Malaysia’s economy is an F1 car on paper, a sedan on the ground — Mohd Zaidi Md Zabri

SEPTEMBER 27 — Malaysia's economy is exhibiting strong performance according to conventional indicators, with a 6% growth in the second quarter of 2026, unemployment at 3.0%, and headline inflation at 1.9%. However, this growth does not seem to be translating into improved living standards for the average Malaysian. A recent survey revealed cost of living as the top concern across Southeast Asia, and Malaysian optimism levels have been dampened by this perception.

Prime Minister Anwar Ibrahim acknowledged the disparity, stating that while economic indicators remain encouraging, many Malaysians continue to face cost of living pressures. The question remains: why is this the case? The answer lies in the stark difference between the country's high-performance sectors and the broader economy.

The F1 cars of Malaysia's economy are the manufacturing and export-oriented sectors, which are driving the headline growth through global demand for AI, data center, and electrical components. However, these are narrow sectors, dependent on capital-intensive investments, global supply chains, and a limited number of large firms.

The sedan representing the majority of working Malaysians is made up of MSMEs in sectors like retail, hospitality, agriculture, and small-scale manufacturing. These sectors employ the majority of the workforce but do not generate the high-value jobs or rapid growth seen in the F1 cars. The gap between these sectors is not a matter of effort, but of resource allocation.

The economic reforms, including fuel subsidy rationalisation or BUDI95, are taking effect unevenly, disproportionately impacting the sedan sector. With fuel costs rising while incomes have been modestly growing, this adjustment has a more immediate and severe impact on the sedan's budget. The policy is sound, but its timing and distribution are causing financial strain for a large portion of the population.

The sedan sector feels this pinch immediately, while the F1 cars barely notice the same fuel cost increase. The issue lies in the sequencing and absorption of economic reforms, not their direction. While Malaysia's economic management is not failing, the disparity between the performance of different sectors highlights the need for a more balanced approach to economic development.