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2013 Economic Review of Malaysia

Jan 20, 2014 | Valerie Wong

Malaysia has had its ups and downs, but it remains a steady economic ship for the most part. The Malaysian economy prior to 2013 has always been considered an upper-middle one. It had in 2011 a gross national income of 8,770 per capita, plus 100% of the GDP comprise of exports, thus it being a highly open economy. It's a leading exporter of natural gas, palm oil, electronic parts and components, and electrical appliances. This competitive tiger of Southeast Asia was projected a 5.0% GDP growth in 2013 after undergoing a 5.1% increase back in 2012. What's more, the World Bank ranks the country 12 out of 135 among the most externally competitive economies out there.

As for how it fared in economic terms in 2013, Malaysia will remember it in two halves. In the first half of 2013, its elections ended up being protracted and bitterly fought, such that it could almost be termed a War of Attrition among the candidates. The economy was therefore mostly defined by how the election went and who won for the first six months of last year. The bad news is that the long period afterward—wherein Malaysia's economy slowed almost to a halt—investors became a bit too cautious and adopted a wait-and-see tactic towards investments, thus the 5.0% projected increase was ultimately dropped when reality sunk in.

The Economic Recovery of the Latter Half of 2013

The good news is that, as the last six months of 2013 rolled in and the Cold War between investors and Malaysia thawed, it became business as usual. Malaysia got its much-needed turnaround soon after that long period of uncertainty, thus allowing for it to achieve stronger growth. It's like after losing several rounds, Malaysia was able to recover and achieve its second wind since it was never knocked down in the first place. According to the Alliance Research Economic Team, the GDP crawl for 2013's first half got a low 4.2%, then its predicted 5.0% projected increase finally came about in the third quarter of 2013 despite the lull prior to that.

This dramatic recovery and strong rebound, the team claims, helped analysts recalculate its estimates, thus 2013 got a 4.6% growth forecast for 2013. Sure, it's 0.4% lower than the promise held in 2012 just as Malaysia is entering 2013, but it's still a positive sign of Malaysia's mettle as an economic contender. Even in the face of political uncertainty during a whole six months, investors still ended up investing in the country because of their good faith and longstanding relationship with the Southeast Asian Tiger. Nevertheless, during the early to mid-year months, TA Securities observed quite a bit of uncertainty in the external economic front.

Foreign Influences to Malaysia's Economic Rebound

Malaysia has come a long way since the U.S. Federal Reserve's suggestion of cutting back on the bond -buying program that would've affected economies like Malaysia in a major way. Aside from internal factors like a local election, external factors were also at play here. Emerging markets like Malaysia were caught up in some sort of guessing game because of that announcement, which is ironically the same guessing game foreign investors were trapped with when the Malaysian elections were going on.

Regardless, a measure of stability came about after the Federal Reserves replaced Ben Bernanke with Janet Yellen. Why is this change important? It's because Yellen is pro-bonds, which means Malaysia can still depend on them to continue its growth (and indeed, its economy has showcased a dramatic recovery from the slowdown it suffered during and after the election was through). Instead of tapering off, Yellen decided that bond buying must continue because the U.S. still has a weak labor market. This decision has helped Malaysia and other countries recover from the previous uncertainties.

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