Macroeconomic Problems in Malaysia

Macroeconomic Problems in Malaysia

Economy is a very powerful element that can speed up the development of that particular country. In contrast, if the economy is performing badly, it will become a stumbling block that retard the process of development of a country. In Malaysia, the economy is considered performing well as the GDP rate is shown to be 4.4% in the first half of 2011 according to the Department of Statistics in Malaysia. In fact, Malaysia has faced some of the major macroeconomic problems such as unemployment, inflation as well as balance of payments problems.

Unemployment is a major economic issue that brings a big impact to Malaysia. The unemployment rate in November 2011 was shown at 3.1% according to the Department of Statistic in Malaysia. It does not mean that people are lazy to work. In fact, they are unable to find a job but still actively seeking for a job. Unemployment rate rises as the country plunged into recession. When recession happened, rate of unemployment will increase due to action of lay off workers by major companies that were affected by the bad economy activities.

Unemployment normally involved during recession as the people are hard to find income. Hence, government will reduce the taxes and increase the government expenditure by implying expansionary fiscal policy to help the people whereas the Central Bank will low down the interest rate to help the people to get loan more easily. Prices of products and services were decreased in order to reduce the weight of the people’s burden.

In addition, Malaysia is also facing inflation in these recent years. Inflation means a general increase in price of goods and services. Due to the scare resources in the country, the cost of production keeps growing up. So, the firms have no choice but have to increase the prices of the products. Inflation has occurred and lead to the falling of purchasing power of the consumer. This is