PETALING JAYA: Malaysian households are experiencing slower income growth, with urban poverty rates worsening due to the effects of the Covid-19 pandemic, according to the Khazanah Research Institute (KRI).
Their report, Households and the Pandemic 2019-2022: The State of Households 2024, released yesterday, revealed that the percentage of households in absolute poverty rose to 6.2% in 2022, up 0.6% from 2019.
“While not all districts faced a rise in absolute poverty, urban households were the most affected with poverty rising from 3.8% in 2019 to 4.5% in 2022.
“The highest increase in household absolute poverty occurred in Kuala Lumpur (6,774 households), Kuala Muda (5,229), and Kota Kinabalu (5,117),” it said.
The report attributes the increases to the high population density in these areas.
As the tabling of the Budget 2025 approaches, all eyes are on how the government plans to tackle these challenges.
Prime Minister Datuk Seri Anwar Ibrahim said on Wednesday that the upcoming Budget aims to improve living standards and advance national development.
Interestingly, KRI reports that rural households experienced a slight decline in absolute poverty during the same period.
In 2022, nearly 78% of households in Malaysia were urban, a rise from 67% in 2002.
The report identifies 107 districts with the incidence of poor households higher than the national average rates, including 62 districts where the prevalence was double the national average while 17 districts were significantly above the national average.
In contrast, districts in Selangor, Kuala Lumpur, and Putrajaya as well as several districts neighbouring Selangor exhibited significantly lower poverty rates.
The report highlights a wide disparity in absolute poverty rates across Peninsular Malaysia, ranging from 0% in Sepang in Selangor to 43.8% in Kecil Lojing in Kelantan.
Meanwhile, household income across the country saw moderate growth as it was slowed by the pandemic.
“Household income grew at a much slower rate compared to the decade preceding the pandemic (2009-2019), dropping from 5.3% to 1%,” it said.
Selangor led income growth, while urban areas like Putrajaya and Kuala Lumpur declined.
“From 2016 to 2019, all states except Sabah recorded positive real median household income growth,” it said.
“During 2019-2022, Putrajaya (-1.3%) and Kuala Lumpur (-2.5%) saw significant declines in real median household income.”
Despite the slowdown, Selangor’s household income outperformed other states by an average increase of RM410, achieving a compound annual growth rate (CAGR) of 5.1%.
Without Selangor’s performance, the national mean household income in 2022 would have been 12.9% lower.
Most districts in Selangor, aside from Klang and Petaling, were in the top percentile of CAGR growth.
“The highest growth districts during 2019-2022 were Kuala Langat (11%), Sepang (10%), and Ulu Langat (8%),” the report said.
However, it notes that income growth in 2022 did not reach its full potential, leaving a 13% gap below pre-pandemic trends, highlighting a substantial lag in recovery.
“A third of districts in Malaysia saw their income growth fall into the bottom quintile (fifth) of the distribution, with many experiencing negative growth.
“Household income, when adjusted for inequality, grew more slowly, with 18 districts, primarily from Peninsular Malaysia, falling into the lowest growth group, resulting in decreased income and increased inequality,” it said.
On the household size front, while the total number of Malaysian households has increased, larger households have declined, reflecting a noticeable shift towards smaller, individual living arrangements.
Malaysia’s average household size fell from 4.6 in 1995 to 3.8 in 2022.
Additionally, household expenditures have risen, with the mean climbing to 77.6% of income and median expenditures reaching 67.6%.
“Housing and utilities dominated the household consumption basket, followed by food and transport expenditures,” said the report.
