| Friday, 07-Dec-2001 8:23 AM Malaysia's 3Q GDP, Part II by Harun Rashid Dec 6, 2001 In the determination of the national gross domestic product (GDP) as an indicator of whether a country has experienced enhanced economic activity as growth, or the reverse, a downturn toward recession, statisticians compare each new quarterly result with the quarter just past and again with the same quarter a year ago. The amount of any difference in each case is determined by simple subtraction, and is recorded as either a positive change (growth) or a negative change (downturn). The earliest figures available are basically just estimates, subject to later revision, and even later, a final revision. There is a time lag in reporting, and rarely are the first reports indicative of present conditions. They do little but give an early indication of the past. If a trend is discernable, these first reports may also give a faint picture of present economic conditions, and less likely, a peek at the future yet to come. Each quarter Malaysia's Statistics Department prepares its GDP report in a standardised fashion. The same basic informational format is used for every report. First, a comparison is made between the present quarter and the quarter before. The difference is given in both Ringgits and as a percentage. Next, there is a comparison between the present quarter and the same quarter one year ago. The difference, again, is given in both Ringgits and expressed as a percentage. Each report contains only three primary numbers, the new one for the current quarter and two prior ones. All secondary information is derived from these three. The current GDP figure, given in Ringgits, is subtracted from each of the two prior quarters in a simple arithmetical operation to find the amount of change, which may be positive or negative. This change is also expressed as a percentage. The quarterly
results are calculated and reported in tables according to whether
the figures used are purchasers prices in constant 1987 Ringgits
or in current Ringgit prices. There is a slight difference in the
results, but the trend and relative changes are much the same. A
letter writer (see The figures for 2000 and 2001 are: (billions)
When one considers the drop in manufacturing activity, the rise in unemployment, the stagnation in the housing and commercial property sectors, and the drop in demand for exports, it is difficult to explain the optimism expressed by the head of Bank Negara, quoted by AFP as saying, "Right now, the indication is that for the fourth quarter, we expect to have a better growth than in the third quarter." On growth for the full year, she added, "Our assessment is that it will remain positive." The year is almost over, and she is in the best position to know. Yet overall indications suggest the end of the year 2001 will not find Malaysia in a very positive growth mode, whether this is measured by GDP figures, exports, tourist dollars, or consumer spending. One should be realistic in the face of declining conditions, and all that is desired is for the ministers and other officers of the party-in-power to be more candid about the situation. The country is facing a critical period, and all the party-in-power can suggest is more consumer and government spending. There is no sign of thrift or belt-tightening, no indication that the serious situation involving the judiciary is getting the attention it demands. In current prices, there was a sharp decline in the first quarter from the peak reached during the 4Q of 2000. The 2Q indicated a sharp decline year-on-year. The lack of acknowledgment or comment on the downturn in year-on-year economic activity to date, expressed in current prices, reflects poorly on both the Statistics Department and Bank Negara. Suspicions that deception is intended may be unjust. The optimism thought unseemly may be but residual remembrance of an earlier era, when each new quarter brought smiles of pleasant surprise. A side glance at consumer confidence, always an important factor in maintaining economic vitality, might be offered in justification. While this is indeed an important consideration, confidence in all levels of government can only be improved when the central bank is seen to conduct its affairs competently and objectively. The Bank Negara and the Statistics Department must be free of any political pressure that attempts to falsify its reports. There is strong interest in attracting foreign funds into Malaysia's manipulated stock market. The loss of direct foreign investment is also troublesome, caused primarily by increased levels of bribery and the multifarious other forms of official and sanctioned corruption in government. An appearance of financial stability and a vibrant economy are lures. To this end it is one thing to be honestly conservative, peppered with a cautious optimism. It is quite another to be seen as making a conscious contribution to public deception for political purposes under the guise of patriotic duty. It is strangely popular for various ministers and economists to make long range forecasts of the GDP. These forecasts have all been overly optimistic for the past year. Repeated revisions were required. Present projections, from the prime minister to the drovers of the Finance Ministry, are for the economy to end the year 2001 on a positive note, exceeding 2000 even if only by a thread. The cold numbers, helplessly free of any creative instinct, when expressed in current prices year-to-date, predict the year 2001 will eventually enter the books in decline from the year 2000 by more than -3.5 percent. The trend continues downward.
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