I haven’t had much of a chance to write this week, with various things on my calendar (I’ll have some thoughts on the 11MP tomorrow, along with the April CPI). But I wanted to very quickly touch on last week’s GDP report.
The published numbers look pretty good (log annual and seasonally adjusted quarterly changes; 2010=100):
One of the big themes over the past year has been the strength of the US Dollar, which has appreciated against currencies and commodities since the middle of last year. That pushed many currencies into “undervalued” territory – exchange rate levels that are below what is suggested by their economic fundamentals. That’s certainly the case here in Malaysia, oil price declining notwithstanding.
But given that its been largely a move by the USD, it would be fair to flip the question on its head: If other currencies are “undervalued”, the opposite must also be true. How “overvalued” is the USD?
Yesterday’s MPC decision came as no surprise, with the OPR held steady at 3.25% (excerpt):
At the Monetary Policy Committee (MPC) meeting today, Bank Negara Malaysia decided to maintain the Overnight Policy Rate (OPR) at 3.25 percent.
The global economic expansion remains moderate, with divergent growth momentum across economies in the first quarter of 2015…Downside risks to this outlook, however, continue to persist. In this environment, the international financial markets will continue to be affected by shifts in global liquidity and investors sentiments.
Michael Porter on social progress (excerpt):
Economic growth has lifted hundreds of millions of people out of poverty and improved the lives of many more over the last half-century. Yet it is increasingly evident that a model of human development based on economic progress alone is incomplete. A society which fails to address basic human needs, equip citizens to improve their quality of life, protect the environment, and provide opportunity for many of its citizens is not succeeding. Inclusive growth requires both economic and social progress.
It’s no secret that Malaysia plays host to a lot of foreign labour; a lot of cheap foreign labour. Among the criticisms of this happenstance is that it takes away jobs from locals, reduces the wages locals can command, and stunts productivity growth.
Underlying these concerns is a false view of the economy, that labour competition between foreigners and locals are a zero-sum game. The first concern isn’t true – given our ridiculously low unemployment rate, there’s not a lot of evidence that foreigners have taken jobs away from locals. Culling foreign labour from Malaysia would only reduce output, and remove industries that would only exist (or exist as cheaply) from the availability of that foreign labour.
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