Good morning. Last night I attended YB Hannah Yeoh‘s youth dialogue event featuring Syed Saddiq and Izmil Amri. I have met Saddiq a few times and we had a chat on the latest economic numbers. I delivered the opening remark at 8 pm and then rushed back home to host dinner for senior academics and friends.
The dinner followed a long discussion on politics till midnight. There is a positive sense that some academics are starting to fully comprehend INVOKE Malaysia‘s big data methodology and reach.
Let me now address the latest economic data. The Q2 numbers are stronger than forecast and follows a reasonably good Q1 number. However, on the ground, this GDP growth has not really been felt. Conventional wisdom tells us that it will take about 6 months to 1 year for the rakyat the feel the real effects of the GDP numbers. Therefore, strategically speaking, Najib will still look to call the elections next year around Q1 or Q2 2018.
As for Najib in trying to take credit for the recent economic numbers, well that is the real “fake news”. As with everything that Najib claims to have done, the devil is in the detail.
GDP is calculated on the formula of consumption + investments + government investment + (exports – imports). This Q2 number is clearly driven by consumer spending that went up 7.1% and investment that went up 7.4%.
Increased consumer spending can be explained by consumers finally buying more mid range goods that they have been putting off since GST was introduced in 2015. Basically. people have resigned to pay the 6% GST tax on a new electronic stuff. However consumer confidence is still lagging for big ticket items such as homes or cars.
On investments, we note that foreigners are coming back to pick up equities due to the weak ringgit. It remains to be seen if these investments are hot money or longer term in outlook. Najib is also banking on China to bail him out. The prime example of such an “investment” is the ECRL, which in reality is an overpriced loan. Najib signs now for your grandchildren to pay later.
The next component of government investment is much trickier for Najib. Government investments in Q2 tells a darker story that is consistent with what is happening in Parliament, that the government is facing a massive cashflow crunch and therefore trying to pass laws to raise new revenue, such as the tourism tax. Government expenditure dropped to 0.2% compared to 6.8% last year.
As for the last component, this is more encouraging with imports outpacing exports at 10.7% to 9.6%. These numbers show that despite the political mess that Najib’s 1MDB gifted us, our SMEs are resilient and moving on.