Assessment of the global financial crisis effects on energy consumption and economic growth in Malaysia: An input-output analysis

Abstract

During the last three decades, dependence on foreign trade has increased sharply in Malaysia, causing the Malaysian economy to become increasingly export-oriented. The global financial crisis (GFC) affected Malaysia's economic growth tremendously in the fourth quarter of 2008, and policy makers subsequently adopted effective measures to avoid future crises. The government unveiled two stimulus packages; the first-totalling RM7 billion (US$1.9 billion), accounting for 1.04% of the GDP-was launched in November 2008 while the second-totalling RM60 billion (US$16.2 billion), or 9% of the GDP-was launched in March 2009. The objectives of this paper are to (1) discuss the influence of the GFC on Malaysia's trade and energy consumption and (2) analyse the effect of the Malaysian government's stimulus plans for economic revival using an input-output model. The results indicate that the drop in exports caused by the GFC led to a 13% decrease in GDP and a 16% reduction in energy consumption. The stimulus packages led to 1.83% and 4.64% increases in economic growth and energy consumption, respectively. © 2014 CEPII (Centre d'Etudes Prospectives et d'Informations Internationales), a center for research and expertise on the world economy.