This article first appeared in Forum, The Edge Malaysia Weekly on December 11, 2017 - December 17, 2017

So, apparently, we grew 6.2% in the third quarter.

And we are only gaining momentum because in the quarter before this, 2Q, we grew 5.8%, which in itself was quicker than the 5.6% in the first three months of the year.

That, by all accounts, is pretty darn impressive.

Even the experts didn’t think Malaysia could grow this fast. They reckoned that growth in the third quarter would only be in the region of 5.7%. So 6.2% isn’t just beating it, it’s a hammering.

In fact, Malaysia is growing at its fastest in not one, not two, but three years.

So what’s behind it?

Bank Negara Malaysia said growth is being driven by domestic demand, particularly private sector spending. And all this is happening because consumers and businesses are becoming more confident.

That’s not all. China, Europe and North America are also buying more of our products and net exports are currently at their highest in 14 quarters.

In short, Malaysia is FLYING. We are apparently doing so well that Bank Negara is almost 100% certain to raise interest rates next year.

But try and tell the Ordinary Joe that things are fantastic and he is likely to give me a knuckle sandwich.

Let me demonstrate.

A national public opinion survey on economic hardship indicators by the Merdeka Centre in early November showed that more than six out of ten Malaysians felt stressed about the future.

And that four out of ten Malaysians either delayed or were unable to pay their electricity or phone bills on time because they simply didn’t have the money.

Three out of ten didn’t even have RM500 in emergency funds in their bank account to tide them over in case they lost their jobs.

In fact, when Merdeka Centre pollsters asked Malaysians, “What is the number one problem facing people in this country today?”, they replied, “The economy”.

Wait.

There’s more.

Retail sales, which are an excellent indicator of consumer sentiment, nosedived in July.

Notably, the independent retail research firm Retail Group Malaysia downgraded its 2017 forecast to 3.7% — its second revision since the end of last year — to reflect lower purchasing power due to inflation.

In banking, it’s much the same picture too.

Nomura Research recently ranked Malaysian banks lowest that those in the Philippines, Thailand, Indonesia and Singapore for buying potential because “stronger headline growth is not (being) reflected in loans growth”. In plain English, this means that folks aren’t borrowing money at the same pace as the growth of the economy.

Nomura’s report reckons local loans growth this year will be in the region of 4.5%, which is clearly some way lower than the 6.2% GDP growth in 3Q.

And if Bank Negara raises rates next year as expected, Nomura says this could put more pressure on growth, not to mention risking the economy’s growth since (Bank Negara) statistics show that the property sector now accounts for a massive 46.2% of loans in the country’s banking sector.

In the advertising and media world, much the same picture emerges. Total advertising expenditure as at October was down 10% from a year earlier. Only cinema is gaining. Everything else, from print and free-to-air TV to radio, in-store media and magazines, is down. Even that media stalwart, PayTV, is down.

In the stock market, it’s the same. The FBM KLCI’s year-to-date return of 4.4% may sound okay-ish but not when you compare it with other bourses in the region. For the same period, Thailand’s SET is up 9.8%, Jakarta’s Composite Index rose 14.3% and Singapore’s STI jumped 19.3%.

As CIMB points out in its latest strategy report, earnings growth momentum among Malaysia’s public-listed companies slowed in the third quarter to 1.1%, half what it was on a sequential basis, and clearly a huge anomaly to 3Q’s 6.2% GDP expansion.

So what gives?

Are Bank Negara’s numbers a fallacy?

Well, one can always dispute statistics but generally, the trendline is accurate — it is simply impossible, even with all its inaccuracies, mis-estimations and assumptions, for the numbers to deviate all that much from the true picture.

Growth in Singapore, another trade-focused, outwardly facing economy like Malaysia, spiked 8.8% in the same third-quarter period, four times higher than in its second quarter (2.2%), itself a massive change in fortunes from its 2% contraction in the first quarter.

So yeah, the trendline appears to be consistent.

So how to explain it?

One way could be to differentiate between the government-linked companies’ (GLC) economy and the rest of the country.

As Universiti Malaya Professor of Political Economy Terence Gomez and Institute for Democracy and Economic Affairs CEO Wan Saiful Wan Jan have both said, most of the country’s largest corporations are controlled by seven government-linked investment companies, which in turn fall under the jurisdiction of the Ministry of Finance.

Which in plain English, therefore fortifies them from the pressures and vagaries of an open and competitive business atmosphere.

And that is one of the chief reasons why global fund managers tend to shun all but the best-

managed GLCs, since their fortunes are irreversibly linked to the whims of a ruling coalition’s ecosystem and the risks of tempestuous national elections.

The other reason?

Malaysia, like Australia and China, is experiencing a two-speed economy, which is when larger industry and business sectors grow much faster than the smaller ones, masking their — and the country’s — challenges.

In China, ongoing structural reforms have given its services and consumption industries a boost, while its construction and metals industries are bleeding.

In Australia, the mining, construction and resources boom saw Queensland and Western Australia grow much faster than the rest of the country.

In fact, you could even say the world is now a two-speed economy, with recession-hit Western economies like France, Italy and Germany seeing their growth dwarfed by that of emerging economies like Brazil, China and India.

And that’s never a good thing, because uneven growth rarely ends well since it exaggerates the differences between the haves and the have-nots — and the anointed and unanointed — until something gives.

Imagine the problems of different wages, different living standards, different opportunities, different privileges, different treatments, different rights, etc, etc.

You can therefore imagine the delicacies and complexities of managing these disparities for policymakers.

So is this yet another ticking time bomb?

You tell me.

Khoo Hsu Chuang is contributing editor at The Edge

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