There is more to the country’s economic health than its debt

Do not simply be misled or fooled by propaganda that stresses the absolute numbers. Instead, look at the economy as a whole and understand what the numbers mean

Eric See-To

Some Malaysians are concerned about the news that there was an increase in Govt debt from RM501.6 billion in 2012 to RM648.5 billion in 2016.

However, what they failed to consider was that during the same period, our country’s yearly GDP or economy size increased, from RM936.2 billion in 2012 to RM1,229 billion in 2016.

This means the debt-to-GDP ratio have been reduced from 53.6% in 2012 to 52.7% in 2016 – signalling increasing strength in govt finances. This ratio actually improved further to 50.2% in Q1 2017 as our economy grew strongly at 5.6% for the quarter.

This is akin to someone whose annual salary was RM93,000 in 2012 and took out a loan of RM50,000 to buy a car.

The person then got promoted and his annual salary increased to RM123,000 in 2016. Should we then be concerned that he took out a loan of RM64,000 to buy a car?

Debt should always be looked at in relation to income – not in absolute value alone.

A millionaire Executive whose credit card debt is RM500,000 may not be any worse of than a fresh graduate who owes RM20,000 on his credit card.

At 52.7%, the ratio compares very favorably to the rest of the world – which is why our country continues to enjoy praises and A-grade investment ratings from the international institutions.

If Malaysia was in trouble or getting worse, these institutions would not be praising us.

During the same 2012 to 2016 period, the USA’s debt increased from US$16 trillion to US$19 trillion while Australia’s debt increased from A$240 billion to A$420 billion.

Even Singapore’s govt debt increased from S$307 billion (RM953 billion) in 2012 to S$335 billion (RM1.03 trillion).

As these three countries grew much slower than Malaysia in those years, their debt-to-GDP ratio actually worsened – as compared to Malaysia which strengthened.

Do not simply be misled or fooled by propaganda that stresses the absolute numbers. Instead, look at the economy as a whole and understand what the numbers mean. 

Malaysians should learn to question the propaganda.

Source: www.facebook.com/EricSeeTo

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