Malaysian Economy Grows at Slowest Pace in Two Years

According to government data, Malaysia’s economy expanded at a slow rate of 4.9 percent in the second quarter, amid such factors as political instability and a stagnant currency, according to AFP. The country has also suffered from drops in exports and private consumption.

The world economy has not been kind to Malaysia, especially when it comes to the issue of lower oil prices. The Southeast Asian country relies a great deal on energy exports to maintain a prosperous economy, but the nation’s devalued currency has hit exports across the board.

According to government data, Malaysia’s economy expanded at a slow rate of 4.9 percent in the second quarter, amid such factors as political instability and a stagnant currency, according to AFP. The country has also suffered from drops in exports and private consumption.

The world economy has not been kind to Malaysia, especially when it comes to the issue of lower oil prices. The Southeast Asian country relies a great deal on energy exports to maintain a prosperous economy, but the nation’s devalued currency has hit exports across the board.

Exports fell 3.7 percent in Q2, which is lower than the 8.8-percent growth seen in Q1. Further, imports contracted 2.8 percent because of lower demand for foreign items. Despite the setbacks, the government maintains that the economy will remain on a stable path, primarily because of domestic demand.

However, the data tells a different story regarding domestic consumption, and experts believe a demand decline is inevitable. The consumption tax that was implemented in April continues to have a negative impact on the economy, and citizens have already complained of high-priced items stemming from the tax.

Natural Resource Output

The mining sector has also declined due to falls in oil and natural gas production. The mining sector accounts for over 9.0 percent of the Malaysian economy but has suffered a slowdown of 6.0 percent, when compared to 9.6 percent from Q1.

Malaysia is a middle-income nation that has shifted from a resource-based economy to one that is rich in diversity, and the government aims to reach high-income status by 2020 through such means as attracting investment from the Islamic world and enhancing developments in biotech and technology.

Currency Downfall

Malaysia’s ringgit plunged to its lowest level in 17 years, and the currency dropped 20 percent in the past year. Malaysian authorities face outside pressure from China’s devalued yuan, which could potentially spark a currency war in the region, and the government is suffering from a number of in-house problems.

For instance, part of the reason why the ringgit is tumbling is because of a scandal that involves Prime Minister Najib Razak and state-run firm 1Malaysia Development Berhad. According to the allegations, Razak received $700 million that was deposited in his personal bank account. The prime minister, who also governs as the finance minister, denied the allegations, and officials have labeled the money in question as a donation.

Malaysia’s Gains

Gross fixed income formation accelerated from a 3.9-percent increase in private investment. In addition, the economy saw a 5.0-percent increase in the service sector, which is attributed to growth in such areas as communications, wholesale and retail. The manufacturing sector also remained on an even keel of 4.2 percent because of developments in electric products.