1. Recently, there has been a series of misleading messages spreading on Whatsapp about our economy that is causing anxiety among some Malaysians.
2. Many of these messages centers on our current Government Debt, which is at a Debt to Gross Domestic Product (GDP) ratio of 53.4% on June 30th 2016. This ratio measures how much debt our government has compared to our GDP size.
Much of the anxiety and accusations is that our ratio is close to the 55% self-imposed limit set by the BN government and that if we breach this limit, Malaysia will be in trouble.
Certain more irresponsible messages even allege Malaysia will be bankrupt if we breach this 55% level.
3. GDP is a measure of the value of all final goods and services produced in a period. In layman terms, it can be interpreted as the size of our economy.
4. Due to years of good economic growth - especially since the year 2009 - our current annualized GDP is currently estimated at RM1.2 trillion as at June 30th 2016, This is about 17 times the size of our economy in 1986 and about 3 times the size of our economy in 2003.
It is only logical that if our country's income has increased then we can comfortably afford to carry more debt in absolute terms compared to the past when our income was not as high.
5. Our current Debt-to-GDP ratio of 53.4%, although higher than it was in 2007 at 40.1%. is still within manageable levels.
6. This level is still not high when compared to historical levels such as during the period between 1980 to 1985 when our Debt-to-GDP ratio increased from 44.0% to 103.4% and stayed above the 55% level until the year 1994.
7. Therefore, it is illogical that even if Malaysia breaches the 55% Debt-to-GDP level then Malaysia would be "bankrupt" or our economy will be in trouble as alleged by certain quarters.
If we did not go bankrupt at 103.4% in 1985, then how are we going to be bankrupt at 55%?
8. Our debt levels must be looked at in relation to our income and not just based on absolute amounts.
As an example: An individual whose yearly income is RM120,000 will be comfortable in borrowing RM60,000 to buy a car compared to another person whose income is only RM6,000 per year but has a debt of RM7,000.
This example roughly show the situation of our economy size and debt levels in 2016 versus 1985.
9. At our current level of 53.4%. we are listed at 71st highest out of 179 countries. Seventy countries have a higher ratio than us including developed countries such as Germany, Japan, Canada, the USA, UK and Singapore.
As I have stated, our current debt-to-GDP ratio is manageable and our economy is still enjoying decent economic growth of 5% for the year 2015 and 4.1% for the 1st half of 2016.
10. Despite the current low commodity prices, the effects of BREXIT and the overall uncertain global economic conditions, our government has no intention to breach this 55% limit and will continue to manage our finances responsibly.
11. Malaysians and certain political parties should avoid spreading misinformation or engage in scare tactics that will end up damaging both investor and consumer confidence in our economy. This is akin to sabotaging our own economy.
Responsible Malaysians should also not share or spread such misinformation and propaganda.
12. By all accounts, our government's transformation plan is proving successful with good policies that are now showing strong results. All Malaysians should focus on such successes, as we navigate the uncertain global conditions at the moment.
13. I have no doubt that the Prime Minister and this government will continue to ensure that Malaysia continues to enjoy economic growth, prioritize the well-being of our citizens and continue to develop Malaysia as we progress to a high-income country status.
Dato' Abdul Rahman Dahlan,
Barisan Nasional Strategic Communications Director,
Minister in the Prime Minister’s Department.
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