I refer to the letter Economic downturn: pray for soft landing .

I would like to raise a question for the experts: Has Malaysian GDP growth been over-estimated because of an under-estimation of inflation over a long period of time?

I am posing this as a question because I really don't have the answer, and don't expect this question to be settled for years. Although I have some economic training, I am no specialist in measuring inflation, and have no access to a price level database. Real-price GDP (gross domestic product) growth is the 4% to 6% figure s(in recent years) and this is widely discussed with government budget forecasts and economic growth reports.

My understanding is that real-price GDP is calculated after taking out the GDP Deflator - a measure of inflation that is a cousin of our familiar CPI (Consumer Price Index). The GDP Deflator is more comprehensive and updated than the CPI, so it is supposed to accurately measure the general inflation of the whole economy (an ambitious task!).

Still, the GDP Deflator must be subject to some subjective judgment. And if the CPI can apparently be under-estimated by a lot, perhaps our GDP Deflator is also under-estimated, though to a lesser extent. And if the GDP Deflator is under-estimated, say by 1% per year, then our real GDP (which is calculated by division by the GDP Deflator) is regularly biased on the optimistic side.

That would explain why we seem to feel a long-term loss of competitiveness (unregistered inflation of living costs) and sluggish economy, even as official figures look so rosy. That would also explain why over three decades, our cousin currency Singapore dollars, which split from the ringgit, has more than doubled its value relative to the ringgit, even though Malaysia has large oil export revenues.

However, there are opposite views, as in the US and the UK: that inflation figures tend to be over-estimated, because the figures do not account for the improved quality of goods and services, such as better quality rice, cleaner meat, sweeter fruits, softer toilet paper, better cars, nicer haircuts, etc. Of course, the US officials insist that they have fully adjusted for such qualitative issues, and that their inflation figures are not biased one way or another.

Then there are confirming views in developing, highly-politicised, and high-inflation economies, such as in Sri Langka, that inflation is under-estimated to give the economy a better shine .

This question has bugged me for a while. But there are few forums where this question can be raised, because there is a social and political pressure to conformist thinking. Economic officials may howl at this suggestion that GDP estimation is biased on the upside. But I think we should take a skeptical view regarding any official statistics.

As much as we talk about media openness and judiciary reform, Malaysia also needs to take an open, methodical, and principled attitude toward the distribution of government and economic information, and the underlying details.

Eventually, the federal government must also let go of its ownership, tight licensing control, indirect control over top appointments in financial institutions and influence over financial business contracts that it currently exercises through the GLCs, EPF, other funds, and the banks.

This in order to foster a free and critical environment to discuss economic matters and to help improve Malaysia's competitiveness for the long term.