Malaysia Presentation:

Justin SaingZebbie HunterAndrea Salazar

9/20/15

Basic Facts:

•Location: Peninsular Malaysia is located South of Thailand, north of Singapore, and east of the Indonesian island of Sumatra. East Malaysia is located on the island of Borneo and shares borders with Brunei and Indonesia.

•Capital: Kuala Lumpur •Official Language: Malay

Basic Facts (2):

•Ethnic Groups: 50.1% Malay, 22.6% Chinese, and 11.8% Indigenous (Original Malaysians)

•Religion: Islam•Government: Constitutional Monarchy / Representative Democracy

•Prime Minister: Najib Tun Razak

Basic Facts (3):

•Population (2015): About 31 Million

(44rd)

•GDP (Nominal): About $327 billion

(2014)

•GDP (Purchasing Power Parity):

$746.1 billion (2014)

•Currency: Ringgit

Malaysia Is Facing Many Economic Issues:

•Rapid growth in public debt, causing severe strain

•Currency depreciation (the ringgit)•Shrinking revenues due to falling oil

prices•Stock market slide and weak economy

(GDP Growth Rate for Q2 2015 is 1.1%) •Potential turmoil and street protests

Rising Debt Level:• Excessive use of bond financings • Malaysia has the second largest increase in

debt as share of GDP (second only to China and Hong Kong)

• Government spending is out of control; in 2013, the debt was at $277 billion, a 35% rise from 2009

• Weak economy and declining exports • A Malaysian economist Amir Baharahuddin

argues that many Malaysians live beyond their means

Currency Crisis:• The ringgit has dropped in value against the dollar not

seen in nearly two decades; RM4.22: US$1, as of Aug. 21.• From last year, the ringgit declined 24% against the dollar• Foreign banks like Swiss Bank UBS are feeling nervous

about Malaysian central bank’s ability to defend its currency;

• Many investors are fleeing the country

Stock Market Decline:• Investors are pulling funds from Malaysia• As China’s stock market plunged, that also hurt Malaysian

stock market• The FTSE Bursa Malaysa KCLI Index has plummeted this

summer• Malaysia is China’s largest trading partner; two-way trade

topped $100 billion in 2014

Impact from Falling Oil Prices• Malaysia is an exporter of oil and natural gas• The collapse in the price of crude oil has huge

impact on government revenues• Since China has devalued its currency, Malaysia

is struggling to stay competitive.

Reserves Are Dwindling:• The Malaysian Central Bank is facing mounting pressure

to stop currency slide• They have tapped more and more into the bank reserves to

protect the ringgit• But this measure has been largely ineffective; besides, the

pool of resources is dwindling

Role of the Central Bank:

•Zeti Akhtar Ahmad, governor of Malaysian Central Bank maintains that the ringgit is falling faster than justified

•He said, ‘the ringgit trading at levels that not reflective of the true Malaysian economy’

•Despite the ongoing pessimism, Zeti dismissed the prospect of financial collapse

•His comments are at odds with many economists

•He also fails to calm the growing fear of emerging markets

Political Turmoil:• It was reported that Prime Minister Najib tun Razak

diverted funds from 1MDB (Malaysian Development Berhad) to his private bank account, some $600 million

• The news sparked an outrage; Malaysians take to the streets to protest

• Amid the corruption charges and abuse of power, Najib refuses to step down

• The controversy has scared away investors as the government begins the crackdown on dissidents

Tough Times are Ahead: • Some economists like Reinhart and Rogoff argue

that high public debut will hurt future growth prospects

• Trade deals with partners of the Trans Pacific Partnerships have been put on hold, hurting foreign investment

• Malaysia finds it harder to compete with other countries like Vietnam with cheaper labor costs

• Unless all these issues are fixed, Malaysia could face a serious financial crisis

Sources:• http://www.adb.org/sites/default/files/publication/154508/ado-2015.pdf (Pg. 25-28)• http://www.freemalaysiatoday.com/category/nation/2013/08/02/housing-car-loans-ca

use-of-rising-debt/• http://cfi.co/asia-pacific/2012/08/mida-malaysia-your-profit-centre-in-asia/ (Image)• http://www.worldpoliticsreview.com/articles/16457/fallout-from-1mdb-scandal-hits-m

alaysia-s-economy-hardest• http://www.bloomberg.com/news/articles/2015-08-10/malaysian-stocks-set-for-correc

tion-as-scandal-spurs-outflows• http://www.bloombergview.com/articles/2015-08-10/1990s-come-back-to-haunt-mala

ysia• http://marketrealist.com/2015/08/malaysian-ringgit-falls-17-year-low/• http://www.wsj.com/articles/how-low-can-malaysias-ringgit-go-1438938355• http://thediplomat.com/2015/08/malaysias-economy-faces-severe-strain/• http://www.marketoracle.co.uk/Article51794.html• http://www.businesscircle.com.my/imf-gives-malaysia-thumbs-up-for-ongoing-reform

s/• http://thediplomat.com/2015/08/malaysias-economy-faces-severe-strain/• https://www.cia.gov/library/publications/the-world-factbook/geos/my.html• http://www.tradingeconomics.com/malaysia/gdp