The recent real GDP growth were considered strong given how expectations were low to start with. In fact, expectations have consistently been on the bearish side over the past quarters as actual growth, or rather the official government estimates, have beaten market expectations over and over again. In fact, real GDP growth for the first and the second quarter have been revised upward to 5.1% year-on-year and 5.6% year-on-year from 4.9% and 5.4% respectively, making the official growth numbers even farther away from market expectations. The first quarter number itself was originally reported as 4.7% in May 2012.
The bearish expectations have partly to do with pessimism in the global economy and how it may affect the Malaysian economy. The Eurozone was not doing enough and went into recession, the Chinese economy slowed down and recovery in the US just had not been fast enough. Malaysian trade and export figures, especially in the third quarter had not been convincing.
But the economy was estimated to have grown by 5.2% from a year ago in the third quarter despite problems abroad. The domestic economy powered through the dark clouds with what I think essentially was a de facto fiscal stimulus. From BRIM to bonuses for civil servants to Felda payment, it sounds like a fiscal stimulus to me, especially if one considers that consumption has been growing above and beyond its usual growth rate in the last two quarters.
But what if recent growth is compared a sort of long-run trend instead of expectations?
Recent growth becomes less impressive and more mundane.
The red line is the geometric mean of growth in all quarters (1Q2006 to 3Q2012) except those from the fourth quarter of 2008 to the second quarter of 2010. The reasons these quarters were excepted was that there were outliers and geometric mean does not work well with negative numbers. The blue bars are real GDP growth in the respective quarters.
Why choose 2006 as the starting year? Well, The Department of Statistics produces the 2005 base series only up to 2005. I can make it longer well into 1957 but that will necessarily introduce a systematic error into the rebased pre-2005 figures and I do not want to do that.
Anyway, the geometric mean is approximately 5.6%.
So it appears that Malaysia is growing at its natural rate (maybe? natural rate is hard to discover but the long run trend I think is a good proxy. Also, it appears that the Malaysian economy is working near its limit although I have a lingering suspicion that the limit is farther out still), despite the estimates-expectations divergence.