Malaysia Economy Is Getting Better or Worse?

As a Malaysian, we are happy to see our quarterly GDP has improved for the recent 2 quarters, 5.4% & 5.8% respectively.

By looking back the past 20 years GDP growth, actually Malaysia in average is able to obtain 5-7% GDP growth year-on-year. That is consider a stable and healthy growth under a developing country.

Source: https://tradingeconomics.com

However, a lot of residents complained or felt that the local economy is not getting any better. They feel in pain. Why is that so, since the GDP from low point of 4.0% to 5.8% within 1 year?

I believe the major pain is the MYR currency depreciation against major currencies like USD and SGD. USD to MYR has appreciated from RM3.10 in year 2013 to RM4.40 lately, and now retrace a little bit to RM4.20. A whopping jump of 35%! Whereas SGD to MYR has appreciated from RM2.50 in year 2013 to RM3.15 lately, and now retrace to RM3.12. A significant jump of 25% as well. That means whatever imported to the country with these appreciated currencies, will be having price hike of at least 25-35%.

The second pain point is Government Service Tax (GST), 6% GST imposed on all items from April 2015 is also a drastic burden to all citizens. Every 1 dollar you spent, you will have to pay additional 6 cents. That's indirectly make the inflation goes up 6% straight.

Source: http:says.com

There's another indirect impact which is the deterioration of the Government efficiency and business strategy. You can see most developing countries in ASEAN are trying to attract foreign direct investment (FDI) by improving internal infrastructure and procedure. But it seems like Malaysia is running backward. Well, I'm not sure about it but you can see the local well-known businessmen's negative comments and feedback in business magazines. We haven't talk about the Government investment scandal yet. ;(

With the combination of these 3 factors, how can the economy turns better in such a short time even with a good GDP statistics? Imagine if you used to make $1,000 and spent $700 and save $300. Now you will have to spend at least $800-$900 and only can save around $200-300. What can the citizens do? Tighten their belt in order to save more and sustain.

Remember, the salary is the one that won't be increased over such a short time, but inflation & the factors above.