GDP Target for 2010: A Numbers Game

The government is targeting 6% real growth this year – how realistically achievable is this? The forecasting community thinks its within reach. I think it’s probably easier than many think.

Beyond discussing a substantive recovery in private consumption and investment, and a sustained recovery in trade, consider this:

1. The economy shrank 1.7% in 2009. Actual real output at 2000 prices reached RM519.2 billion
2. To achieve 6% growth in real GDP for 2010, we need RM550.4 billion in output value.
3. But that figure is just 4.2% above 2008 output, and just 9.0% over 2007 output.
4. The shape of the recovery (at least for Malaysia) is closer to a Freidman recession pattern (click here for a discussion on different recession types), though this is subject to how we actually do this year.
5. If we are in a Freidman recession/recovery then we should return to the economy’s previous growth path. A full recovery in trade, which appears to be in the offing, will certainly put a floor to 2010 output.
6. Therefore we only need a below average growth year to record a 6% increase in real GDP. If we do get an average growth year, look for even higher growth (7%+).QED.