chapter 6 - Malaysia Productivity Corporation ( MPC)

SOURCES OF MALAYSIA’S ECONOMIC GROWTH
Overview
Sources of economic growth is derived from two
components namely, the increase in employment
and productivity. The underlying factors that
contribute to productivity growth are increase in
capital intensity and TFP growth. TFP is defined
as the change in output after taking into account,
the growth in physical capital and changes in the
quantity and quality of labour input.
Sources of Economic Growth
For the period 2002-2011, output growth of 5.1%
was achieved and supported by employment
growth of 2.0% and productivity growth of 3.1%.
The productivity growth was derived from TFP
contribution of 1.7% and capital intensity of 1.4%
(Figure 2.1).
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Figure 2.1: TFP Contribution to Productivity Growth, 2002-2011
Total Factor
Productivity
1.68%
Productivity
3.09%
TFP contributed to the bulk of the country’s
economic gain over the 10 year period of 2002-
2011 accounting for 32.7% to the economic growth
of 5.1% while capital and labour contributed 40.0%
and 27.3% respectively (Table 2.1). In term of
sub-period analysis, the contribution of TFP was
45.2% during the first period (2002-2006) and
16.2% during the second period (2007-2011). The
decreased in TFP contribution during the second
period was due to the financial crisis faced by
developed economies which affected national
trade performance. However, the overall growth
in the economy during the 10 years period was
attributed mainly by capital intensive investment
and efficiency gain through better utilisation on
resources.
Capital growth during the 10 year period was 2.0%.
The contribution to capital growth came from non-
GDP
5.12%
Capital Intensity
1.41%
Employment
2.03%