Monday, 27 February 2017, 30 Jamadilawal 1438H Solat Time:
KL Imsak 5:59 | Subuh 6:09 | Syuruk 7:24 | Zohor 1:29 | Asar 4:44 | Maghrib 7:29 | Isyak 8:38

From the Desk of the Chief Economist


 

2016
December
Economic Outlook 2017 – Maintain Cautious
November
CPI moderated to 1.4% in October
OPR stays at 3.00%
3Q2016 GDP – Higher Than Expected
US Presidential Election 2016
October
Budget 2017 – optimism amidst uncertainty
IPI increased by 4.9% in August
Budget 2017 Preview: A Delicate Balancing Act
Malaysia’s exports grew 1.5% in August
September
US Fed kept rates unchanged between 0.25% and 0.50%
Industrial Production Index (IPI) softened to 4.1% in July
Export fell 5.3% in July
BNM kept OPR unchanged at 3.00%
August
CPI grew by 1.1% In July
IPI grew more than expected in June
Export grew higher than expected in June
July
Monetary aggregates and banking statistics in June
Inflation rate moderated to 1.6% in June
Economic Outlook for 2H2016 – Brace for impact
Its official, OPR now at 3.00%
June
Brexit – expect more noises to come
Residential Property: Slower Launches in 1Q 2016
Inflation rate at 2.0% in May
Production growth momentum is slowing
MYR/USD – which direction now?
May
CPI records slower gain in April
GDP grew unexpectedly higher by 4.2% in 1Q2016
IPI moderated to 2.8% in March
Export grew 0.2% in March
April
IPI gained 3.9% in February
Export grew more than expected in February
MYR – what has changed?
March
CPI shot up to 4.2% in February 2016
BNM Annual Report 2015
US FOMC – Tampering the speed of FFR hike
IPI upped 3.2% in January
Export declined 2.8% in January
February
Inflation rate edged up to 3.5% in January
4Q2015 GDP growth surprise on the upside
IPI expanded 2.7% in December
Export growth skidded to 1.4% in December
January
Recalibration of Budget 2016 – Striking the right balance
US FOMC – growing pessimism
OPR stays but SRR cut by 50 basis points
Inflation rises 2.7% in December

 

 

2015
December
Economic Outlook 2016 – Stay Cautious
US Fed Fund Rate raised by 25 basis points
Industrial production marginally slower in Oct
Export growth shot up to 16.7% in Oct
November
CPI stabilised at 2.5% in October
3Q 2015 GDP at 4.7%
Oil & Gas – Petronas 3QFY15 Results
IPI accelerated to 5.1% in September
Export surged 8.8% in September
OPR maintained at 3.25% in 2015
October
US FOMC meeting – December’s meeting could see a rate hike
Budget 2016 – walking on a tight rope
Sneak Preview – Budget 2016
IPI moderated to 3.0% in August
Augusts’ export rose more than expected
Monetary condition & loan growth in August
September
CPI moderate slightly to 3.1% in August
BNM’s international reserve assets rose to USD95.3 billion as of 15 September
US Federal Fund Rate kept at 0.25%
OPR maintained at 3.25%
IPI gained 6.1% in July
Export growth remained positive in July
August
Market volatility…as we see it
2Q2015 GDP grew at 4.9%
IPI moderated to 4.3% in June
Export rebounded in June
July
IPI up slightly to 4.5% in May
Ringgit and sense
OPR maintained at 3.25%
Economic outlook for 2H2015
Export in May – better than expected
June
Fitch Ratings – from Negative to Stable Outlook
CPI rose 2.1% in May
US FOMC – indecisiveness could pose risks
Moderate gain in IPI during April
Malaysia’s export declined 8.8% in April
May
11th Malaysian Plan (2016-2020)
1Q2015 GDP still stable…for now
Higher IPI in March
April
Inflation rate increased to 0.9% in March
Malaysia’s Residential Property Market – Slow and Steady
IPI gained 5.2% in February
Exports fell again in February
Monetary and Banking Statistics – Feb 2015
March
A view on weak MYR
Inflation at 0.1% in February
BNM Annual Report 2014 & Financial Stability and Payment Systems Report 2014
Trade Surplus Sustained at RM9 Billion
OPR unchanged at 3.25%
February
Inflation rate decelerated to 1.0% in January
Export rose further to 2.7% in December
January
Budget 2015 Revision – A Reality Check
Don’t Forget Consumer Spending
Oil and Economy – Measuring the Relationship
Export Rebounded to 2.1% in November

 

2014
December
US FOMC – Fed Fund Rate hike could commence in 2Q 2015
Economic Outlook 2015 – Going defensive
Export growth contracted more than expected
November
3Q2014 GDP growth within expectation
Export grew 2.0% in September. Fell short of expectation
OPR maintained at 3.25%. BNM turned more dovish
October
Budget 2015 (Harian Metro)
US dollar regains strength (The Star)
Pre Budget 2015 (Harian Metro)
Budget 2015 – Towards a Balanced Budget
Export Grew 1.7% in August
Pre Budget 2015 – Time to be a Realist
September
What to expect from Budget 2015 (The Star)
BNM turns dovish on growth concerns (The Edge)
Goverment spending to come under scrutiny (The Edge)
Flattish IPI in July
Export Growth at its Lowest in July
August
2Q2014 GDP at 6.4% (Harian Metro)
2Q2014 GDP at 6.4%
Stronger than expected IPI Growth in June
Exports Grew Moderately at 7.9% in June
July
CPI Rose 3.3% in June
Overnight Policy Rate (OPR) hike by 25 basis points
June
CPI Moderated 3.2% y-o-y in May
External trade – off to a good start
May
Malaysia’s 1Q2014 GDP – Higher than expected
April
Property sector – still neutral
February
4Q2013 GDP – Better Than Expected
December’s IPI – a mixed picture
What’s up with consumer?
January
OPR retained at 3

Despite volatile capital flows and a mixed outlook on the global front, the Malaysian economy continued to perform favourably during the course of 2014. The country recorded Gross Domestic Product (“GDP”) growth of 6.0% in 2014 after delivering 4.7% expansion the previous year. This was mainly supported by a massive 19.7% growth in net exports. Rising demand from developed countries such as the United States (“US”), the European Union (“EU”) and Japan contributed to a large increase in export growth, a sign that Malaysia is benefitting from the recovery of key economies. However, domestic growth was modest due to the ongoing fiscal consolidation exercise which has resulted in moderated public sector spending. Similarly, weaker business sentiments following volatility in the financial and foreign exchange market reduced private investment growth down to 11.0%. Nonetheless, consumer spending was fairly resilient with private consumption posting a stable growth of 7.1% owing to stability in the labour market and continued household income growth.

On the supply side, all economic activities reported stronger growth compared to the previous year. Services sector, which accounted for 55% of Malaysia’s GDP, grew by 6.3% attributed to activities in wholesale & retail trade, transport & storage and finance. All services sub-sectors recorded higher growth during the year. Meanwhile, the manufacturing sector was mainly sustained by export-oriented industries, such as the production of electrical and electronics goods. The construction sector was boosted by the implementation of infrastructure projects as well as the construction of residential and non-residential buildings. Growth in the sector remained at a double digit pace of 11.6%. In the same vein, higher production in crude oil and condensates products led to the strong rebound in mining industry output which rose to 3.1% from 0.7% previously. Meanwhile, agricultural output increased by 2.6%, aided by industrial and food crops.

The heightened growth environment set the stage for the government to address several macroeconomic imbalances. A notable development was the introduction of the managed float system in order to determine domestic petrol fuel prices. Earlier, there had been an increase in electricity tariff in January and a gas price hike for commercial users was announced in mid 2014. The result was tangible. The government’s fiscal deficit fell further to 3.5% of GDP in 2014 from 3.9% previously. In addition, strong economic growth provided the necessary backdrop for the central bank to further normalise the policy rate. To this end, Bank Negara Malaysia (“BNM”) raised the Overnight Policy Rate (“OPR”) by 25 basis points to 3.25% in July last year. Apart from that, Malaysia’s current account surplus balance widened to RM49.5 billion or 4.8% of Gross National Income (“GNI”) in 2014 from RM39.9 billion or 4.2% of GNI recorded in the previous year; signalling a higher savings and investment gap in the economy.

Nevertheless, the Malaysian ringgit was heavily penalised despite the country’s sound economic fundamentals. The possible normalisation of US monetary policy in 2015 has been widely factored in by global investors. This is in view of the country’s sustained economic recovery, particularly in the US labour market space. Additionally, concerns over lower oil prices to oil-exporting countries have been exacerbated by the Organisation of the Petroleum Exporting Countries (“OPEC”) members’ decision to maintain its production quota at 30 million barrels per day in November 2014. This espouses the view that the supply glut in the oil market will likely to continue as OPEC is seen to be taking steps to protect its market share in the global oil market. Such notions have caused outflows of capital to become more apparent in Asian economies as prospect of higher returns in developed economies have become more prevalent. And Malaysia is obviously no exception.

The Malaysian currency has lost its value against the US dollar by 6.3% during the course of 2014 as some of the foreign funds exited the Malaysian financial market. Foreign institutions have generally become a net seller in 2014 at RM6.6 billion as opposed to a net buyer of RM3.0 billion in the preceding year. As a result, the FBM KLCI index fell by 5.7% as at end December last year, to close at 1,761.25. Similarly, foreign funds were offloading ringgit denominated debts holdings. The share of foreign ownership in Malaysian Government Securities (“MGS”) slid to 44.1% at the end of 2014 from a high of 48.4% in July. Consequently, bond yields were higher with the 3- and 10-year MGS yield rising by 31 and 2 basis points at the end of last year to reach 3.64% and 4.15% respectively.

Amidst such volatility, the Islamic finance industry demonstrated a high degree of resilience. Total Islamic banking assets maintained double digit growth of 12.4% to register RM487.1 billion in 2014. The share to total banking system asset also rose to 22.2%, suggesting the increased standing of Islamic banks as financial intermediaries in the Malaysian economy. This was reflected in financing assets growth of 18.4% to RM336.1 billion, which surpassed the 9.3% growth for the whole banking industry. There appears to be more placements for Islamic deposits with growth registering 14.8% or RM401.0 billion as at end 2014; largely supported by current and savings account (“CASA”) which posted 10.1% growth during the year. The Islamic capital market also flourished during 2014 with new issuance of Sukuk rising to RM8.8 billion – an increase of 11.3% from the previous year. Issuances were mainly dominated by financial institutions as they commenced fulfilling Basel III requirement. Against such a backdrop, the operating environment should be earnings-accretive for Bank Islam as the stable employment market bodes well with our financing portfolio composition. Additionally, the anticipation of sustained increase in private investment activities would mean there are pockets of opportunities for the Bank to widen its presence in the commercial and corporate space.

Going forward, the economic landscape is expected to remain challenging as prospects for global demand is mixed. On one hand, the US economic recovery has been ongoing with unemployment rate steadily scaling down while the number of jobs created is soaring. Combined with lower oil prices, household spending in the largest economy is anticipated to be supportive to global growth. However the situations in other developed economies are less positive as they grapple to fend off deflationary pressures. The European region has been plagued by falling prices with the Harmonise Index of Consumer Prices (“HICP”) declining for three consecutive months between December 2014 and February 2015. In addition, the fall in property prices in China amidst rising non-performing loans is likely to temper growth in the immediate terms as policy makers seek to rebalance the Mainland’s engine of growth. As a result, a slew of monetary easing measures were introduced by major central banks across the globe; most notably in Europe, where negative interest rate and quantitative easing (“QE”) measures were announced in late 2014 in a bid to resuscitate demand while avoiding the threat of a deflationary spiral. In the meantime, China, India, Indonesia and Singapore have now switched to a more accommodative monetary stance as lower oil prices have allowed them to reduce policy rates to support the economy.

Back home, on 20 January 2015, the Malaysian government has revised its Budget 2015 allocation since fiscal deficits as percentage of GDP in 2015 is projected to reach 3.2% from the previous estimate of 3.0%. The revision came as oil prices are likely to remain low. Such an announcement is deemed to be timely and realistic since the government is committed to reduce the budget gap, albeit more gradually, while sustaining economic growth. Therefore, the economy is poised to grow between 4.5% and 5.5% in 2015 underpinned by continued resilience in domestic activities and the external sector.

 

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