Reasons of Malaysia Gdp to Fall

Topics: Inflation, Economics, Investment Pages: 3 (932 words) Published: September 30, 2010
The Reasons for Malaysia GDP to fall.

(i) Conditions of Labour Market
The employment condition in Malaysia is affecting mostly the manufacturing sector, which is represented by around 10% of the country as total labour force. Despite that, the revival of the local labour market seems to put ahead that the procedures taken by the Government under its fiscal stimulus packages to enclose the increase of unemployment in the country are effective. As firms in the manufacturing sector that were affected by the crisis reduced their operations, the conditions in the labour market weakened in the first quarter, especially in the first two month of the year. With one-half the workers being retrenched in the first quarter, the total retrenchments increased to a seven year high of a 26064 persons in 2009. However, as retrenchments declined and firms started to hire new workers, labour market conditions began to stabilize in the second quarter and improved thereafter. The unexpected fast recovery in the labour market following improvements in both global and domestic economic conditions, resulted in a lower unemployment rate of 3.7% of the labour force, compared to the earlier forecast of 4.5%. The grant salary increments had been continued by the employers in the private sector at a moderate rate of 3.4%, despite the challenging economic environment and declining productivity growth in 2009. At the moment, though, the official estimate of unemployment for the full year of 2009 still stands at 4.5%. (230)

(ii) Inflationary Pressures
The average of the headline inflation is 0.6% in 2009, moderated significantly as inflationary pressures in Malaysia, in line with global and domestic developments. The conditions of global demand which is weak, particularly in the first quarter of 2009 led to a significant drop in global commodity prices, especially crude oil prices. The rental prices for the local residential market in 2010 are expected to be determined by...
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