Malaysia Recession 2024: What Caused & Factor The Financial Crisis
What is recession meaning? A recession is defined as a prolonged economic activity downturn that can last for months or even years.
It is a phase where the nation experiences a negative gross domestic product (GDP), an increasing unemployment rate, reduced retail sales, and low industrial production.
It is also part of the business cycle, which cannot be avoided but can be overcome.
Therefore, fiscal and monetary policies are adopted to prevent the recession from worsening.
When Was Malaysia Recession 2024
Malaysia was formed in 1963, and its economic performance has been at its best over the years.
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Malaysia’s economy experienced sustained rapid growth, which reflected a positive growth in gross domestic product (GDP).
Domestic and international investment are the main contributors to the development of Malaysia.
However, by mid-1997, Malaysia’s economy had been affected by the Asian financial crisis.
This event has caused Malaysia’s GDP to decline from US$100.8 billion in 1996 to US$72.2 billion in 1998.
It has brought Malaysia to significant changes that result in a low exchange rate, a low unemployment rate, low real income, low domestic demand, and many more.
Most of Malaysia’s citizens suffered in that phase.
Hence, it has affected the economy of Malaysia in the long run, and Malaysia is still struggling to recover from that towards the reformation of the country.
Will Malaysia Go Into Recession 2024
Will there be a recession in 2024?
According to the latest gross domestic product (GDP) statistic, Malaysia is expected to sustain domestic demand and spending throughout the entire year 2024.
It is very unlikely for Malaysia to go into recession. This is because there has been positive growth in GDP for the first quarter of 2024, which is expected to continue accelerating for the entire year.
Based on the first quarter of 2024 GDP, the economic performance is showing more robust growth compared to the previous year, as recorded in the fourth quarter of 2023.
In fact, Malaysia is currently in a process of recovery and better economic development.
The central bank, Bank Negara Malaysia, forecasts that the economic growth for 2024 will be between 4% and 5%.
In response, policymakers need to be aware of all possibilities and risks that might trigger the economy to slip into recession.
Hence, some neutral policies must be implemented to maintain and sustain Malaysia’s economic growth.
What Caused The 1998 Malaysia Financial Crisis
A financial crisis that occurred in 1998 was one of the worst financial crises faced by Malaysia.
The main cause of the 1998 financial crisis was financial deregulation in the capital account and banking sectors.
It has a huge impact on currency exchange rates.
The GDP started to decline rapidly, which affected the economic performance for the entire year.
What Are The Important Factors For Recession
Recession is considered a dark phase by a country that will have a significant impact on the country itself, its economy, and its society. In this phase, the citizen might suffer and struggle to survive the downturn in the economy.
There are various factors that can lead a country to slip into recession. One of them is inflation that occurred over a long period of time.
A condition where the prices of goods and services accelerate and increase, which reduces the individual’s purchasing power.
By this means, the production of goods and services will decrease as people tend not to purchase them due to their high cost. As a result, the unemployment rate and layoffs will be high.
Apart from that, excessive deflation can cause a recession. It has bad effects in that the price of goods and services drops excessively, which results in low production costs.
These phenomena will be risky for business owners, as the purchasing power is high but they need to sell their product at the lowest price.
This might lead to bankruptcy. In fact, this will damage the existing economic conditions.
Besides that, a recession is likely to occur not solely because of the economic impact on the country.
It can be due to technological development. The introduction of Artificial Intelligence (AI) and robots in industries may lead to a drastically decreased employment rate.
Society might face a loss of employment as it is replaced by advanced technology.
Last but not least, Malaysia may also go into financial crisis and recession if the asset bubble bursts. The economic uncertainty led the investors to make a decision and take rash steps.
For instance, the investors expected that the increasing price of stock and property would encourage them to purchase massive quantities.
However, when the economy starts to shake and become unstable, investors will start to sell them in large quantities, which can lead to a market crash.
Various steps have been taken into account, including the restructure of financial and non-financial institutions, to strengthen economic growth up until now.
What Is The Difference Between Inflation And Recession
Inflation and recession are linked.
However, there are differences between the two critical phases faced by a country, which both need to be avoided and reduced in order to maintain the sustainability of economic growth.
Below are the differences between inflation and recession:
| DIFFERENCES | INFLATION | RECESSION |
|---|---|---|
| DEFINITION | Inflation is defined as the instability of market conditions lead to increase in price level of goods and services beyond the general prices. | Recession occurs when the market condition is in the weak state of economic growth level. |
| REASONS | The main reasons the nation faced inflation are due to country debt, purchasing power and spending increase, taxes increase and population growth. | The main reasons the nation faced recession are due to technology development, inflation, trade wars, asset bubble burst and GDP lower. |
| MEASUREMENT | Inflation can be measured through Consumer Price Index (CPI) | Recession can be measured through Gross Domestic Product (GDP) |
| EFFECTS | Inflation can cause the purchasing power decrease and value of money priceless. | Recession can cause unemployment rate increase due to layoff or worker and business bankruptcy. |
Is A Recession Good Or Bad
Generally, the phase of recession is a bad phase in the economic cycle. It can affect society as a whole, especially business owners.
During the recession, people will face high financial risks such as business failure, unemployment, default, and bankruptcy.
Hence, society needs to withstand these economic challenges by implementing policies that can control and endure financial risk at those moments.
Where To Invest During A Recession
Financial risk during the recession is high.
However, the investor can still maximize their wealth by investing in the right sources during a recession.
Below are some investments that can be made during a recession:
- Investing in real estate is advantageous as investors can acquire them at the lowest price, and the value of real estate will rise once the economy starts to recover.
- Investing in dividend stocks, where investors can enjoy a high total yield with low stock prices.
- Investing in stock funds, as they are less volatile than others.
How To Make Money and To Get Rich During Recession in Malaysia
Even during recession, some people are good at taking advantage. If they play the cards right, they will get rich during the recession.
The easiest way to get rich during a recession is to invest in the right investment platforms, such as dividend stocks, real estate, and stock funds.
In that time, stock market performance will decline, and this might create losses for investors.
However, the economic performance will recover. Therefore, their investment will rise.
Other than that, people need to cut unnecessary expenses during the recession.
This will help the investors secure their wealth from anything that might risk it.
In conclusion, things might get hard during recession if you cannot handle the situation well and take advantage of it.