GDP growth not a direct measure of living standards, say experts

Economic experts are emphasizing that Gross Domestic Product (GDP) growth alone is not a direct indicator of the living standards of a nation's citizens. Prof. Dr. Ahmed Razman Abdul Latiff, Director of the MBA Program at Putra Business School (PBS), stated that while GDP measures economic activity, it doesn't directly reflect how well people are living.

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GDP is a measure of the value of economic activity, but not a direct measure of the living standards of the Malaysian people.

He noted that a 6.0% GDP growth, as seen in the second quarter of 2026, is positive. However, more important questions revolve around the creation of quality jobs, increases in wages, and whether household incomes are growing faster than the cost of living. For instance, if salaries rise by 4% but essential goods, rent, transportation, education, and debt commitments increase at a faster rate, an individual's real purchasing power may not improve.

Furthermore, growth in high-tech sectors like semiconductors, data centers, and information and communication technology (ICT) can significantly boost GDP. Yet, the benefits might not be distributed equally across all income groups. This highlights the need to focus on the "quality of growth" rather than solely the "growth rate."

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As an example, if someone's salary increases by four percent but the prices of necessities, house rent, transportation, education, and debt commitments increase faster, the individual's real purchasing power does not necessarily increase.

Dr. Mohd. Afzanizam Abdul Rashid, Chief Economist at Bank Muamalat Malaysia Berhad, acknowledged that the country's economic performance remains strong despite global uncertainties. He attributed this to a substantial surge in net export growth, particularly from the Electrical and Electronics (E&E) industry, which accounted for 48.6% of total exports. Other sectors like petroleum, LNG, and palm oil-based manufacturing also showed significant growth.

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That is why we need to look at the 'quality of growth', not just the 'growth rate'.

However, Dr. Afzanizam cautioned that the rising cost of living is expected to remain a primary factor influencing Malaysian consumer spending. He concluded that while the 6.0% GDP growth indicates robust economic expansion, the next task is to ensure this growth is inclusive and translates into real income increases and improved purchasing power for the majority of citizens. The true measure of economic success, he stated, is whether most people feel their lives are more comfortable, their incomes more secure, and their futures more assured.

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The main sectors leading the high export growth are the Electrical and Electronics (E&E) related industries, which is 57.4 percent and represents 48.6 percent of the total exports during that period.