Economics Assignment | Economy of Malaysia

Running head: ECONOMY OF MALAYSIA
ECONOMY OF MALAYSIA
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ECONOMY OF MALAYSIA
EXECUTIVE SUMMARY
The macroeconomic condition of a nation plays important role in its present performance
economically as well as politically worldwide. Various aspects of the economy has significant
impact on its overall economic, social and political activities. Such macroeconomic picture is
determined through performance and modulation of the major macroeconomic variables like
GDP, its growth rate, unemployment, inflation, and exchange rate and so on. This report
conducts an analysis of entire Malaysian economy in terms o the macroeconomic condition and
sheds light on the current problems the nation is diagnosed with. As one of the biggest trading
nation of Asia the country faced hit on the face of global financial crisis and the small economy
like this recovered from extensive government expenditure. The expansion in fiscal polices even
though increased the growth rate but over time it created problem of fiscal deficit worsening
macro condition of the nation. Further, various recommendations and policy instruments of the
nation are discussed in terms of removing this deficits and maintain good health over time.

ECONOMY OF MALAYSIA
TABLE OF CONTENT
INTRODUCTION:..........................................................................................................................2
SNAPSHOT OF MALAYSIAN ECONOMY:...............................................................................3
ISSUES AND POLICY RECOMMENDATION:........................................................................17
CONCLUSION:............................................................................................................................18
REFERENCE:...............................................................................................................................19

ECONOMY OF MALAYSIA
INTRODUCTION:
Economy of Malaysia posses utmost importance in globe as one of the strongest Asian
nation growing remarkably. No wonder why it is the third largest economy in the entire region of
South East Asia and globally it earns 35th position. The nation known for its contribution to
greatest labor productivity in national as well as international field. The global competitiveness
report in 2017 marks the nation at rank 6th as most competitive nation in world dodging the Asian
competitors like Singapore, Japan, UAE, Qatar and Israel (Khan and Khalique 2014). These
facts allures toward the macroeconomic performance of the country.
A national economy of any country is broadly summation of various activities going
within the national territory. The national health of the economy is measured in terms of
performances exerted by the macroeconomic variables operative in the nation determining its
growth trajectory.
This report aims to shed light on the macro economy of Malaysia with an outlined
analysis of the factors consisting the entire economy. The attention is given on the analysis of
present situation as well as existential facts of the nation along with highlighting the trends and
patterns in the performance level of major macro economic variables like GDP and its growth,
unemployment, rate of interest, exchange rate regime (Aggarwal and Urata 2013). The
importance of these variables lie in shaping the position of the economy among global
economies in terms of parameter like standard of living, international trade, macro market for
goods and money, capital market conditions and so on. The discussion also analyses how
internal macroeconomic policy changes influences the domestic as well as international market
and foreign investments.

ECONOMY OF MALAYSIA
SNAPSHOT OF MALAYSIAN ECONOMY:
Malaysia owes 35th position among largest world economies and one of the greatest
competitor for Asian giants like Japan, China in terms f its growth and macro economic
performance. All the factors make the nation lead among the nations of world with 23rd position
in world and 6th position within South East Asia in 2017-18 (Khoo 2012). The nation is rich in
human resources due to the higher intensity of investment in building industry and
manufacturing based knowledge.
The national GDP of the nation is recorded at 0.816 trillion in terms of purchasing power
parity as per 2016 estimation. What is attractive about the nation as well as and source of
immense economic benefit is the higher growth of GDP hovering around 5.8% annually
(Almulali and Sab 2013).. In comparison to the neighboring nations like Philippines, Indonesia,
Vietnam as well as bigger growing nations like Singapore, Japan. UAE, this growth pace of
Malaysia has raised it to the spotlight in eyes of global investors and business expander. In
nominal terms the per capita GDP is as high as $10,503 which reflects into affluence in standard
of living of the citizens in Malaysia (Alom 2015). The nation is mostly dominated by service or
tertiary sector with contribution of 56% in the national production. This is followed by secondary
sector that is industry, which contributes 36% to the GDP. Agriculture is also representing GDP
by 11%. Looking at this segmentation it is quite clear that unlike other nations, Malaysia
maintains a balanced division of resources and resultant contribution made to the GDP. The
nation record unemployment at 3.4% with population below poverty line is recorded to be 0.6%
of the total population. 15.3 million of the total population is accounted as labor force. The Gini

ECONOMY OF MALAYSIA
coefficient of 0.43 reveals that the nation is blessed with equal distribution of income and
resources (Ljungqvist and Sargent 2012)
In terms of purchasing power parity, the per capita income of the nation is $28,681 as per
2017 estimation made by World Bank leaving behind the upper middle-income countries like
Brazil, Mexico and Turkey and achieving the third largest position in the world in terms of per
capita wealth in the nation after Brunei and Singapore in Asia.
GDP & ITS GROWTH:
The economy of Malaysia faced a shift towards heavy industrialization that creates room for
market economy. The nation even though is open to world but also follows orientation toward its
state only to make the economy most robust. The nation follows a diversification strategy
evident in its export basket filled with goods ranging from high tech goods of electronics,
chemical, machineries, metal, manufacturing equipments as well as wood and oil based products
worth $57.258 billion. The nation is the second most large producer as well as exporter of palm
oil after Indonesia. The nation encounters export with countries like China, Japan. USA,
Thailand, Hong Kong and India accounting for $175.7 billion worth trade in nominal terms
(Khan and Khalique 2014). The nation imports worth $147.7 billion from the countries like
China, Singapore, Japan, USA, Indonesia, and Thailand and so on. This explains that the nation
has positive balance of trade indicating good health of the economy. The national revenue
captured by the local government are $65.71 billion where as the expenditure is estimated to be
$79.4 billion with economic aid of $31.6 billion (Awalludin, Sulaiman, Hashim and Nadhari
2015). This indicates that the nation has internal fiscal budget deficit that calls for concern
towards focus of the fiscal policies.