COMMENTARY

GDP is, at its essence, the total value of a country’s production in a given year. The indicators derived from it, such as GDP growth and GDP per capita, are often used as KPIs or major policy objectives. Almost everyone has heard of these three little letters. But what is often forgotten is that GDP is an estimate based on a system of accounting, not a fact of nature. As a result, there are numerous misconceptions about the role of GDP. This note aims to clear the confusion by explaining what GDP is and what it is not.

For the last few months, inflation has been the talk of the town. Consumers have been complaining about rising prices, especially of food and groceries. Yet official statistics suggest that Malaysia's annual inflation rate remains under control at 2.8%. So why is there a mismatch between the perceived rise in the cost of living and the official rate of inflation? To answer this question, we must first identify the causes of inflation and critically review how we measure inflation.