Friday, October 15, 2010

Waiting For The Budget: GNI Per Capita

While I’m hanging around waiting for the budget broadcast to begin, here’s a quick note on the New Economic Model target.

You may recall that the NEM target is a minimum of USD15,000 per capita GNI by 2020. I’ve gone on the record to say that I think we’ll reach that target pretty easily, because of:

  1. The Ringgit’s appreciation, which is a by-product of going up the development scale; as well as
  2. Through the demographic transition that Malaysia is going through.

That doesn’t detract from the necessity of some of the NEM/ETP objectives however – I still believe that a restructuring of the economy is necessary to spread the wealth around, as well as to put the economy in a less vulnerable position relative to external demand.

Having said that, the official GNI per capita numbers generally support my hypothesis:


Even after accounting for the deep recession of 2008-2009 and the shorter one in 2000-2001, as well as an estimated 20.2% increase in the population, GNI per capita has almost doubled from the end of 2000, a period of 8 years.

That amounts to a compound annual growth rate of around 8.9%, which is a little under the assumptions made by the NEM for the second half of the next decade.

How much would it take for us to get USD 15,000 GNI per capita by the end of 2020? Just a little over 7% growth per annum.

If we maintain 8.9% per capita growth every year, we’ll exceed the NEM’s top end estimate of USD17,700 by 2020. Alternatively we’ll get to the lower USD15,000 target in a little over 8 years – about the beginning of 2018.

I’ll return to this topic periodically, first to keep track of the GNI target as and when new numbers are published, as well as to delve deeper into the historical sources of growth.

Stay tuned.

Technical Notes:

GNI per capita data from BNM’s Monthly Statistical Bulletin

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