Malaysian Economy Reality Check: GDP and GNI

Bank Negara reported an expected GDP growth of 5-6% for 2013, but what does this really mean for the average Malaysian? | Image by Kaihsu Tai

In a previous blawg entry, I showed you what inflation is, i.e. an increase in the money supply, how to calculate it, and a little about what it means. In this post, I’ll show you what happens when you apply these insights to the Gross Domestic Product (GDP) and Gross National Income (GNI) of Malaysia.

The Bank Negara Governorm Tan Sri Dr Zeti Akhtar Aziz recently commented on the expected GDP for this year. From The Star:

The Malaysian economy is expected to grow steadily at 5% to 6% in 2013, thanks to strong domestic demand, robust private investment and a better global outlook.

Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz expects growth to be sustained on the back of higher domestic demand and an improvement on the exports front as the global economy recovers.

She added that last year’s better-than-expected 5.6% full-year growth came despite a weaker global economic environment.

Sounds pretty good right? A GDP increase of 5% to 6% is pretty impressive. But what happens if we take a look at GDP and GNI over the past decade and apply our new insight of how to adjust for inflation?

Time for a reality check!

As in my previous articles, I’ve crunched the numbers and put them into a spreadsheet, and so here is a video where I show this to you, and explain briefly what it means.

And that’s today’s Reality Check.

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Internationally renowned Swedish software developer with a passion for Systems Thinking and understanding the many facets of the human condition, and how we can move forward by understanding the past.

Posted on 25 April 2013. You can follow any responses to this entry through the RSS 2.0.

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2 Responses to Malaysian Economy Reality Check: GDP and GNI

  1. Dexter

    Nice study!

    however, I find a flaw in the calculation (im not an economist, so i may be wrong) in the assumption you made on inflation. You have compared the currency supply from 1993 to 2012, and the inflation rate that you calculated is based on this increase of currency. But there are a couple of crucial factors that I think were neglected here:

    1. The growth of the country. From 1993 to 2012, there is growth within the country. This growth increases our wealth and therefore increases the value of our currency. Your calculation is based on the assumption that, our country maintained the same from 1993-2012, whilst the supply of currency keep increasing. So i believe that the inflation should be supply of currency minus growth of the country. The growth of the country is reflected in the GDP, but then again it is debateable whether the GDP reported is real.

    2. The value of our currency is affected by the value of currencies of other countries too. How valuable our currency is compared to other countries, will depend on many many factors and is too complex.

    Putting the complexity of foreign currencies aside, I believe that the supply of currency should be propotionate to the growth of our country, or GDP (in percentage). However, like mentioned before, the GDP reported may not reflect the real growth of our country.

    Would love to get your comment.

  2. Pepper Lim

    Nice!