World Economic Forum (WEF), Davos: What Does an Improving Economy Mean?

Samirul Ariff Othman

Every January, the World Economic Forum (WEF) in Davos morphs into a bustling nerve center where global leaders tackle the big questions of the global economy. It’s where bold ideas and sharp insights meet the challenges of a complex world.

This year, from January 20–24, 2025, some 350 leaders from across the globe will convene in Davos, and our own Prime Minister will be there, along with the Malaysian delegation. Let’s hope this trip isn’t just about speeches and handshakes but delivers real benefits to the rakyat (citizens). After all, it’s not about bringing back lofty visions; it’s about coming home with a tangible roadmap for making Malaysia’s economy work better for everyone.

But here’s the kicker: What does an “improving economy” even mean? To the economists and policymakers, it’s a symphony of rising GDP growth, shrinking unemployment, low inflation, a stable currency, and growing investments. By those measures, Malaysia is playing a pretty good tune.

Take the numbers. The third quarter of 2024 saw economic growth hit 5.3%, with full-year growth projected at 4.8%. Unemployment is down to 3.2%, meaning only 547,000 Malaysians are jobless. Inflation? Just 1.8%—a feat in today’s turbulent world. Meanwhile, the ringgit has regained strength, now trading at RM4.50 to the USD, up from RM4.80 in February 2024. And investments are rolling in—RM254.7 billion in the first nine months of 2024 alone, split between RM106.7 billion in foreign direct investment (FDI) and RM148 billion in domestic direct investment (DDI). That’s a standing ovation for macroeconomic performance!

To the man on the street

But wait—before we start patting ourselves on the back, let’s talk about “man on the street.” For the ordinary Malaysian, these headline figures are abstract. If that 5.3% growth doesn’t show up in their paycheck, does it even matter? For these Malaysians, macroeconomic milestones feel far removed from their day-to-day struggles.

Here’s the real challenge: Good macro numbers are necessary, but they’re not sufficient, points out Professor Noor Azlan Ghazali, who heads the Malaysian Inclusive Development and Advancement Institute (MINDA-UKM). Economic growth may get the big cheers, but if it doesn’t widen wallets and boost household incomes, skepticism will persist. Case in point: the median wage for Malaysian workers in the formal sector was RM2,745 in the second quarter of 2024. More than half—53.8%—earned less than RM3,000. For them, the talk of “an improving economy” ring hollow. For them, the talk of “an improving economy” is just noise!

Do the gains trickle down?

For example, the wage disparity is glaring. Only Kuala Lumpur (RM3,982), Selangor (RM3,000), and Penang (RM2,800) boast median wages above the national average. At the other end of the gamut, Perlis (RM1,682), Kelantan (RM1,645), and Sabah (RM1,864) paint a starkly different picture. Economic progress isn’t trickling down; it’s pooling in a few key states.

And what about young workers? The median wage for those aged 20–24 is RM1,782—barely above the soon-to-be-implemented minimum wage of RM1,700. Can we really call that progress? It’s a sobering reality for those just stepping into the workforce.

The government must focus more on addressing wage and salary issues. Why doesn’t strong economic performance translate into higher incomes for the people? Why are wages in Malaysia skewed to the left—low and stagnant? Is it due to poor worker quality and productivity? Does the issue lie in supply factors, such as the quality of education and training? Is it due to poor worker quality and productivity? Does the issue lie in supply factors, such as the quality of education and training?

Or is it more of a demand-side problem, such as limited job creation, particularly in high-skill sectors? Could the influx of foreign workers be exerting downward pressure on wages, crowding out local workers in low- and semi-skilled categories?

This issue must be addressed urgently. The benefits of strong economic performance need to reach the people. It is clear that much of the public’s concern over the cost of living stems from low wages, rather than high prices for goods and services.

From a global perspective, Malaysia has a low cost of living, ranking 105th out of 139 countries. Malaysia is considered to be a country with a low cost of living However, for a significant portion of the population, the cost of living feels high, affecting their quality of life. The gap between the economic data and daily realities is where frustration brews.

Davos will no doubt debate grand global challenges, but our mission is clear: Make sure the takeaways from Switzerland don’t just sit on policy briefs but make their way into the lives of ordinary Malaysians. Because an improving economy should mean an improving life for everyone.

——————————————————————

Economist Samirul Ariff Othman is an adjunct lecturer at Universiti Teknologi Petronas, international relations analyst and a senior consultant with Global Asia Consulting. The views in this OpEd piece are entirely his own.

Subscribe Below: