THE IMPACT OF THE FINANCIAL CRISIS ON POVERTY AND INEQUALITY IN MALAYSIA* Ragayah Haji Mat Zin** Paper to be presented at the WBI-PIDS Follow-Up Workshop on Strengthening Poverty data Collection and Analysis Manila, Philippines April 30-May 3, 2001 * Crude draft and not to be quoted. ** Deputy Director, Institute of Malaysian and International Studies, National University of Malaysia, 43600 Bangi, Selangor, Malaysia. E-mail:
[email protected]. This paper is written in collaboration with Ms. Saidah Haji Hashim who prepared most of the tables. The author also wishes to thank Dr. Ali Hamsa and his team of the Economic Planning Unit for providing access to the data. 1. Introduction Before the devaluation of the baht in July 1997 that triggered the East Asian financial crisis Malaysia was enjoying an enviable average growth rate of per cent per annum in the four years prior to the crisis. In the beginning most analysts expected it to be contained within a few months. However, the crisis turned out to be unprecedented in terms of the speed and severity of the contagion effect that also spread to countries outside of East Asia. In Malaysia, as in other East Asian countries, the financial crisis quickly deteriorated into an economic and social crisis. The objective of this paper is to evaluate the impact of the financial crisis on poverty incidence and income distribution in Malaysia. Unlike in other crisis affected countries such as Indonesia, Thailand and Philippines, where a substantial volume of works impact of the financial crisis on poverty incidence and income distribution have been published, very little work on this subject has been done for Malaysia.