Tag: GDP

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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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Economics WDYT

[2851] Guess the 1Q17 Malaysian GDP growth

The first quarter 2017 Malaysian GDP figures will be out on May 19. So…

Industrial production in 1Q17 did not grow as strongly as it did in the previous quarter. Nevertheless, manufacturing had swell of a time. Trade figures were very good, with both goods exports and imports grew double digits, which indicates both the external and the domestic demands are somewhat healthy. But in terms of net exports, I do not think it would contribute much to the GDP growth since import growth was stronger than export expansion.

Talking about the domestic market, the unemployment rate seems to have finally responded to the better economic environment. Eyeballing, the seasonally-adjusted UE for the quarter is about 0.2 percentage points lower than what seems to be the average for 2016. Core inflation is slightly up, also showing domestic demand is recovering, assuming this core inflation calculation by the Department of Statistics completely isolates cost-push inflation.

By the way, the 4Q16 GDP grew 4.5% YoY.

How fast do you think did the Malaysian economy expand in 1Q17 from a year ago?

  • 3.5% or slower (0%, 0 Votes)
  • 3.6%-4.0% (0%, 0 Votes)
  • 4.1%-4.5% (29%, 2 Votes)
  • 4.6%-5.0% (29%, 2 Votes)
  • 5.1%-5.5% (14%, 1 Votes)
  • Faster than 5.5% (29%, 2 Votes)

Total Voters: 7

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Economics WDYT

[2848] Guess the 4Q16 Malaysian GDP growth

The final quarterly GDP figures will out next week on February 16. The GDP grew 4.3% YoY in the third quarter, up from 4.0% YoY in 2Q16. In the first quarter of 2016, it was 4.2% YoY. So, as the game goes…

How fast do you think did the Malaysian economy expand in 4Q16 from a year ago?

  • 3.0% or slower (13%, 3 Votes)
  • 3.1%-3.5% (0%, 0 Votes)
  • 3.6%-4.0% (9%, 2 Votes)
  • 4.1%-4.5% (35%, 8 Votes)
  • 4.6%-5.0% (39%, 9 Votes)
  • 5.1%-5.5% (0%, 0 Votes)
  • Faster than 5.5% (4%, 1 Votes)

Total Voters: 23

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Judging from industrial and import figures, I would think the domestic demand part of the economy grew reasonably okay in the fourth quarter although other statistics like car sales remain depressed, suggesting not all is well.

The labor market says as much. Unemployment rate is relatively high at 3.6%. That suggests the recent economic growth recovery has not brightened up the labor market. It is not that there is no job creation, but the pace of job creation is not happening as fast as the growth of the labor force.

(Interestingly, the core inflation has been stable at about 2.0%-2.2% in annual terms. Nerdy stuff to note: core inflation fell as unemployment rate rose. This is cool, assuming the GST had minimal impact on the core inflation. Cool because unemployment rate and demand-pull inflation that the core is supposed to measure tell something about the output gap: it may suggest the gap has not changed by much despite 2015-2016 economic weakness. One would start to worry if unemployment rate goes up but core inflation remains unchanged, which suggests the output gap might be widening. A worse worry is when unemployment rate goes up together with core inflation: gap is shrinking but potential is decreasing)

The other good news is that exports did great. But with strong import growth, trade balance for the quarter will not help the GDP. Indeed, from the merchandize goods trade stats, 4Q16 net exports actually fell in the quarter by nearly 10% YoY.

So, in the end, I am thinking the 4Q16 GDP growth will be somewhere in the mid-4.0%, leaving the full year 2016 GDP growth at 4.2%-4.3%.

Categories
Economics WDYT

[2837] Guess Malaysia’s 3Q16 GDP growth

The Department of Statistics will release the third quarter GDP numbers this Friday.

Growth, I think, unlikely to be pretty and will likely be the worst so far yet this year. This slowdown has lasted longer than I expected but the good news is, I think we might be close to the trough. There is not much light at the end of the tunnel, but it does feel like it will get slightly better next year. Projections all around point towards a high-4% for 2017, versus this year’s low-4%.

Still, there is risk things would hardly move on the ground. I remember as we entered the last election cycle (possibly began as early as 2011 and definitely by 2012. It felt like forever) the government crept on its four legs. Everybody was being cautious. Friends in the government shared their frustration how the bureaucracy moved extra slow and reluctantly as the civil service felt the need to wait out for the election, lest work invested would go to naught. Najib Razak post-2013 did change the agenda rather spectacularly that Pemandu men and women hardly have work in Malaysia now, and working in India at this very moment.

So, forgive me when I am a bit skeptical upon hearing the government’s claim that the construction for the east coast rail line (ECRL) and the high-speed rail (HSR) will start next year. Maybe having a no-bureaucracy, no-tender MYR2 company doing the ECRL would hasten the timeline a bit.

But that is the prospect for 2017. What about 3Q16?

How fast do you think did the Malaysian economy expand in 3Q16 from a year ago?

  • 3.0% or slower (0%, 0 Votes)
  • 3.1%-3.5% (8%, 1 Votes)
  • 3.6%-4.0% (42%, 5 Votes)
  • 4.1%-4.5% (50%, 6 Votes)
  • 4.6%-5.0% (0%, 0 Votes)
  • 5.1% or faster (0%, 0 Votes)

Total Voters: 12

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I think growth would decelerate to below 4.0% YoY, about high-3%. That is the lowest expectation I have ever had since I left grad school and first started working. The unemployment rate is relatively high at 3.5% and export figures have not been pretty.

Still, the industrial production statistics have shown some encouraging numbers. Furthermore, consumption and imports are no doubt on the rise.

We will see how all this adds up this Friday.

Mohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reservedMohd Hafiz Noor Shams. Some rights reserved

p/s — Do not fuck this up Americans.

Categories
Economics

[2825] How has the GST affected the consumption GDP?

The GDP growth for the second quarter decelerated further to 4.0% YoY from 1Q16’s 4.2% YoY. But the most interesting GDP component ever since the GST was implemented in April 2015 is private consumption.

And there was a huge jump in that part of the equation. The 2Q16 private consumption expanded 6.3% YoY from 5.3% YoY in the previous quarter. It suggests things are normalizing.

Is growth normalizing?

I did a bootstrap model comparing actual growth with what it would have been without GST. It does show some kind of normalization.

The modelling is very naive with just a bit of seasonality sprinkled in it. The blue line is the actual YoY GDP growth while red is the counterfactual if there was no GST imposed:

GST vs non-GST GDP

But it is important to say it is not so straightforward to claim consumption growth is normalizing. The fact is 2Q15-1Q16 growth are incomparable to the 2Q16 rate. The latter period is the first time the GST effect has been controlled on the year-on-year basis since the tax was implemented while the earlier ones are polluted by base effect. Perhaps, it is better to compare 2Q16 rate with those before 2015 to get a feeling how the GST has impacted economic growth as a whole.

But we have only one point so far. Maybe it is wise to be patience and wait for more data point to be available.

Difference-in-difference

Nevertheless, the nature of 2Q16 makes YoY difference-in-difference analysis across time possible for the first time. Diff-in-diff is done to compare how a certain thing (in this case, YoY GDP growth) behave in two different situations with respect to one factor, while controlling for everything else. Controlling for everything else is tough, but in our case, we are interested the impact of the GST on GDP growth only.

More specifically, what we want to know is whether consumption GDP growth is weaker with GST than without, post-2Q15-1Q16 transition period. Or to put it simply, is the GST-drag on consumption GDP growth a one-off thing?

In the spirit of stylized facts, we want to determine whether it is Case 1 (which is bad):

Output loss, rate permanently changed

Or Case 2 (which is okay):

20160813 output loss rate normalized

Case 1 offers a much bigger output loss than Case 2. There is a Case 3 where output loss happened only during a few periods, but I do not think it is realistic since the GST is an ongoing concern.

YoY chart above suggests we are closer to Case 1.

Quarterly growth suggests case 2

But keeping in mind the issues about base effect for YoY method, maybe quarter-on-quarter calculation would be of a better help.

And QoQ suggests Case 2 is in play. There is a persistent negative effect on growth rates. From the Department of Statistics seasonally adjusted data, 2Q consumption grew only 0.7% QoQ. In 2011-2014, growth that quarter averaged close to 2% QoQ but in 2Q16, it was only 0.6%:

GST vs non-GST GDP QOQ

Indeed, QoQ growth rates since 2Q15 has been weak compared to previous years. QoQ in an way does suggest some kind of a growth slowdown.

How much output loss we suffered?

The easier question is whether the GST has adversely affected the GDP levels. It is easier because base effect is pretty much irrelevant to levels. The answer is, it has.

In the first chart, you can see the GST roughly took 1 to 2 percentage points off quarterly consumption GDP growth. That is equivalent to MYR47 billion output loss in real terms (2010 prices) in the 1Q15-2Q16 period. This includes the abnormal spending increase in 1Q15.

MYR47 billion sounds large. So is Najib’s billion ringgit donation. But to put the number is the proper context, the total size of real consumption GDP during that period was MYR843 billion. So, that is about 6% output loss in that period.

But I have not done the same diff-in-diff for other GDP components. I would speculate the overall impact is bigger than MYR47 billion. But it is hard to imagine it in my head since the expected impact is all over the place.

But I am certain the overall economy lost some economic output. That is probably Captain Obvious speaking.

Implications

If Case 1 is true, then the government has less room to mess around with its GST revenue and start encouraging investment to raise the GDP potential so that the loss is recovered as soon as possible.