SEGI UNIVERSITY

Microeconomic issues of
Malaysian Economy
[Type the document subtitle]
Name#
8/1/2015

Masters in Business Administration

Contents
Executive Summary:...................................................................................................................................... 2
Introduction: ................................................................................................................................................. 3
Economics in General: .................................................................................................................................. 3
Definition: ................................................................................................................................................. 3
Macroeconomics:...................................................................................................................................... 4
Major issues of Macroeconomics being faced by Malaysia: .................................................................... 4
Macroeconomic policies: .......................................................................................................................... 4
Objectives of Macroeconomic: ................................................................................................................. 5
Economic Growth and Living Standard in Malaysia (for the period 2005-2013).......................................... 6
Unemployment in Malaysia: ......................................................................................................................... 9
Inflation in Malaysia:................................................................................................................................... 11
Summary: .................................................................................................................................................... 13
Reference: ................................................................................................................................................... 15

Executive Summary:
The assignment work is undertaken to enrich the analytical abilities regarding the macroeconomic
environment of a specific country i.e. Malaysia. The whole work is done under the strict guidance as
dictated by the facilitator.
A brief account of Malaysian macroeconomic issue is presented with the necessary graphical depiction
for the exact understanding of the subject.

Introduction:
The Assignment is about the Malaysian Economic conditions for the period of 2005 to 2013. It
establishes brief issues which have been faced by the Malaysian government along with a
comprehensive analysis of the Policies undertaken by the contemporary administration. Then the
policies success can be measured against their stated objective.

Economics in General:
Economics is the investigation of how we deal with our rare assets. It speaks the truth advancing
under limitations on the assets (on the other hand, Economics matters do not cover all parts of
human conduct).
Economics is a science. As trademark for science, market analysts create models, utilizing
suppositions of what is esteemed vital and they intentionally improve how circumstances and
end results function in some piece of the economy. The models are utilized to comprehend and
break down monetary advancements and to make recommendations about strategies and to
enhance financial results. Thus Economics is additionally an investigation of approaches.
Definition:
Economics is the study of the production and consumption of goods and the flow of wealth to
produce and obtain those goods. Economics explains how people intermingle within markets to
get what they want or achieve certain goals. Since economics is a driving force of human
interaction, studying it often discloses why people and governments act in a particular ways
There are two major types of Economics:

Microeconomics

Macroeconomics

Microeconomics usually focuses on the individuals and domestic market e.g. the trade links
between the buyer and seller in a local or indigenous market. While the Macroeconomics focus is
on a much broader view of economic activity, it covers the whole country and analyses the
international market between different countries.

Macroeconomics:
Macroeconomics studies total request and supply, blended with the investigation of cash. Total
yield is the aggregate creation of an economy in a given period i.e. the aggregate yield of
merchandise and administrations. Total interest is the aggregate sum of merchandise and
administrations requested in the economy in a given time period at a characterized value level.
Total supply is the aggregate sum of merchandise and administrations that organizations are
willing to give in a given time period at a certain value level.
Both, total request and total supply, differ with value level, as showed in total interest bend and
total supply bend. Balance yield is acquired where both interest bend and supply bend cross at
the same value level. This is the place value level and total yield are in offset. The yield and the
general value level in the economy will have a tendency to alter towards this harmony position.
Major issues of Macroeconomics being faced by Malaysia:
The issues in macroeconomic analysis are:

Living standard of Peoples, and the real productivity of a country or region

Typically measured as gross domestic product (GDP) of the Country

How its economy developing (economic growth)

Change of economy, architecturally as well as in size (growth, decline), and what

influences such transformation, in particular the effect of government policies;

Productivity i.e. output of a single worker in the economy (output per person);

Employment and unemployment, the latter being the workforce that desires to work but
has no employment, job, occupation; and - price level of goods and services (inflation,
deflation, stagflation).

Macroeconomic policies:
Governments and their Subsidiary bodies or institutions have many means at their discretion to
have an effect on the economy.
The government policies can be differentiated into two main groups,

Monetary policies (financial policies) and,

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Fiscal policies.

Monetary policy decides on the supply of money into the economy, and is typically determined
by the central bank. The central bank (also often named reserve bank or monetary authority) is
the body responsible for the monetary policy of a country. The central bank's core
responsibilities are national currency and money supply, with the purpose to keep both stable.
But central banks have often more duties, such as regulatory interest rates, acting as a lender of
last resort to the banking sector, and supervising financial institutions so they do not behave
irresponsibly or deceitfully. In many countries, central banks are "independent", and own
separate entity as independent state organ, that is, they operate under rules and procedures
designed to prevent political interference. Examples include the U.S. Federal Reserve, the Bank
of England, and the European Central Bank. In some other cases, the central banks act as
government agencies for government purpose (such as Bank Negara Malaysia, BNM).
The instruments of Fiscal arrangement are government consumption and income. At the point
when government consumption, for example, compensation for common workers, government
base ventures or endowments is higher than government income, for example, duties and
benefits of government-claimed undertakings, its called spending plan deficiency; the inverse
case is called spending plan excess.
Other government strategies used to impact the economy are pay arrangements and supply side
approaches. With salary arrangements, government controls costs and wages. With supply side
approaches, for example, tax on pay or exchanges, government controls production houses.
Objectives of Macroeconomic:
Macroeconomic objectives of governments and central banks include the following:

Full unemployment i.e. those who are talented and willing to have a job will also get one;

Price stability i.e. no swift changes in price levels, no unexpected or steep inflation or
deflation; - economic growth i.e. steady upsurge in real per capita income; and

Openness to trade, nationally and internationally, to facilitate exchange of goods and

services and admittance to resources.

Macroeconomic analysis, models and forecasts are used by both governments and large
companies to assists in the development and valuation of economic policy and business strategy.

Economic Growth and Living Standard in Malaysia (for the period 2005-2013)
GDP was continuously growing in the subject period, in fact since the Asia financial crisis
erupted in the early 20th century, until the global financial crisis finally hit Malaysia in 2008-9. In
2009, the GDP per capita plunged to even below the level before the catastrophe started. But
already in 2010, growth leaped back, and the GDP reached new heights. A brief view of the GDP
growth rate is depicted in the following figure.

Figure 1: GDP growth rate from 2005-2013

Source: http://www.tradingeconomics.com/malaysia/gdp-growth

Figure 2: GDP Growth and productivity level over the same period i.e. 2005-2013
Source: http://www.epu.gov.my/documents/10124/2257e64f-b08d-41b7-bed0b6e6498c38a3
In 2012, Malaysia recorded a GDP development of 5.6%, upheld for the most part by household
request which enrolled a twofold digit development of 10.6% adding up to RM199.7 billion.
Residential interest was an aftereffect of both private (58%) and opens (42%), mostly determined
by a household situated assembling segment, got primarily from purchaser related
administrations sub-segments. These are the information transfers, land and aeronautics
subsectors, yet local development was likewise the consequence of the usage of activities in the
oil and gas industry.
Development in speculation was to a limited extent because of limit extension in a few new
development territories one of which is medicinal and correspondences gear. The change of yield
over information permitted work efficiency to develop at the rate of 1.6% over the period 2008
to 2012. Malaysia's efficiency development in 2012 was 2% adding up to RM58,874.

The work business sector keeps on enhancing, reflected by an increment in labor power
cooperation ascending from 62.6% in 2008 to 65.6% in 2012. This solid pattern was bolstered by
an empowering unemployment pattern, which tumbled from 3.3% in 2008 to 3.0% in 2012. In
the meantime, livelihood recorded an increment (from 10.7 million representatives in 2008 to
and 12.7 million in 2012). Regarding the instruction level of the work drive, it was accounted for
that just 25.6% of the aggregate utilized had tertiary level training while in created economies,
for example, South Korea, Japan, USA, Canada and Australia, more than 40% of the work power
had tertiary level instruction.
Interestingly, the growth rate displays considerable variation over the calendar year: growth rate
droplets in the first and the last quarter of the calendar year, with negative (!) growth rate values
in the first quarters of all the years of the detected period, while the growth rates stayed still
positive in the calendar years' last quarter apart from for the last quarter of year 2008. Towards
the end of 2008, the global financial crisis grasped Malaysia as "external demand collapsed in
the fourth quarter, weighing heavily on Malaysias externally oriented economy (Bloomberg,
2009)

Figure 3: economic indicator at glance

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Source: http://www.tradingeconomics.com/malaysia/indicators

Unemployment in Malaysia:
The number of employed persons improved steadily year-on-year, with greater leaps in 2006 and
2007 and as well in 2013. The unemployment rate varied between approx. 3% and 4% in the
observed period, with no clear trend over this period to cessation from this band.

Figure 4: unemployment in Malaysia

Source://www.tradingeconomics.com/malaysia/unemployedpersons'>tradingeconomics.c
om</a>

Figure 5: Unemployment rate in Malaysia

Source: http://www.tradingeconomics.com/malaysia/unemployment-rate/
The populace in Malaysia expanded consistently, from more than 25 million individuals in 2005
to more than 29.5 million in 2013.
One purpose behind the evidently low unemployment rate could be the low efficiency levels of
laborers in Malaysia (Seah, 2013). Malaysia's economy relies on upon a substantial number of
exceptionally untalented work (70%), while as yet applying a low level of mechanical
advancement and lacking R&D exercises and development (Shamsudin Bardan, 2012). Different
businesses contract hugely low-talented, particularly outside specialists, and keep on relying
upon them, as they make due by making little ventures to stay at the base of the innovation
stepping stool (Dudley 2013). Some of these monstrous hirings are leftovers of practices in the
past when the work expense preferences served to keep costs low for fare and subsequently
drove development (Flaaen, Ghani &, Mishra, 2013).

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Inflation in Malaysia:
According to the Consumer Price Index (CPI), prices augmented rather reasonably within a 2%
to 4% band (year-on-year) in the start of the investigated period. But few months into 2008, they
were increasing sharply to a topmost, within a couple of weeks. From this peak, they were
tumbling almost as sharp again, within a couple of months, to reach a level in the first months of
2012 that continued the route and increase seen over the years before, as if there was no peak at
all.

Figure 6: Inflation rate in Malaysia from 2005-2013

Source: http://www.tradingeconomics.com/malaysia/inflation-cpi
Interestingly, the customer spending shows significant variety over the schedule year: In the first
quarter of another year, it will drop underneath the level of the last quarter of the earlier year,
then even drop marginally all the more in the second quarter (aside from 2010 when there was a
slight increment), to rise forcefully with the second from last quarter. The fourth quarters in the
examined period have seen either a further build (2008, 2009 and 2010), or a minor drop (2011,
2012 and 2013). This obvious regular conduct is reflected additionally in the quarterly
development rate of GDP.
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House costs in Malaysia expanded consistently in the alluded period, with quarterly increments
in the scope of approx. 2% to 5%, except for a somewhat little increment in 2011 (1% to 2%),
which was, then again, remunerated with the sharp ascent in 2013 to 6% to 8% expansion.

Figure 7: Consumer price index of Malaysia

Source: http://www.tradingeconomics.com/malaysia/consumer-price-index-cpi

BNM's charge of interest rates and the administration's expansionary money related arrangement
in the repercussions of the worldwide monetary emergency served to keep shopper products,
houses and other capital resources open and moderate for Malaysian families and organizations.
The improvement of the interest rates mirrors this direction: Interest rates in Malaysia were kept
low and consistent until 2005. Be that as it may, toward the end of 2005, the three month
interbank rate began to ascend to a more or less half more elevated amount inside of a large
portion of a year, to stay at very nearly 4% for the second 50% of 2006. For 2007 and 2008, this
interbank rate dropped marginally to stay enduring at 3.6%, until it was dropped forcefully to 2%
toward the start of 2009 in light of the emergency. While waiting simply over 2% for whatever
remains of 2009, it began to rise once again 2010 to reach right around 3% at the year end.
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Summary:
Macroeconomics manages the structure, conduct and execution of a national or provincial
economy all in all, utilizing total variables to examine request and supply of items,
administrations and assets inside such framework. Approaches guide choices to impact the
economy. The fundamental approaches connected by governments are financial strategies
(applied ordinarily through and by the nation's national bank) and monetary arrangements.
Commonplace macroeconomic goals of governments are full unemployment, value soundness,
financial development, and openness to exchange.
This report took a gander at fundamental macroeconomic issues in Malaysia in the period from
2005 to 2010, specifically in regards to monetary development and expectation for everyday
comforts, (un)employment, and expansion. Malaysia has all that much a business sector
economy, which is moderately open yet state-situated. Entering the subject period in 2005,
Malaysia's economy was still checked from the Asian money related emergency in 1997/8, and
the measures taken, for example, budgetary controls, enhanced saving money framework and
exchange execution. Then again, in 2007, Malaysia chose to forsake the altered swapping scale
for the ringgit.
The subject period has seen its own particular emergency: the worldwide money related
emergency that began in September 2010. In the alluded period, monetary development was
enduring, as found in the ascent of GDP, with the exception of a year-long stretch after the
worldwide money related emergency began. The dunk was additionally found in the customer
spending.
The administration reacted to the worldwide money related emergency with financial extension
and two boost bundles, and they appeared to have helped Malaysia to bounce back inside of a
year. Interestingly, development is seen fluctuating extensively over the timetable year: solid in
the center a large portion of the year, and frail in the months around the turn of the year. This
conduct agrees with a comparative trademark in shopper spending.

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Unemployment in Malaysia is low, between 3% to 4% annually. An explanation behind this

obviously low unemployment could be the low efficiency levels of specialists in Malaysia, and
the versatile use of low advances in various commercial ventures.
Costs in Malaysia, as indicated by the advancement of the CPI, expanded inside of a 2% to 4%
band in the subject period, aside from 2008, when a sudden surge, in any case, trailed by an as
sudden drop gave a deviation to the generally relentless cost level increment. House costs
demonstrated a comparative relentless increment as CPI, just with a decreased ascent amid the
worldwide emergency, however recuperating inside around a year.
Altogether, Malaysia's economy is in travel from low-pay to center salary status, be that as it
may, at present corrupted with legacies, for example, reliance on regular assets and commercial
ventures utilizing low-level innovation.
In a nutshell we can conclude that, the Malaysian economy is anticipated to achieve a
productivity growth of 3 - 4% for 2013. This forecast is reinforced by current presentation of the
economic sectors. In 2013, the construction sector is predictable to register a productivity growth
of 13% along with an output growth of 15%. This growth will be summed by construction
activities in the sub-sectors of oil and gas, travel & tourism and transport and utilities.
The manufacturing sector is probable to register a productivity growth of 3% and an net output
growth of 5%. The industries in this sector are likely to make a shift towards more capital
intensive and advanced technology operations. The services sector is expected to register a
productivity and output evolution growth of 3% and 6% respectively.
MPCs study on business challenges reveals that the five main challenges faced by Malaysian
business leaders in attaining higher productivity are in the areas of Customer Relationship,
Human Capital, Sustainability, Operational Excellence and Corporate Brand and Reputation.
However, against the current global economic scenario, it is human capital, operational
excellence and innovation that must remain the uppermost of priority list.

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Reference:
-

Productivity Report 2012/2013 (June, 2013). Malaysia Productivity Corporation.

www.mpc.gov.my

Business Times (2013, September 22). Economic numbers bode well of Malaysia.

Oxford Business Group (2011, January 12). Malaysia: Year in review 2010. Retrieved
from http://www.oxfordbusinessgroup.com/economic_updates/malaysia-year-review2010

Qualifications Frameworks: Implementation and Impact ,Background Case Study on

Malaysia (January 2010) Jack Keating, University of Melbourne Centre for PostCompulsory Education and Lifelong Learning, Skills and Employability Department ILO
www.ilo.org/wcmsp5/groups/public/@ed_emp/.../wcms_126594.pdf

Mohammed B. Yusoff Fauziah Abu Hasan Suhaila Abdul Jalil, Globalisation, Economic
Policy, and Equity: The Case of Malaysia (27 December, 2007)
www.oecd.org/countries/malaysia/2682426.pdf

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