Following on from the 2013 annual reports and quite apart from any benefits that might accrue over the next few years, this is what the ETP has done for Malaysia (RM millions and log annual changes; 2005 prices):
I still remember, late in 2011 after the government budget announcement, just how pessimistic everyone was. The Euro debt crisis had gotten into high gear, export growth had dropped off, and growth estimates were being cut drastically. The MOF forecast of 5% growth was met with disbelief and derision.
Yet, growth actually did better than that, hitting 5.6% for 2012 and 4.7% in 2013. If the economy was only export driven, we would have done much, much worse. The counterfactual I estimated above (basically forecasting GDP based on export numbers) suggests the economy would have entered a shallow but prolonged recession beginning in 3Q2012 and only ending in 3Q2013. The difference in output from the beginning of the Euro debt crisis and the end of 2013 is a not insignificant RM105.6 billion, or about 13.4% of 2013 GDP.
Lest one think Malaysia’s growth wasn’t unusual, here’s what happened to the Asian Tiger economies over that same period (% yoy):
Only Malaysia avoided a sharp slowdown in 2012 and subpar growth in 2013 – every other export-oriented economy in East Asia (save for China) basically tanked in 2012, and showed higher growth in 2013 only because 2012 was so bad.
Growth around 5% is around Malaysia’s current long term growth trend, so in that sense, Malaysia’s performance over the last few years is nothing special. But taking into account the decline in world trade over that same period, it was on the contrary pretty extraordinary. Even if you take away the assumption that policy is exogenous (i.e. the government wouldn’t react to the slowdown in the economy), any such support would have been expensive and a pretty hard blow to fiscal stability.
Who says the ETP is a failure?
- Malaysian GDP data from the Department of Statistics
- Cross country comparison data from the April 2014 edition of the IMF World Economic Outlook