Debate rages in Malaysia over how to measure GDP

29 Aug 17

A debate has been sparked in Malaysia over how the country measures its gross domestic product (GDP).

Second finance minister Datuk Seri Johari Abdul Ghani has objected to a call from the Federation of Malaysian Manufacturers (FMM) for Malaysian GDP to be measured in US dollars, a move it said would give a better reflection of the country’s economic growth.

The FMM argued that measuring GDP in the local ringgit currency gave a misleading impression of growth since the ringgit had fallen in value.

But the minister said the country’s economic activity was measured primarily through activities transacted ringgits.

“Malaysia's GDP is reported in constant prices which already takes into account the effects of price changes and exchange rate movements,” the minister said.

“In other words, the GDP reflects only the changes in the quantity of goods and services produced in the country.”

Malaysian GDP calculations were in line with the international standards required by the World Bank and International Monetary Fund, so “GDP measured in US dollars is not relevant for a matured and sophisticated economy like Malaysia, nor is the GDP measured in US dollars appropriate for an economy that is not dollarised in any sense”, the ministered believed.

He said Malaysia’s economy had grown by 5.8% in the second quarter of 2017 and 5.6% in the first quarter, compared with the same periods in 2016. 

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