A tale of two recoveries: Malaysia vs. Germany

by Rebecca Wilder

Today, North America saw the Q4 2009 GDP figures for Malaysia and Germany. In my view, the two releases accurately depict the developed vs. developing picture of economic recoveries: one is causing the other.

Malaysia’s real GDP, population 29,992,577 in 2008 according to the World Bank, grew 4.5% compared to the same period one year ago. The impetus behind headline number was domestic demand (GDP minus net exports), +3.9% Y/Y and external demand (exports), +7,3%.

The recovery in Malaysia is healthy. Domestic private consumption improved 1.7% Y/Y, while investment surged 8.2% over the same period (up from -7.9% in Q3).

The pace of contraction in German real GDP, population 82,140,043 according to the World Bank, slowed to -1.7% Y/Y from -4.7% Y/Y in Q3. On the surface, the trend is sound: the annual economic deterioration is slowing markedly. But below the hood, the true nature of the beast is present: only external demand and government spending are stabilizing GDP.

The growth rate in domestic demand is essentially moving laterally; it fell to -2.8% Y/Y from -1.6% Y/Y in Q3, and is now essentially unchanged from Q2 (-2.7% Y/Y) . Pockets here and there are improving – the decline in imports and machinery slowed somewhat; spending on machinery jumped 3 points to -18% Y/Y in Q4 (this is not much of an improvement).

Is this a country-level illustration of the world growth schism? Are Emerging Markets providing the impetus growth for all? I think so.

Rebecca Wilder crossposted with Newsneconomics