Kuala Lampur, Aug. 17 -- Malaysia's second-quarter GDP figures released last week surprised on the upside. The economy grew by 6.0 per cent year-on-year, above the earlier advance estimate of 5.8 per cent and placing Malaysia among the stronger-performing economies in the region. However, the headline growth rate needs to be interpreted carefully and read alongside other macroeconomic and socioeconomic indicators.

Two features are particularly important in explaining why the strong GDP performance has not translated into an equally strong improvement in sentiment on the ground. First, much of the recent growth has come from externally driven and capital-intensive sector where employment and wage spillovers are relatively limited. Second,...