Essay: Impact on Finance – Malaysia

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  • Subject area(s): Geography essays
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  • Published on: November 15, 2017
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  • Impact on Finance - Malaysia
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Malaysia suffers a huge capital flight due to the global financial crisis 2008. All the financial institution in the US solely focused on their own country’s market and choose to reduce the business from international. Malaysia having a decrease situation on the GDP Growth Rate over the few years and the capital inflows of Malaysia was decreasing from RM37.7 billion in the year 2007 to –RM118.5 billion in the year 2008. In the last quarter of the year 2008, the GDP rate growth in Malaysia decreases to 0.1%. While in the 1st quarter and the 2nd quarter of the year 2009, which is decline to -6.2% and 3.9% in respectively (Figure 6).

Furthermore, Malaysia also one of the countries that impressed by the outflows of portfolio investment because the high volume of foreign investors in Malaysia’s stock market. In year 2008, the KLCI was falling from 1393 points in January to 876 points in December. This is because of the foreigner investors was made a decision which is withdraw investment in Malaysia’s stock market, so we could said that there is a relationship between the stock prices and the changes in net portfolio equity flows.

Foreign exchange rate also can’t be escape from this Global Financial Crisis. The declining in demand in the export and portfolio capital outflows causes the depreciation on the value of Ringgit Malaysia. In the late year 2008, the value of Ringgit Malaysia almost decrease by 6% against US dollar (Figure 10). Apart from the negative impact, the rate of export may be can be better due the value of Ringgit Malaysia is in depreciation situation.

Impact on Trade

In the year 2009, Malaysia suffered declining trade in export due to the Global Financial Crisis 2008. It was declining 28% in year on year terms over the few year which is affected by this global financial crisis (Figure 12). The trade of Malaysia will be affected because of Malaysia is an export dependent country.

40% of the Malaysia’s export is on manufacture sectors such as electronics or electrical appliances and this become the most worrying fall in the export segment. The trade in the export of manufactures was decreased by 20% in the quarter to quarter in the year 2008. Apart from the export manufacture, the prices of the export in natural resources such as palm oil (decrease by 32%) and crude oil (decreased by 33%) dropped in the period from quarter to quarter (Table 5). Besides that, prices of agricultural sector also are affected and plummeted.

At the same time, the government was doing some act of improving the export sector while the declining of export rate. In the second half of the year 2009, the export of Malaysia was being controlled and improve due to the result of some stimulus plan such as fiscal policy and monetary policy.

Impact on Labour and Employment

This Global Financial Crisis had affected the segment of the labor and employment rate but it was not a huge problem to Malaysia. During this crisis, the unemployment rate in Malaysia was quite low and stable compared to other countries. The unemployment rate was just increased by 0.9% from 3.1% to 4.0% even during the depth period in the 1st quarter of the year 2009, but in the 2nd quarter of the year 2009, it was declined by 0.4% which is from 4.0% to 3.6% (Figure 14).

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