KUALA LUMPUR (April 3): Bank Negara Malaysia (BNM) released its annual report, economic monetary review and stability review today.
We have compiled the highlights of the report in addition to further information shared by the central bank governor Datuk Nor Shamsiah Mohd Yunus.
1. Malaysia’s 2020 GDP growth projected at between -2% and 0.5%
Malaysia's economic growth, as measured by gross domestic product (GDP), is projected at between -2% and 0.5% in 2020 against a highly challenging global economic outlook due mainly to the Covid-19 pandemic.
2. 2020 Monetary policy to support economic growth amid subdued inflation
The country’s monetary policy in 2020 will focus on providing support to domestic economic growth in an environment of subdued price pressures as the Covid-19 pandemic increases risks to the country’s growth outlook.
3. Financial institutions remain profitable and well-capitalised
BNM said today banks, insurers and takaful operators in the country remained profitable in 2019 despite the more challenging operating environment.
4. Relative to income, Malaysian house prices remain seriously unaffordable
Relative to income, Malaysian house prices remain seriously unaffordable due to a pronounced and prolonged mismatch between demand and supply of residential property. This was despite lower average transacted house prices in 2019, consistent with higher activity in the affordable housing segment, according to the Central Bank’s Financial Stability Review for Second Half 2019.
5. Private investment up 1.5% in 2019, slowest growth in a decade
Malaysia’s private investment grew at 1.5% in 2019 — the slowest pace since 2009 — compared with 4.3% growth in 2018. The private investment declined significantly by 21.8% in 2009 after the onset of the Global Financial Crisis.
6. Employment grew 2.1% while 29,605 persons were retrenched in 2019
Malaysia’s employment grew by 2.1% in 2019, compared with 2.5% in 2018, mainly driven by the services sector, followed by the manufacturing and agriculture sectors. The growth translated to an additional employment gain of 316,000 persons, while unemployment rate remained stable at 3.3%. On the other hand, BNM reported that retrenchments went up to 29,605 persons per annum, compared to 23,168 persons in 2018.
7. Private consumption to see further slowdown in 2020, grew slower at 7.6% in 2019
Private consumption continued to grow but at a slower pace at 7.6% in 2019 compared to 8% in 2018. Still, the growth pace in 2019 was higher than the long-term average (2011 to 2018) of 7%. Private consumption accounts for nearly 60% of the Malaysian GDP in 2019.
8. Malaysia's external debt rises 2.3% to RM946.3b as at end-2019
Malaysia’s external debt has gone up 2.3% to RM946.3 billion as at end-2019, or 62.6% of the country’s GDP, compared with RM924.9 billion as at end-2018 or 63.9%. The higher amount is mainly due to the increases in non-resident holdings of domestic debt securities and deposits, and external loans by corporations.
9. Risk of loan repayment defaults remains low among M'sian households
Although household debts expanded faster in the second half of 2019, the risk of Malaysian borrowers defaulting on their loan repayment remains low. This is simply because borrowers have larger residual income and greater flexibility to adjust discretionary expenditures under adverse circumstances.
10. Those earning below RM3,000 borrow less but default risk elevated
Borrowings by the vulnerable segment (borrowers with monthly earnings of less than RM3,000) continued to decline in 2019. However, BNM cautions that default risks among this group of borrowers remain elevated.
11. Continuation of large-scale infra projects to provide additional lift to economic growth — BNM
The continuation of large-scale infrastructure projects will provide additional lift to the economic growth amid the challenging economic conditions. BNM estimated that capital spending on major transport infrastructure projects of about RM15 billion is expected to lift 2020 GDP by 1 percentage point (ppt).
12. BNM sizeable international reserves a critical policy buffer to external shock
BNM said its international reserves, which account for 23.9% of the country’s external assets, remained an important policy buffer against external shocks.
13. RM250b stimulus package to add 2.8 percentage points to GDP growth in 2020
The government’s recently-announced RM250 billion economic stimulus package will add about 2.8 percentage points to the country’s GDP growth in 2020, which has been revised to between -0.2% and 0.5%.
14. Malaysia’s growth to be supported by private and public consumption
Against the backdrop of weak global demand, Malaysia’s economy will nevertheless be supported by growth in private and public consumption, said BNM. According to the central bank, private consumption is expected to grow 4.2%, lower than a recorded 7.6% growth in 2019.
15. Malaysia unemployment rate expected to hit 4% this year due to Covid-19
Amid the Covid-19 pandemic this year, Malaysia's unemployment rate is expected to shoot up to 4% this year, from 3.3% in 2019, said BNM. Labour market conditions, in general, are expected to be weak this year, affected by the Covid-19 pandemic.
16. Household debt continues to expand, but credit risks largely contained
BNM said today household debt, as measured by the household debt-to-GDP ratio, expanded at a faster pace in the second half of 2019, primarily driven by loans for the purchase of residential properties.
17. Bank Negara to pay higher dividend of RM3.5b to govt
BNM will pay a higher dividend of RM3.5 billion to the government for 2019, up 40% from the preceding year's RM2.5 billion payout.
18. BNM to publish next blueprint for financial sector in 2021
BNM is currently working to develop the next blueprint for the financial sector which the central bank aimed to publish it by next year. In the blueprint, the central bank will address the future path of regulation to support the objectives of a sound, progressive and inclusive financial system going forward.
19. BNM to implement requirements of Currency Act 2020
The central bank will implement the requirements of the Currency Act 2020, which include establishing a registration regime to regulate currency processors.
In its Annual Report 2019, the central bank said there are several notable provisions in the Currency Act 2020 such as an economic-wide cash transaction limit can be set to prohibit large value cash transactions and a legal tender limit for coins is set at 25 pieces.