The Impact of COVID-19 on the Cost of Living in Malaysia

Abstract

The issue of the cost of living has become a crucial focus for the government and has worsened, particularly during the COVID-19 pandemic. While many factors are believed to be contributing to the rising cost of living, there have been limited studies focusing on the duration of the COVID-19 pandemic. Thus, this study aims to identify the relationship between factors influencing the cost of living in Malaysia, both before and during the COVID-19 pandemic. The factors analyzed include gross domestic product per capita, population growth, and the unemployment rate. The study also identifies three major new influences during the pandemic: supply chain disruptions, significant changes in household income, and a dramatic shift in consumer spending toward essential goods and digital services. This study employs several statistical methods such as descriptive statistics, correlation tests, variance inflation factors, and the Multiple Linear Regression model (MLR). Using MLR with 108 monthly data points from 2014 to 2022, the findings from two models consistently indicate that population growth has the greatest impact on the cost of living for households. This result suggests that demographic changes and population dynamics are the most significant drivers of the cost of living, even more so than GDP per capita or the unemployment rate.