I was reading the Mid-Term Review of the Ninth Malaysia Plan:

During the 2006-2007 period, real GDP expanded by 6.1 per cent per annum, exceeding the target of 6.0 per cent. Per capita income increased by 10.6 per cent per annum to RM23,066. Per capita income adjusted for purchasing power parity increased at a higher rate of 14.2 per cent to RM46,478 in 2007. This growth was achieved in an environment of stable prices. Unemployment stood at 3.3 per cent in 2007, reflecting the full utilisation of labour resources. [Full speech in Parliament by Prime Minister Datuk Seri Abdullah Ahmad Badawi when tabling the Mid-term Review of the Ninth Malaysia Plan. The Malaysian Insider. June 26 2008]

Someone, please enlighten me: why does the income per capita figure need to be adjusted to purchasing power parity?

So far, I see no reason why it should be adjusted. PPP is usually used to make comparison between countries. When there is only one country in question and we are dealing in terms of just a currency, why on earth would we need to adjust it for PPP?

Is the statement “higher rate of 14.2 per cent to RM46,478” meaningful at all?

Also of interest to me is this:

11. The nation’s robust economic growth has been spearheaded by the private sector, with private sector investment growing at a rate of 8.6 per cent per annum. Foreign direct investment also increased by 39.3 per cent to RM29.1 billion in 2007. At the same time, public sector investment grew by 8.9 per cent per annum following vigorous implementation of development projects under the Ninth Malaysia Plan. [Full speech in Parliament by Prime Minister Datuk Seri Abdullah Ahmad Badawi when tabling the Mid-term Review of the Ninth Malaysia Plan. The Malaysian Insider. June 26 2008]

Increased government spending typically crowds out private investment. I wonder how much the public sector grew at the expense of investment growth in the private sector.

Another question: how much of export has been sacrificed so far due to increased government spending?

4 Responses to “[1697] Of oh, enlighten me about purchasing power parity please”

  1. on 26 Jun 2008 at 23:36 Azrir

    I fell asleep last night by the time i got to the second paragraph. Good thing i found a summary of this somewhere on the Net.

    A really good fiction piece worthy of the top 10 on the New York Times bestseller weekly list.

    +ve GDP, increase Income Per Capita, less people in poverty bla bla bla *yawn*….

    Now back to the real world:

    Teh tarik gelas besar is expensive.

    Beras is expensive.

    Milk formula is expensive….

    ….I think i may not be one of the denominator when the Income Per Capita was calculated…(that’s the folly of averages….the extremely rich tends to skewer the graph)

    Economist should learned from the statistician and come out with a concept based on the normal distribution….(if it aint any yet..)

    Now where is my teh tarik that i ordered…..

  2. on 27 Jun 2008 at 07:45 Random African

    So far, I see no reason why it should be adjusted. PPP is usually used to make comparison between countries. When there is only one country in question and we are dealing in terms of just a currency, why on earth would we need to adjust it for PPP?

    To compare, lol. And most likely because Malaysia’s GDP is higher in PPP terms than in nominal terms..

    Is the statement “higher rate of 14.2 per cent to RM46,478” meaningful at all?

    “it was even better if you look at it this way”

    Increased government spending typically crowds out private investment. I wonder how much the public sector grew at the expense of investment growth in the private sector.

    Typically doesnt mean always, does it ?

  3. on 27 Jun 2008 at 09:58 Hafiz Noor Shams

    To compare, lol. And most likely because Malaysia’s GDP is higher in PPP terms than in nominal terms..

    To compare, yes but why? It is only meaningful if we want to use an “international dollar” with the objective of accommodating differing cost of living across countries. Within the context of the speech, it is meaningless. As meaningless of a statement made earlier when a politician said Malaysian GDP per capita increased in excess of 40% between 2003 to 2007 whereas in fact, that increase is due to translating MYR into USD instead of focusing on local situation.

    In other words, this is a manipulation of statistics.

    On typical, not always: actually, pretty much all the times.

  4. on 28 Jun 2008 at 06:33 Mudasir

    PPP reflects Worth, and thats what really matters. Going by nominal for per-capita would be misleading.

    It also reflects the domestic economy. For 90% of Malaysians who most likely would not be traveling nor importing goods the PPP figures is all they should care.

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