The 1Q GDP / A Two Year Perspective
by Harun Rashid
May 23, 2002
The results for the first quarter are now posted, along with a positive assurance that, "it is clear that the widely anticipated economic improvement this year is happening." Whether this is borne out or not depends on a number of factors outside local control. Again and again, the prediction of impending riches two quarters hence has proven to be premature. What is established is a trend for unfulfilled optimistic prognostication.

A consumer-based economy relies on continuing confidence that the economy is sound, jobs are secure, and that all is safe to spend, spend spend. Buying on credit is officially encouraged as a patriotic performance in the national interest. The official spur for promoting consumer confidence is, "The oasis is out there, just two quarters beyond that distant lake." It is working; consumers have continued to spend just like the government, believing borrowed money never needs to be repaid. Unfortunately for lenders, this fiction often comes true.

Figure 1. shows the range of the GDP, first for the four quarters of 2000, and then for 2001, with the average value and the midrange indicated. The 1Q of 2002 is indicated by an arrow to give a current perspective on how the economy is doing in this difficult period. GDP values in Figure 1. are taken from tables posted today on the webpage of the statistics department. [the raw data is available here]



Based on the 1987 values, the 1Q of 2002 is lower than the average of 2000, but well above the midrange. For 2001, the 1Q of 2002 is below the midrange and also the average. The figure does not suggest a robust new beginning for the year.

Figure 2. also shows how the 1Q of 2002 compares to the full years of 2000 and 2001, but expressed in current values.



The range for 2000 is wider than for 2001, and the 1Q of 2002 falls below the average and mid range for both years. At first glance, it appears that the average for 2001 is higher than for 2000, but this is an illusion, caused by the necessity to compress the 2000 scale. The average of the four quarters of 2000 is RM 85.54 billion, while the average for 2001 is RM 83.65 billion. The 1Q of 2002, at RM 83.35 billion, is only RM 0.30 billion below the average of last year. It is significantly lower (RM 2.19 billion) than the RM 85.54 billion average for 2000.

If the next three quarters are as good as the 1Q, then the total GDP for 2002 will be around RM 334 billion, or exactly the same as 2001. While that would mean a year of zero growth, sometimes just staying even with the current is a profit, preferable to being carried backward toward a trip over the falls.

What conclusions may be drawn? We are well within the range of the previous eight quarters, regardless of the method of calculation used, but the 1Q of 2002 falls below the average on all four graphs. Bolstered by big borrowing and enormous deficit spending, we are muddling through, for the moment. Not much more can be said. The heavy debt is worrisome, and it continues to increase rapidly.

If there is to be a lift of confidence, and higher morale for the population, it must come from improvement in the political scenery. A recent survey shows the people have the goods on the police, and a similar survey would reveal a public knowledge of the widespread political corruption.

There is room for hope. The world has changed. People are beginning to see that difficult changes timely taken avoid greater future pain. The scent of enlightened action is in the air. Many are lifted by it. One day the tide of wrong will run itself out, and the tide of right can start rushing in.

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