By Datuk Ts Dr. Hj Ramli Amir, former President of the Chartered Institute of Logistics and Transport (CILT) Malaysia and Vice-President of CILT International for Southeast Asia
KOTA KINABALU: Malaysia’s economy, by most conventional measures, appears to be on a stable footing.
Growth has resumed, employment remains high, and official indicators point to resilience after years of global disruption. Yet beneath these reassuring averages lies a quieter, more uncomfortable truth: many Malaysians feel financially stretched, anxious, and uncertain about the future.
This disconnect is not merely a matter of perception. It reflects the reality of a K-shaped economy.
A K-shaped economy describes a situation in which different segments of society move in opposite directions simultaneously. The “upper arm” of the K points upward, representing households and sectors that are advancing—those with stable incomes, assets, and access to opportunity.
The “lower arm” slopes downward, capturing those whose wages lag behind rising costs, whose savings are thin, and whose economic exposure is largely to prices and debt.
At the upper end of Malaysia’s K-shape are asset owners, professionals, and business operators in capital-intensive or export-linked sectors. Rising property values in prime urban areas, resilient corporate earnings, and exposure to financial markets have strengthened balance sheets.
For these households, the economic recovery feels real. Asset appreciation builds confidence, which in turn sustains spending on travel, services, dining, and other discretionary consumption. This spending feeds into GDP growth and reinforces the narrative of a healthy economy.
The lower arm tells a very different story. Many B40 households and a significant share of the M40 experience the economy primarily through the cost of living. Food prices, rents, utilities, transport, childcare, education, and healthcare have risen steadily, and in many cases permanently, since the pandemic.
While wages have increased in nominal terms, they have often failed to keep pace with these recurring expenses. Employment may be available, but income security is increasingly fragile.
This divergence explains why headline indicators can look strong while household sentiment remains subdued. GDP measures total output and spending, not how income and opportunity are distributed.
When higher-income households spend more—fuelled by asset gains or business income—the economy grows even though a large share of the population is cutting back or relying more heavily on credit to maintain basic consumption.
Malaysia’s high household debt amplifies this effect. Consumption continues, but increasingly at the expense of thinner buffers and higher financial stress.
Borrowing-driven spending still counts as growth, even when it leaves households more exposed to shocks. From a statistical perspective, the economy expands.
From a lived perspective, resilience erodes.
Housing illustrates the K-shape particularly clearly. For existing homeowners in desirable locations, property remains a store of wealth. For younger Malaysians and renters, especially in urban centres, housing is an increasing burden. Rising rents and high entry prices turn shelter into a recurring source of stress rather than a pathway to security.
This gap has generational consequences, shaping who can accumulate wealth and who remains perpetually vulnerable.
Labour market dynamics further widen the divide. High-skill, professional roles—often concentrated in the Klang Valley and major cities—offer better wage progression and greater flexibility. By contrast, workers in services, logistics, tourism, retail, and the informal economy face tighter margins and limited bargaining power. In Sabah and Sarawak, higher logistics costs and lower average wages mean that price increases bite harder, making the lower arm of the K even steeper.
Fiscal reform and subsidy rationalisation add another layer. While necessary for long-term sustainability, subsidy changes affect households unevenly. Higher-income groups are better placed to absorb price adjustments, whereas lower-income households feel them immediately, reinforcing the sense that economic adjustment carries unequal pain.
This is why public sentiment often diverges from official optimism. Policymakers speak in averages. Households live in specifics. National data smooths over differences, but people experience the economy through monthly expenses, debt obligations, and their ability—or inability—to save and plan ahead.
Ultimately, a K-shaped economy is not only about income inequality. It is about the inequality of exposure. Some Malaysians are exposed primarily to upside-down assets, opportunities, and flexibility. Others are exposed mainly to downside prices, debt, and shocks.
Over time, this divergence weakens social cohesion and erodes trust, even when growth continues.
Understanding Malaysia’s K-shaped economy matters because it reframes the policy question. The issue is no longer whether the economy is growing, but who that growth reaches and whether it strengthens resilience across society.
Growth that remains narrowly shared may look successful in the short term, but it carries long-term social and economic costs.
When Malaysians say the economy is doing well but does not feel good, they are not rejecting the data. They are describing life on the lower arm of the K—where growth exists, but relief does not.
