Pressures of high growth on the current account balance

Abstract

The Malaysian economy has been growing at a blistering pace since the recession in the mid-80s. From 1988-94, the economy recorded an average annual real GDP growth of 8.8 per cent. Although the unemployment rate has declined to an estimated 2.8 per cent in 1995, there are several areas of concern that have emerged in the Malaysian economy. Among the chief concerns are escalating wages resulting from the tight labour market, inflationary pressures, and of late the widening current account deficit in the balance-of-payments. We analyse the pressures of sustained high economic expansion on the current account in this paper.