Tag: GDP

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Economics WDYT

[2876] Guess the 3Q18 Malaysian GDP growth

The Department of Statistics will release the third quarter GDP figures on November 17. To celebrate…

How fast do you think did the Malaysian economy expand in 3Q18 from a year ago?

  • Below 3% (11%, 1 Votes)
  • 3.0%-3.9% (22%, 2 Votes)
  • 4.0%-4.5% (22%, 2 Votes)
  • 4.6%-5.0% (33%, 3 Votes)
  • 5.1%-5.5% (11%, 1 Votes)
  • 5.6%-6.0% (0%, 0 Votes)
  • More than 6.0% (0%, 0 Votes)

Total Voters: 9

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Before you play the game yet again, here is some background.

The 2Q2018 GDP grew slowly at 4.5% YoY, largely due to an unexpected major gas supply disruption in west Malaysia. The relatively weak growth was enough for many economists to lower their expectations for Malaysia’s 2018 growth rate. The necessary repairs will take time and supply disruption will likely last until early next year. This can be seen from the industrial production index, where the mining component has been declining since May, diverging away from the other components.

And then of course, there was a change in government, which had affected public procurement policy, with major cleaning-up exercise relating to overpriced megaprojects. There had been some public spending slowdown due to the need to recalibrate everything towards a more transparent system, which means the use of open tender throughout the government system. But things are picking up again. More importantly, there had not been any austerity despite loose talks to the contrary. The recent budget should be proof enough.

Meanwhile, strong consumption expansion had hit the trade balance by a bit: for the third quarter, trade surplus did shrink by 4.1% YoY. But with the sales & service tax back online in September, the surplus ballooned RM15.3 billion as imports dropped amid rising exports.

But the unexpected economic stimulus the economy received in the form of 3-month tax holiday from June until August should more than balance out the supply shocks. Consumption should be expanding stronger than it did in it did in the second quarter, which was already growing at an above average rate of 8.0% YoY.

Categories
Economics WDYT

[2873] Guess the 2Q18 Malaysian GDP growth

I have been extremely busy and I have just realized the last time I updated this blog was just slightly more than 3 months ago.

I still want to keep this going, except this time, no real commentary. But the second quarter was quite a quarter, externally and especially domestically. These events had added significant short-term uncertainty that might have affected growth.

How fast do you think did the Malaysian economy expand in 2Q18 from a year ago?

  • Below 3% (8%, 1 Votes)
  • 3.0%-3.9% (8%, 1 Votes)
  • 4.0%-4.5% (23%, 3 Votes)
  • 4.6%-5.0% (38%, 5 Votes)
  • 5.1%-5.5% (15%, 2 Votes)
  • 5.6%-6.0% (8%, 1 Votes)
  • More than 6.0% (0%, 0 Votes)

Total Voters: 13

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Categories
Economics WDYT

[2865] Guess the 4Q17 Malaysian GDP growth

It is the final GDP release before the year goes to the dogs! The Department of Statistics will announce the fourth quarter figures tomorrow at noon. Before that, let us play a game:

How fast do you think did the Malaysian economy expand in 4Q17 from a year ago?

  • 4.5% or slower (13%, 3 Votes)
  • 4.6%-5.0% (13%, 3 Votes)
  • 5.1%-5.5% (22%, 5 Votes)
  • 5.6%-6.0% (43%, 10 Votes)
  • 6.1%-6.5% (0%, 0 Votes)
  • Faster than 6.5% (9%, 2 Votes)

Total Voters: 23

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For some context, the year 2017 was a pretty good year for GDP growth. It came after a pretty bad two-year period that in large part caused by the GST-shock to the economy.

But the fourth quarter growth is unlikely to be faster than the 6.2% yearly expansion we experienced in the July-September period. The third quarter was the peak and it was extraordinary. Even the 5.8% year-on-year growth in the second quarter now seems slightly on the high side.

You could see that industrial production has taken a break from the pace it grew for much of last year. Hot export and import growth are tapering off, with the volume index growing at a more modest pace now. There will be no more double-digit growth in the near future. Improving foreign exchange rates for the ringgit (with the exception against the Euro) will also keep export growth from flying off as it did from December 2016 to November 2017. Money supply growth is stabilizing after climbing for much of 2017 from a trough.

Change in government spending would be super-interesting this time around since the general election is just around the corner. Other GDP components like consumption and investment would likely expand at a rate not too different from the recent quarters.

Whatever the fourth quarter GDP growth would be, the first nine-month strong growth has translated well in the labor market. Seasonally-adjusted unemployment rate fell to 3.3% in December after staying at 3.5% for the longest time. So, consumption growth seems sustainable and okay in light of labor market improvement.

This happens at a time when core inflation has also fallen, suggesting potential output for the economy may have risen up, which is good news. As a result, unemployment rate could probably drop further with little impact on demand-pull inflation. I think this may also mean another rate hike by the central bank might be unnecessary this year, if things go as it is now.

Oh, happy lunar new year. Given how things are happening with the dogs here in Malaysia, I already cannot wait for the year of the pig. Too oinking exciting.

Categories
Economics

[2861] The society (and the GDP) is larger than a collection of individuals

It is fashionable in certain circles these days in Malaysia to question the reliability of GDP as a measure of welfare. They say they do not feel GDP growth and they prefer something like household income or wage statistics to a measure that is hard to understand. The more extreme criticism goes to claim GDP is worthless.

A journalist recently called me up for a crash course in GDP, just after the release of the third quarter statistics. “Why would the GDP matter to the man on the streets?” She asked me in a combative tone, as if I was lying about GDP, as if I was part of a conspiratorial system.

But GDP has functions that wages and household income cannot fulfill, just as wages and household income play roles GDP cannot properly fit in.

Wages and household income describe individualized statistics. Its appeal to personal welfare is also its weakness: it does not describe much beyond the individuals.

If the world were all about the individuals and the things happening within the four walls of our homes, then wages and household income would be sufficient. But there are entities that exist outside that do not contribute to our incomes and wages directly. And yet, those extra-household activities bring benefits to us (and sometimes, not so).

For instance, if a robot owned collectively by a community of humans provides a service to the neighborhood for a nominal fee (or perhaps even at market price), and that the robot income is used for community improvement instead of being paid as dividend to individuals, it is not clear to me wages and household income would increase as a result. But that income would definitely be counted under GDP.

Or if you are a Luddite and dislike the example, consider a more traditional case. If a government-run business — like operating the trains — makes profit and pays dividend to public coffers while the government itself is running a fiscal surplus, that income would not translate into wages or household income. But GDP would take care of that income, taking it as income for the whole economy.

Granted, GDP has its issues but we have to be careful about making false dichotomy when in truth GDP, wages and household income (along with other statistics) play complementary roles within multiple contexts. There are times GDP is more useful than wage stats and there are times the reverse is true. A widening productivity-wage gap, for instance, can be worrying within the current system and headline GDP figures might not be as illuminating as wage/household income statistics. And there are times all are useful. A complete picture of the world would use all measures available.

To kick GDP out as worthless in favor of a more restrictive statistics centered purely on the individuals is to develop a worldview of selfishness, that the world is all about me, me and me while discarding the fact we live in a society. The society can be larger than a collection of individuals. And I say that as a libertarian.

Categories
Economics WDYT

[2860] Guess the 3Q17 Malaysian GDP growth

The Malaysian GDP has been growing strongly so far this year. So strong, that a lot of economists and institutions had to revise their 2017 projections significantly.

The growth has been partly due to consumption recovery that took a tumble thanks to the GST, and partly due to strong trade figures (though this is true for the second quarter only). You can see the actual contribution of each component to the GDP below:

Industrial production rose about 6.0%-6.8% YoY in the third quarter, which is quite respectable. The September numbers are not out yet but I do not expect it to be bad. The fourth quarter could be a different story with all the major flooding happening, especially in Penang which is an industrial powerhouse in Malaysia. And we are not yet done with November. I am unsure how the major Penang industrial spots are affected but it does not seem like the disastrous Bangkok-style 2011 flooding. But at the very least, several production days could have been affected just because of labor and commuting issues.

This monsoon season feels stronger than usual but I probably should look at the rainfall data first before making that statement. Unfortunately, data at the Met Department is… not really forthcoming. But this is one negative impact of climate change on GDP growth. Addressing climate change for Malaysia might not be easy since our emission contribution is not big compared to other countries, but we can do our part by keeping our jungle healthy and perhaps, institute a carbon tax or at least a tax on petrol.

Trade figures continue to be outrageously strong. Total trade has been growing at double digits since December last year. There is no temporary “base effect” and instead there is a level shift, as you can see in the second chart. More relevantly, net exports are strong too.

You might say, “but these are in nominal prices!” Well, the same level shift is also visible in export and import indices that strip price effect out. So, it is real (Get it? Did you get it?).

But the double-digit yearly growth on the nominal part will not last, and so this I agree with Mr Econsmalaysia. Eyeballing the levels, December sounds like the time when the double-digit growth phenomenon will end. But, that also means, Penang flooding notwithstanding, trade would likely have a positive effect on the GDP in the fourth quarter.

Anyway, the labor market and core inflation appear stable despite the relatively strong GDP growth so far this year. Meaning, no overheating yet.

The Department of Statistics will release the GDP figures on Friday. So…

How fast do you think did the Malaysian economy expand in 3Q17 from a year ago?

  • 4.5% or slower (10%, 1 Votes)
  • 4.6%-5.0% (10%, 1 Votes)
  • 5.1%-5.5% (20%, 2 Votes)
  • 5.6%-6.0% (40%, 4 Votes)
  • 6.1%-6.5% (20%, 2 Votes)
  • Faster than 6.5% (0%, 0 Votes)

Total Voters: 10

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