ASEAN is one of the largest economic zones in the world. Growth in the region has been relatively quick and stable since the early 2000’s. However, one country stands out from the others. GDP growth is shrinking. The value of its currency is at is at a 15 year low. With the lowest consumer confidence in ASEAN, the Malaysian economy has seen better times.
Even though the Malaysian economy is one of ASEAN’s fastest growing, its recent results show some disappointing numbers. The country’s second quarter GDP growth rate dropped to 4.9% when compared to the first quarter’s 5.6%.
This is the slowest the Malaysian economy has been in two years.
According to the Central Bank of Malaysia, factors contributing to lower GDP growth include a weak services sector. This is fueled by weak expansion in most sub-sectors. Exports from Malaysia have dropped four months out of the past six. Many experts attribute this to an uneven economic recovery and a slowdown in China.
The central bank believes domestic demand will be a key driver of steady growth in the Malaysian economy. Combined with investment in infrastructure which the government has planned, this should offset the weaker performance of other sectors.
The Ringgit’s Depreciation
The depreciation of Malaysia’s national currency, the ringgit, has been going on for awhile now. But the ringgit dropped to its lowest value in over 17 years due to prolonged activity.
The drastic drop in the ringgit is not without explanation. Experts are quoting several reasons for the fall. But the four main ones are an ongoing crude oil price crisis, the devaluation of the Chinese yuan, the possibility of the US increasing their interest rate, and Malaysian political drama with its PM facing corruption scandals.
Being a net exporter of energy, Malaysia has been hit by lower crude oil prices. While trying to stay competitive overseas, Beijing devalued their currency forcing others to follow suit.
People Losing Hope Over Malaysian Economy
People have not reacted well to the above circumstances. According to a recent report from Nielsen, Malaysia now has the lowest level of consumer confidence, suffering the largest drop at a time when many other ASEAN countries are seeing their confidence increase.
Consumers elsewhere in Southeast Asia are more hopeful. In fact, the Philippines, Indonesia, Thailand, and Vietnam are among the top 10 most optimistic 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, an under-performing Malaysian economy, and drastic depreciation of its currency, the country needs to step up its game to catch its neighbors.
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