KUALA LUMPUR, March 14 ― Malaysia’s gross national income (GNI) per capita in US dollars decreased to an estimated US$8,821 (RM39,231) last year, raising concerns that it would set back the country’s goal of achieving high-income status by 2020.
According to the Malaysian Economy in Figures 2016 report by the Economic Planning Unit (EPU) in the Prime Minister’s Department, Malaysia’s GNI per capita (US$) fell from US$10,677 in 2014 to an estimated US$8,821 in 2016. The World Bank’s current definition of high-income economies is those with a GNI per capita of US$12,476 or more.
“If that continues, then it'll set back our goal to reach the high-income threshold by 2020; it'll set back by a couple of years,” Sunway University economics professor Yeah Kim Leng told Malay Mail Online.
“Our purchasing power, especially in buying foreign goods, has dropped. But it won't affect our domestic spending if it doesn't involve imported items,” he added.
Yeah said two factors caused the “sharp” estimated fall in Malaysia’s GNI per capita in US dollar terms: ringgit depreciation and the extremely low inflation rate of below 1 per cent in advanced economies since the global financial crisis. Malaysia’s inflation rate was estimated at between 2.5 and 3.5 per cent per annum last year, according to the EPU report.
“But we do expect, with the pickup in inflation in the four regions ― US, Europe, Japan and UK ― when inflation picks up and our currency and ringgit exchange rate strengthens, then it'll normalise,” said Yeah, referring to the GNI per capita.
Jayant Menon, lead economist (trade and regional cooperation) at Asian Development Bank, said the estimated fall in GNI per capita in US dollar terms showed that living standards were being “significantly eroded”.
“It suggests that the capacity of the average consumer to purchase goods and services, produced abroad as well as at home, is diminishing.
“This drop also pushes Malaysia's aspirations of graduating to developed or high-income country status even further away, since the benchmark is defined not in ringgit but in US dollars,” Jayant told Malay Mail Online.
Wan Suhaimie Saidie, senior vice president of research at Kenanga Investment Bank, said the estimated fall in GNI per capita in US dollar terms could push back Malaysia’s goal of achieving developed nation status.
“But for sure it would take a lot more effort to achieve the target given that it has less than three years to achieve it. With the global and domestic economy looking uncertain, it would be even more challenging,” he told Malay Mail Online.
RAM Holdings head of research Kristina Fong, however, said she did not find the estimated drop of the GNI per capita in US dollar terms very alarming, pointing out that the ringgit exchange rate had depreciated quite significantly.
“From 2014 to 2016, there was on average 27 per cent depreciation. So falling by 17 per cent in USD terms shows that there was still output growth,” Fong told Malay Mail Online.
“Population growth over the two years from 2014 to 2016 was around 3 per cent, so if income/ capita grew 9 per cent in ringgit terms despite this, it is not bad. The real test would be to compare it with other countries,” she added.
According to the EPU report, Malaysia’s GNI per capita in ringgit terms rose from RM34,945 in 2014 to an estimated RM37,930 last year.
Fong also stressed that these were just numbers and that the more important thing was to ensure sustainable growth from policy implementation.
“Growth in income per capita has to be representative of economic development rather than a reflection of inflation.”