate the cost of living.

However, he cautioned that these reforms would take time.

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Economist explains high cost of living despite low inflation

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PETALING JAYA: An economist has sought to explain why the cost of living in the country is still high despite the "benign" inflation of 1% last year. Speaking to FMT, Yeah Kim Leng, who lectures at Sunway University, said the inflation had not caused a contributing decline to the cost of living.

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Thank you for posting the preliminary analysis. You are on track. Do carry out more research and start writing your report.

Cheers!
Josh Nathan

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What is inflation?
Inflation is a sustained and continuous increase in the average level of prices of goods and services in the economy.

Prelim analysis:
- with high inflation rate, increase in wages does not really ameliorate the high cost of living among general Malaysians (some of them might still have difficulty to purchase basic necessities esp those with lower wage)
- Real interest=Nominal interest rate-inflation rate.
In this case, the real interest is only 6.6%-3.7%= 2.9%
- Huge proportion of income is spent on food -> demand-pull inflation
- inflation affects amount of income left to save
- employment rate increases, that might result in inflation.
-wage price spiral:
Further increase in prices of goods & services><Further rise in wages><Increase in prices of goods & services><Rise in wages

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THE headline numbers are certainly encouraging. Malaysia's gross domestic product (GDP) growth is strong and the financial sector seems to be in the pink of health.

While the broad numbers tell a story of improving national wellbeing, and with the ringgit gradually appreciating against the dollar, anecdotal evidence on the ground suggests hardships that are told in drips and drabs and are rarely collated into a single public source.

For many households, especially the Bottom 40 (B40) and the middle 40 (M40), the struggles have been voiced out through the rising cost of living.

"The main grouses of the man on the street and even some small and medium-sized businesses are that they are not feeling any better off even as the economic growth has delivered a strong performance in recent quarters and is likely to continue in 2018," says Socio Economic Research Centre executive director Lee Heng Guie.

"While better GDP growth numbers help to boost confidence, what really matters to the households is their real purchasing power and disposable income, as well as living standards. Contained cost of living, easing prices of goods and services and sustained income growth via better salary increments are key to lifting sentiment."

According to the Department of Statistics' 2016 Household Income and Basic Amenities survey, the median monthly household income for Malaysians increased to RM5,228 in 2016 compared with RM4,585 in 2014, with a growth rate of 6.6% per annum at nominal value. It has been reported that these growth rates are below the compounded annual growth rate of 10.1% between 2009 and 2014.

Between 2014 and 2016, the mean monthly household consumption expenditure for Malaysia increased from RM3,578 to RM4,033, a growth of 6% per annum at nominal value. Although there is more money to be spent, those healthy gains are being eroded by jumps in inflation, which rose 3.7% in October.

The headline inflation number may be well below the annual rise in household income, but what has bitten into the wallets of households has been the increase in the cost of food.

Fuel prices have been volatile and have driven up overall inflation, but it has been the price increase in everyday food items that has caused most of the headaches.

The price of fish, like the Indian Mackerel, labelled the poor man's fish, cost RM13.84 a kg in October based on official statistics from RM12.39 a year ago.

It is just one example of many food items that have experienced a jump in price. The food component of the consumer price index or CPI, apart from fuel prices, increased the most by 4.4%.

The reason food inflation is a big problem for households is the amount people spend on food. One report says that the bottom 10% of households by income spend about 70% of their income on food, and it is this group that is most susceptible to variations in food prices.

The other element has been the disconnect between urban and rural spending. With costs still low in rural areas, it has been said that spending in the villages and rural areas tend to be lower than urban areas when it comes to food inflation.

Bank Negara also illustrates just how much living costs have hurt savings. Using the example of a household earning RM5,000 a month, it has just RM43 to save every month after paying for a loan on a RM300,000 house and on monthly expenses based on the Household Expenditure Survey 2014 by the Department of Statistics.

Looking at data on savings deposits, the number has basically stagnated at the RM150bil level for much of the year.
Rise in spending
One element of data that has piqued the curiosity of economists has been consumption growth. At a growth rate of 7% between January and September of this year, that number suggests that spending is still healthy.

While it is said that the M40 and the Top 20 in terms of income earners account for roughly three quarters of consumption in Malaysia, Maybank Investment Bank in a report notes that the rise in employment, which was up 2.1% to 14.54 million in the third quarter of this year, and private sector wages and salaries, up 7.4% during the same quarter, along with cash handouts by the Government, are responsible for keeping consumption up.

The rise in e-commerce too has been a factor that has seen retail sales numbers compiled by Retail Group Malaysia slipping by 1.1% in the third quarter.

One other aspect of the strong economic growth has been in exports. This is up by more than 20% for the first three quarters of the year, but its linkages with the domestic economy is not as strong as housing and construction in the country.

One cement company says the bump in construction work is not sufficient to overcome the slump in housing demand, hence the multiplier impact to the domestic economy will be more pronounced.

"Apart from the contrasted picture painted by the different sources of retail trade data, the mixed sentiment between headline GDP growth and the feeling of the people on the ground could be because the recovery in economic growth this time is very much export-driven," says RHB Research Institute in a note this week.

"On the other hand, businesses that cater to the domestic market are being unsettled by domestic issues. These include a sudden cut in public spending, sluggish housing and non-residential construction activity, the rising cost of doing business and income tax collection. We believe these issues could continue to pose a drag to domestic-oriented companies in 2018."

The headline GDP number always brings a feel-good element to consumer sentiment. In time, a steady sequence of good economic data will translate to better employment and wages.

"Besides sustaining a healthy pace of economic growth, a steady performance of the ringgit, purchase of consumer durables, continued economic activities and job creation should signal a sense of vibrancy in the economy. When people see that things are happening in the economy and confidence improves, that should get them out spending," says Lee.

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Analysts say food inflation still a big problem for many households - Business News | The Star Online

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THE headline numbers are certainly encouraging. Malaysia's gross domestic product (GDP) growth is strong and the financial sector seems to be in the pink of health. While the broad numbers tell a story of improving national wellbeing, and with the ringgit gradually appreciating against the dollar, anecdotal evidence on the ground suggests hardships that are told in drips and drabs and are rarely collated into a single public source.

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Inflation Rate
(CPI, annual variation in %).
2013 -2.1
2014 -3.1
2015- 2.1
2016 -2.1
2017 -3.8
Note: Annual variation of consumer price index (CPI) in %.
Source: Department of Statistics Malaysia and FocusEconomics calculations.

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Malaysia is the 66th largest country in the world with a population estimated to 30.33 million. The economy of Malaysia is the 38th largest economy in the entire world and is the 3rd largest in the Southeast Asia.

Malaysia's economic system is principally a laissez-faire, free economy with government control for national interests and for realignment of national wealth, focusing on trade, investment, manufacturing, and services.

Malaysia is well-endowed with natural resources in areas such as agriculture, forestry and minerals, thus their products mainly include cocoa, rice, rubber, palm, and oil. However, Malaysia is still not a developed country.

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Prelim analysis:
Though global economy continues to make its recovery, Malaysia is facing youth unemployment rate estimate that will remain around 13.2% in 2018.

There is a slower pace of hiring fresh graduates as businesses are cautious about the economic performance that restrains them from expanding their workforce.

The labour force participation rate for young men is at 53% whereas for young women it is at 37%.

With the increased technological advancement and employment of foreign workers, this can cause risks of brain drain in the Malaysia's economy since businesses emphasis on cost efficiency and the dependence on cheap labour than to pursue innovation from fresh graduates.

Hence, Malaysia is facing high level of unemployment rate as businesses prefer cheap labour instead of innovation and is also cautious of the economy performance before making decisions to hire new employees.

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AS the global economy continues to recover, labour force is improving, albeit at a slower pace.

Global unemployment in 2018 is projected around 5.5%, slightly better than 2017's reading of 5.6% on the back of a better global GDP outlook, with an expected growth of around 3.6% in 2018 from 3.3% in 2017.

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Young and jobless in Malaysia - Business News | The Star Online

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AS the global economy continues to recover, labour force is improving, albeit at a slower pace. Global unemployment in 2018 is projected around 5.5%, slightly better than 2017's reading of 5.6% on the back of a better global GDP outlook, with an expected growth of around 3.6% in 2018 from 3.3% in 2017.

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According to the article ,Malaysia's economy is expected to increase steadily.
In the third quarter of 2018, it is said that Malaysia's GDP rose by 4.4%

The rise in GDP is due to the services and manufacturing sectors.
however on the other hand, the agriculture  remained weak and has not improved from the previous quarter.

As for a overall view on Malaysia's GDP, in 2017 , it was worth 314.50 billion USD

The GDP value of Malaysia represents 0.51 percent of the world economy. GDP in Malaysia averaged 87.25 USD Billion from 1960 until 2017, reaching an all time high of 338.06 USD Billion in 2014 and a record low of 1.90 USD Billion in 1961.

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KUALA LUMPUR (Nov 16): The Malaysian economy is expected to remain on a steady growth path for the remainder of the year, after recording a gross domestic product (GDP) growth of 4.4% in the third quarter of 2018.

According to Bank Negara Malaysia (BNM), private sector activity continued to be the primary driver of growth as private consumption expanded strongly, following the zerorisation of Goods and Services Tax (GST) during the quarter.

"On the supply side, the services and manufacturing sectors supported growth, while the mining sector continued to be affected by production shocks," BNM governor Datuk Nor Shamsiah Mohd Yunus said in a release of the Malaysian Economic Performance in the Third Quarter of 2018 report.

The agriculture sector, on the other hand, remained weak due to the protracted recovery from production constraints in the previous quarter.

Meanwhile, headline inflation declined to 0.5% during the third quarter of 2018, compared with 1.3% in the previous quarter, mainly reflecting the impact from the GST zerorisation.

"The implementation of the sales and services tax (SST) beginning September 1, 2018 had a muted impact on inflation during the quarter," Shamsiah added.

Going forward, BNM expects private sector activity to remain the key driver of growth, amid the repriotisation of public sector expenditure.

Furthermore, headline inflation is expected to increase primarily due to higher projected global oil prices and the prospective floating of fuel prices.

"While the impact of the consumption tax policy will contribute to higher headline inflation in 2019, it will lapse towards the end of 2019," the report added.

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BNM: Malaysia GDP grew 4.4% in 3Q, expected to remain on steady growth path

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KUALA LUMPUR (Nov 16): The Malaysian economy is expected to remain on a steady growth path for the remainder of the year, after recording a gross domestic product (GDP) growth of 4.4% in the third quarter of 2018.