Write an article about Malaysia’s post-pandemic paradox — booming economy, shrinking wallets .Organize the content with appropriate headings and subheadings (h1, h2, h3, h4, h5, h6), Retain any existing tags from
From Muhammed Abdul Khalid
Three years after the Covid-19 pandemic, Malaysia’s economic recovery has been marked by significant progress. However, challenges persist in ensuring that this recovery translates into broad-based improvements in living standards.
The gross domestic product (GDP) and GDP per capita have risen 16% and 21% respectively since 2019. At RM378.5 billion, the approved investments in 2024 were up nearly 15% over the previous year, and the highest on record.
Tourism, a critical revenue generator, has rebounded to 96% of pre-pandemic levels. We welcomed 25 million international visitors last year.
The visa-free policy led to a 123% surge in Chinese arrivals and 69% rise in the number of visitors from India. The sector expects a full recovery by the first half of 2025.
Unemployment fell to 3.2% in 2024, below the 3.3% recorded in 2019, the year before the pandemic, and significantly lower than the pandemic peak of 4.6% in 2020.
The benchmark KLCI was up 13% last year, outperforming peers like Indonesia and Thailand, reflecting boosted investor confidence. Fifty-five new companies were listed, the highest in 19 years.
Going forward, Malaysia’s economic expansion is forecast to continue at a slightly slower pace given the ongoing trade war. Growth will be driven primarily by domestic demand, with the 13% increase in minimum wage, 30% rise in cash transfers under social assistance programmes and up to 15% pay increase for civil servants serving as key drivers.
Despite these encouraging macroeconomic trends, a significant segment of the Malaysian population feels poorer. What accounts for this?
The anomalies
First, GDP growth does not translate directly into improved living standards. For instance, Lojing in Kelantan has GDP per capita on par with Germany and Turkey. Yet it also has a poverty rate exceeding 30%, highlighting the disconnect between economic output and equitable wealth distribution.
Second, despite the low unemployment rate, underemployment remains a significant concern. As of Q3 2024, 37% of Malaysia’s tertiary-educated workforce (roughly two million) was underemployed, a 1.4% increase from the previous year.
Only 17% of new jobs are high-skilled. Not surprisingly, informal employment grew, from 17% of total employment in 2016 to 22% in 2023, worsening job security and wages. Simply put, we are not creating enough good jobs.
Third, adjusting for price increases, real wage growth is actually negative, eroding purchasing power, disproportionately affecting low-income workers and fresh graduates.
For instance, the median nominal wage for fresh graduates saw a 17.3% drop in real terms, between 2019 and 2024. In other words, university graduates who joined the labour market last year have lower salary compared with the cohorts who started work five years ago.
As food prices surged 17%, far outpacing nominal wage growth of 7%, low-income households are hardest hit.
But the decline in real wages is not due to a drop in productivity. Bank Negara Malaysia (BNM) data actually shows that it has risen by 5.3% since 2019. Yet, real wage growth per worker has fallen 1.9% over the same period.
This paradox of working harder but earning less highlights a growing imbalance between productivity and wage distribution, leaving many workers worse off despite overall economic gains.
Fourth, despite economic expansion, half of Malaysian workers have lower savings now than before the pandemic. Employees Provident Fund (EPF) data shows that while average savings were up 24% between 2019 and 2024, median savings actually declined 14% in the same period.
In other words, half of EPF contributors have less savings now than before the pandemic.
While average savings have risen from RM89,000 in 2019 to RM110,000 in 2024, median savings have dropped from RM36,000 to RM31,000 in the same period.
This is not unexpected given that the government had allowed withdrawals during the pandemic, a mistake that should have been avoided, and not to be repeated.
Fifth, despite low headline inflation, the cost of living remains elevated. The expansion of the sales and service tax (SST), a 15% hike in electricity rate and the highly anticipated removal of fuel subsidy of RM20 billion risk spiking prices.
Recent measures such as the 6-8% hike in SST, the 10% tax on low-value goods and 53% increase in diesel prices threaten to erode household purchasing power further.
The key challenges
The Malaysian government has reassured the public that these fiscal reforms will not burden most households. It says only those in the T15 (the 15% of Malaysians who earn the most) — or the “maha-kaya” (ultra rich) as Prime Minister Anwar Ibrahim refers to them — will be affected.
To mitigate the impact of rising prices, the government has raised the quantum of cash aid and assistance to the highest level in over a decade, benefiting about nine million people, equivalent to 60% of the country’s adult population.
However, key issues remain: the government has yet to clearly define who to include in the T15 category. For instance, in Kuala Lumpur a household needs a minimum income of RM19,000 to make it to the T15 group, whereas in Baling, Kedah, the threshold is only RM5,400.
In other words, a couple working as junior teachers in Baling would technically qualify as ultra-rich, along with the tycoons and millionaires.
Looking ahead, economic expansion in the short term will be challenging. Geopolitical developments, particularly the tariffs imposed by the US on Malaysia and other key trading partners, will have an impact on domestic growth.
Long-term domestic risks remain, given the demographic shifts. For instance, people are living longer but with greater fiscal insecurity, human capital development is weak, and the health condition of Malaysian children is a concern.
One in 10 children is born with low birth weight and, by age five, one in five suffers from stunting. Alarmingly, six in 10 schoolchildren are at risk of obesity, the highest in the region.
Malnutrition remains a long-term threat to human capital development, economic competitiveness and productivity, adding pressure on already strained healthcare resources.
While Malaysia’s economic recovery is notable, its uneven distribution highlights a deeper structural concern. Persistent inequality, wage stagnation, and employment mismatches suggest that growth alone is insufficient without meaningful reforms.
Government interventions have provided short-term relief, but sustained and well-calibrated policies are critical for building a more equitable and resilient economy.
Crucially, consistent policy directions, strong, trusted, and independent institutions especially the judiciary and enforcement agencies, and a government without corrupt leaders are essential to restore investor confidence, both domestic and foreign.
These are the three important pre-requisites for sustainable and inclusive economic growth that benefits all.
Muhammed Abdul Khalid is a research fellow at the Institute of Malaysian and International Studies (IKMAS) at UKM and a fellow at the World Inequality Lab at the Paris School of Economics. This article is an extension of the commentary published recently by the S Rajaratnam School of International Studies (RSIS). It is part of a research project done in collaboration with the Malaysia Programme at RSIS, Nanyang Technological University (NTU), Singapore.
The views expressed are those of the writer and do not necessarily reflect those of FMT.
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