Summary

Author Fintan Ng article “Economy Expands More Than Expected in Q4” emphasizes
that the economy grew at a faster pace in the fourth quarter because of superb
combination of fiscal policy both from government expenditure and low inflation rate
that boost domestic demand. The application of monetary policy also play major role in
expanding the economy. GDP (Gross Domestic Product) boosted to 4.5% in the Q4 after
3 consecutive quarters of contractions. Economists expectation for an average growth of
3.2% has gone beyond par as the GDP expand to 4.5% this quarter. Besides that,
economic research head from CIMB Investment Bank Bhd, Lee Heng Gue states to
Starbiz that there would be an increase in GDP for the year 2010 as a result from an
expansion in the services and manufacturing sectors. Furthermore, the economy growth
momentum would continue because of positive global environment supports with the
strengthening of intra-Asia trade that however eventually shields the economy in the
region from slowing down. Basically all of our major sectors (manufacturing, agriculture,
manufacturing and service) shown positive increase in the percentage of pace except in
the mining field where it declines from 3.5% in the 3rd quarter to minus 2.8% because of
the fall of condensate and crude oil. Bank Islam Malaysia Bhd chief economist Azrul
Azwar states that the rate of growth would most likely continue into the first half of 2010
but could slow down after that as global recovery was affected by the unwinding of
stimulus measures. He also mention that when the unwinding begins, there may be
questions over how sustainable growth can be while the stubbornly high unemployment
in the US and the euro-zone will translate to weak consumer demand that will affect
Asia’s manufacturers. RHB Research Institute Sdn Bhd economist Peck Boon Soon also
mention that any recovery in jobs in the developed economies, crucial to export-reliant
economies in Asia, would be gradual. Data on the Q4 GDP released by Bank Negara also
showed that private consumption spending expanded by 1.7% following a 1.5% rise in
Q3 while public consumption expanded by 1.3% and public sector capital expenditure
increased further due to the accelerated implementation of the stimulus measures.
Analysis

Generally this article is about the positive economy growth after 3 quarter of
contractions. There are actually a few ways that increase the economy growth that are by
using fiscal policy and monetary policy. In this case, Malaysian government used both
fiscal policy and monetary policy to boost the Malaysian economy. Fiscal policy is
basically the use of government expenditure and revenue collection that influence the
economy. While monetary policy the process a government, central bank, or monetary
authority of a country uses to control the supply of money, availability of money, and
cost of money or rate of interest to attain a set of objectives oriented towards the growth
and stability of the economy. So basically fiscal policy is all about government spending
and tax while monetary policy is about the supply of money and interest rates. These
elements however would effect the economic growth of one country, inflation and also
the level of unemployment of a country. Fiscal policy and monetary policy takes time to
be effective because as an example, a government spending (making a bridge or
highway) would take 6-12 months to accomplished. So this is one of the reason where
Malaysian went through 3 quarter of contractions because the method of using fiscal
policy and monetary policy doesn’t take place on the spot. It would take sometimes to
take effect. As we all know now, the global economy had gone through a harsh economic
situation where many countries gone through high inflation and also the number of
unemployment had increase rapidly. Many of the well known company like the Lehman
Brothers Inc in the US went bankrupt in 2008 that actually led to the increase of
unemployment. This situation also occurred in Malaysia where at a certain period many
of the private company went bankrupt and became a big issues where at the same time
the inflation rate also increase. This is why the Malaysian economy went into contraction
for three quarter. However, in the fourth quarter the economy boost back because the
GDP (Gross Domestic Product) expanded 4.5% more than what expected by the
economist. Many of our sectors record positive number in their growth that boost the
GDP. Besides that, although many of trade are mainly involve with the US, our economy
can still maintain its stability because of the strong trade among the Asian country that
however shields the economy from any slowdown.
Conclusion

The method of using both fiscal policy and monetary policy has shown us the great effect
to the nation economy slowly although the global economy are in turmoil. Our GDP
increase more than what expected as well as our sector both private and public.
Recovering the economy back would take some times but the effect are greatly seen. The
level of unemployment and inflation is not as bad as other nation where the effect of
economic downturn are hardly seen in Malaysia. However the growth momentum must
be maintain in order to stabilize our economy. In a nutshell, economy expands more than
what expected in quarter fourth.

Ameer Shafiq bin Kamalullail

1071116646