Economic growth is the most important factor for poverty reduction and development of living standards in developing countries like Malaysia and the rapid economic growth is crucial in advancing the economy towards the Millennium Development Goals (MDGs). However, concerns rose about impending slower growth in Malaysia, and this leads to the question why Malaysia could not maintain a stable increase of economic growth. According to Bank Negara (2012), strengthening domestic demand has become a key driver of growth, underpinning the continued resilience of the economy despite the challenging external environment. On the other hand, as Malaysian economy has undergone transformation into a highly-open economy through greater trade and financial integration since the late 1970s, this study also examine the impact of external demand to the Malaysian economic. Thus, the main objective of this study is to develop an understanding of the impact of the domestic and external demand factors on economic growth in Malaysia using the time series data from 1960 until 2018. The method employed in this study includes Engle Granger Co-integration, Error Correction Model (ECM), and Multiple Linear Regression. This study revealed that household consumption, government spending, gross investment, and export have a positive relationship with economic growth. Meanwhile, import and the economic in Malaysia related negatively. The results of this research support the idea that Malaysia’s growth is externally driven, rather than internally driven. This study also confirms that the variables have significant relationship with economic growth. Therefore, this study suggest that Malaysia need to review and update its high-tech export strategies, and rejuvenate its high-tech export industries to meet the rising challenges of exporting high-tech products to the world.
Almsafir, M. K., & Morzuki, Z. M. (2015). The relationship between investment and economic growth in Malaysia. Journal of Empirical Economics, 4(2), 116-126
Bank Negara Malaysia. (2012). Bank Negara Annual report of 2012. Bank Negara Malaysia.
Bank Negara Malaysia. (2019). Bank Negara Annual report of 2018. Bank Negara Malaysia Chidako, C., & Sachirarwe, I. (2015). An analysis of the impact of investment on economic growth in Zimbabwe. Review of Knowledge Economy, 2(2), 93–98. https://doi.org/10.18488/journal.67/2015.2.2/67.2.93.98
Fatemah, A., & Qayyum, A. (2018). Modeling the impact of exports on the economic growth of Pakistan. Turkish Economic Review, 5(1), 56-64.
Furuoka, F. (2007). Do exports act as “engine” of growth? Evidence from Malaysia. Economics Bulletin, 6(38), 1-14
Furuoka, F., & Munir, Q. (2010). Does export dependency hurt economic development?
Empirical evidence from Singapore. Economics Bulletin, 30(1), 204-218.
Hasnul, A. G. (2015). The effects of government expenditure on economic growth: the case of Malaysia. Munich Personal RePEc Archive, (71254), 1–16.
Jirayankul, K., and Brahmasrene, T. (2007). The relationship between government expenditures and economic growth in Thailand. Munich Personal RePEc Archive.
Kana, G., & Aruna, P. (2018, Aug 07). Experts: US-China trade war may have negative impact on Malaysia. TheStar.
https://www.thestar.com.my/news/nation/2018/08/07/experts-uschina-trade-war- may-have-negative-impact-on-malaysia/
Kogid, M., Mulok, D., Kok, S. C., Lily, J. (2011). Does import affect economic growth in Malaysia. The Empirical Economics Letters, 10(3), 297-307.
Rutkovska, A. (2019). Domestic demand remains the only pillar supporting GDP growth. Macroeconomics.
Saglam, Y., & Egeli, H. A. (2018). A comparison of domestic demand and export-led growth strategies for European Transition Economies. Foreign Trade Review, 53(3), 156–173. https://doi.org/10.1177/0015732517734755
Yeah, K. L. (2017). Domestic demand-driven growth: Analytical perspectives and statistics needed. Advances in Economics and Business, 5(3), 109-128.
https://doi.org/10.13189/aeb.2017.050301
Handriyani, R., Sahyar, S. S., & Arwansyah, M. (2018). Analysis the effect of household consumption expenditure, investment and labor to economic growth: A case in province of North Sumatra. Studia Universitas Economics Series, 28(4), 45-54. https://doi.org/10.2478/sues-2018-0019
Rafiy, M., Adam, P., Bachmid, G., & Saenong, Z. (2018). An analysis of the effect of consumption spending and investment on Indonesia’s economic growth. Iranian Economic Review, 22(3), 753–766. https://doi.org/10.22059/ier.2018.66642
Sun, X., Deng, L. (2013). An empirical analysis on the influence of household consumption on economic growth in Hubei province. The 19th International Conference on Industrial
Engineering and Engineering Management, 45-51. https://doi.org/10.1007/978-3642- 38427-1_6
Uddin, H., & Khanam, M. J. (2017). Import, export and economic growth: The case of lower income country. IOSR Journal of Business and Management, 19(1), 37-42. https://doi.org/10.9790/487X-1901053742
World Bank. (2020). Malaysia: Leveraging knowledge for development. The World Bank In Malaysia.
