Monday, 1 April 2013

Household incomes continue to soar?

I read with amazement the following article from Bernama:

"Household Income Continues to Soar on Economic Transformation".

"The current average monthly household income of Malaysians at about RM5,000 compared to RM4,025 in 2009"

This simple statement begs a few remarks:

[1] 2008/2009 was the worst global recession of the last 50 years, to take 2009 as the starting point for a comparison is rather tricky; at the very least it should have been noted that 2009 was an exceptional year, to put things in the right perspective.

[2] The average monthly household income does not mean much for the average person on the street. Malaysia has one of the worst GINI scores in the world, this index measures the degree of inequality in the distribution of family income in a country. A much better measure would have been to divide the population in brackets and to show how much for instance the people earning the lowest 20% wages have benefitted.

[3] An increase in income is only "real" if accompanied by low inflation. The Department of Statistics claims that the inflation is indeed very low (between 1% and 2% the last year), see for instance this graph. I don't believe those low numbers at all, when I left Malaysia in 2010 almost all prices that I could come up with had roughly doubled in the last say 10 years, not exactly an indication of low inflation (I have to admit that I compared prices in KL, in the rural areas it might have been different).

Interestingly, the Bernama article seems to agree that the official number is wrong:
  • "However, he said the government should place greater emphasis and take measures to reduce inflation rates in the two states, which were escalating due to indiscriminate hikes in prices of goods by certain parties."
  • "Universiti Sains Malaysia, School of Social Sciences, associate professor of criminology Dr P. Sundramoorthy said, all the government initiatives and various financial support were timely and relevant to ease the burden of the rising cost of living."
But if the real inflation rate is indeed much higher than the reported one (and I think everybody will agree with that), then the real GDP growth (which is the GDP growth corrected for inflation) is much lower than reported.

I wrote before about Malaysia's economic growth, and made some critical comments.

I like quite a few aspects from the Economic Transformation Program and in general I am positive about their achievements, but some of the claims they make are really too much. By giving a more balanced picture their credibility would increase.

1 comment:

  1. If that was the case, why close to 5m households out of estimated 6.7m households in Malaysia eligible for BR1M?