ASEAN has proved itself to be one of the largest and most rapidly growing economic zones in the world. Growth in the region has been relatively quick and stable since the early 2000’s. One of the key success factors of ASEAN is the diversity of the different countries involved.
With the recent recovery of the global economy, many countries have been in line with the recovery, displaying improving performances in terms of their stock markets, economic indicators, and the general attitude of the population.
However, one country stands out quite conspicuously apart from the others. With a continuously shrinking GDP growth rate, the value of the Malaysian currency, the ringgit, the lowest it has been in over 15 years, and the lowest consumer confidence in ASEAN region, the outlier, Malaysia, has seen better times, to say the least.
Slower GDP Growth Rate
Even though Malaysia is one of the fastest growing economies in ASEAN, its recent results report quite some disappointing numbers. The country’s second quarter GDP growth rate has dropped to 4.9% when compared to the first quarter’s 5.6%. When the current GDP growth of 4.9% is compared to last year’s second quarter’s number, it seems that 2014 was much higher at 6.5%.
This is the slowest the economy has been in two years.
According to the Central Bank of Malaysia, some factors that contributed to the lower GDP growth rate includes the lower growth in the services sector fueled by the slower expansion in most sub-sectors and the moderation in the manufacturing sector Exports from Malaysia have dropped four months out of the past half year with many experts contributing the decrease to the uneven global recovery as well as the slowdown in China.
The Bank believes that domestic demand will be a key driver of steady growth of the Malaysian economy, and combined with key investment in infrastructure initiatives that the government has planned, should offset the weaker performance of the external sector.
The Ringgit’s Depreciation
The depreciation of Malaysia’s national currency, the ringgit, has been going on for a while now. However due to the prolonged activity, the ringgit has dropped to its lowest in value in over 17 years.
The drastic drop in the value is not without explanation. Experts are quoting several reasons for the fall but the 4 main ones are the ongoing crude oil price crisis, the devaluation of the Chinese yuan, the possibility of the US increasing their interest rate, and its very own Malaysian political drama with its PM facing corruption scandals.
Being a net exporter of energy, Malaysia has been hit by the lowering of crude oil prices affecting its business. In trying to stay competitive in overseas markets, Beijing devalued their currency forcing others to follow suit.
Malaysians Losing Hope
The population has not reacted well to the above circumstances outlined. According to a recently released report from Nielsen, Malaysia is now the country with the lowest level of consumer confidence, suffering the largest drop in its third quarter in a time when many other ASEAN countries are seeing their confidence measure increase.
Consumers elsewhere are very much more hopeful it seems. In fact, the four SEA countries Philippines, Indonesia, Thailand, and Vietnam are among the top 10 most optimist countries in the world.
According to the report from Nielsen, “With the exception of Malaysia, Southeast Asian confidence levels are still tracking along the global average.”
With record low consumer confidence, under-performing economy, and drastic depreciation of its currency, Malaysia really needs to step up its game if it hopes to catch up to its neighbors.