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Embargo Not for publication or broadcast before 1200 hours on Friday, 15 May 2015 Sidang Akhbar Prestasi Ekonomi pada Suku Pertama Tahun 2015 Gabenor Bank Negara Malaysia 15 Mei 2015 Sidang akhbar akan meliputi: • Prestasi ekonomi pada suku pertama tahun 2015 • Perkembangan monetari dan kewangan 1 Moderate global economic expansion in 1Q 2015 Global Growth Real GDP (Annual change, %) 2014 1Q 4Q 2015 Year 1Q Advanced economies US 1.9 2.4 2.4 3.0a UK 2.7r 3.0r 2.8r 2.4p Euro area 1.1 0.9 0.9 1.0p Asian economies PR China 7.4 7.3 7.4 7.0 Chinese Taipei 3.4 3.3r 3.7r 3.5a Indonesia 5.1 5.0 5.0 4.7 Korea 3.9 2.7 3.3 2.4a Singapore 4.6 2.1r 2.9r 2.1a p Preliminary estimate a Advance estimate r Revised Source: National authorities 2 • Divergence of growth momentum across major economies • Sustained economic recovery in the US and UK • Subdued growth in the euro area and Japan • Growth in Asia continues to be sustained by the expansion of domestic demand The Malaysian economy expanded by 5.6% in 1Q 2015 RM bn (2010 =100) 300 Real GDP growth 6.3 6.5 Annual change (%) 7 5.7 5.6 5.6 250 6 5 Real GDP 4 200 3 2 150 1 0 100 1Q 2011 2Q 3Q 4Q 1Q 2012 2Q 3Q 4Q 1Q 2013 Source: Department of Statistics, Malaysia 3 2Q 3Q 4Q 1Q 2014 2Q 3Q 2Q 1Q 2015 Private sector remains the anchor of growth Ppt contribution Share, % (2014) 1Q 4Q Year 1Q 10 Domestic demand (excluding stocks) 91.5 7.6 5.7 5.9 7.9 8 Private Sector 68.5 8.9 8.3 7.9 9.6 Consumption 51.8 7.0 7.6 7.0 8.8 Investment 16.6 14.9 11.1 11.0 11.7 Public Sector 23.0 3.6 0.6 0.4 2.5 Consumption 13.6 12.2 2.5 4.4 4.1 Investment 9.5 -6.3 -1.9 -4.7 0.5 Real GDP (Annual change, %) Net exports of goods and services 9.3 2015 2014 8.2 -4.0 12.8 6 2.0 4 4.6 2 0 -1.1 -0.4 -2 7.9 1.9 5.1 -0.6 Imports Change in stocks (RM billion) 66.8 7.8 2.6 4.2 1.0 -0.8 -1.6 -2.7 -8.5 -2.5 GDP (y-o-y) 100.0 6.3 5.7 6.0 5.6 - 1.4 1.8 - 1.2 GDP (q-o-q growth, seasonally adjusted) 5.6% 0.5 -10.2 76.1 Exports 6.3% GDP growth: 5.7% 6.5% 5.6% -4 1Q 14 Source: Department of Statistics, Malaysia 4 2Q 14 3Q 14 4Q 14 1Q 15 Private investment Private consumption Public investment Public consumption Net exports Change in stocks Private consumption expanded at a stronger pace of 8.8% Spending remained supported by stable employment conditions Stronger pace of private consumption Unemployment Rate and Employment Real Private Consumption Growth Annual change (%) Unemployment rate (% of labour force) 10.0 3.5 Persons (million) 14.5 Employment (RHS) 9.0 8.8 8.0 14.0 13.7 13.7 3.1 13.5 Unemployment rate 3.0 13.0 7.6 2.8 7.0 6.0 12.5 12.0 2.5 11.5 5.0 11.0 2.0 4.0 10.5 1Q 12 1Q 12 3Q 12 1Q 13 3Q 13 1Q 14 3Q 14 1Q 15 Source: Department of Statistics, Malaysia; Ministry of Human Resources 5 4Q 12 3Q 13 2Q 14 1Q 15 Private investment advanced by 11.7% Real Private Investment Growth Annual change (%) 30 Private investment driven by: 25 • Capital spending in the exportoriented manufacturing industries and the services sector • On-going multi-year investment projects 20 15 11.1 11.7 10 5 0 1Q 12 4Q 12 3Q 13 2Q 14 1Q 15 Source: Department of Statistics, Malaysia 8 6 Trade balance remained sizeable and current account surplus improved Trade balance remained sizeable Higher current account surplus in 1Q15 RM bn 183.2 30 RM bn 200 RM bn 40 % of GNI 12 Current account balance (RHS) Exports 150 175.0 Imports 30 9 20 6 10 3 0 0 25 20 100 21.3 50 Trade balance (RHS) 15 5 3Q 13 1Q 14 3Q 14 -3 -20 -6 10 0 1Q 13 -10 -30 1Q 15 % yoy 1Q14 4Q14 2014 1Q15 Exports 10.7 0.5 6.4 -2.5 Imports 5.5 4.6 5.3 0.2 -9 3Q 12 1Q 13 3Q 13 Goods Primary income CAB % of GNI Source: Department of Statistics, Malaysia 7 1Q 14 3Q 14 1Q15 Services Secondary income Ample reserves to meet external obligations while external debt affected by valuation effect Reserves position remained at about fivetimes the level during Asian Financial Crisis USD bn Times 12 30 Apr. 2015: USD105.8 bn 10 Net International Reserves 160 140 120 100 In 1Q 2015, higher external debt in ringgit terms due to valuation effect Total external debt RM768.1 bn, 65.9% of GDP RM bn 350 900 800 696.6 700 1997: USD21.7 bn 80 8 602.1 500 747.5 211.8 537.5 600 6 USD bn 768.1 300 205.1 434.3 200 400 60 4 100 200 2 20 150 300 40 50 100 0 250 0 0 1991 1994 1997 2000 2003 2006 2009 2012 2015 As at 30 Net International Reserves Apr Retained import cover (RHS) Reserves/ST ext debt (RHS) 0 2010 2011 2012 2013 2014 1Q 2015 Offshore borrowing (Previous Definition) Non-resident holdings of domestic debt securities Other debt liabilities* Total External Debt, USD equivalent (RHS) *Include trade credits, SDR allocation and miscellaneous Source: Bank Negara Malaysia, Department of Statistics, Malaysia 8 Growth supported by the major economic sectors Real GDP (Annual change, %) 2014 2015 1Q 4Q Year 1Q Services 53.5 6.7 6.6 6.5 6.4 Manufacturing 23.0 7.0 5.4 6.2 5.6 Mining 9.0 -0.1 9.5 3.3 9.6 Agriculture 9.2 2.6 -3.7 2.1 -4.7 Construction 4.3 19.3 8.8 11.8 9.7 100.01 6.3 5.7 6.0 5.6 GDP 1 Share, % (2014) Numbers do not add up due to rounding and exclusion of import duties component Source: Department of Statistics, Malaysia 9 • Services: Expansion in all subsectors, particularly in consumption-related sub-sectors • Manufacturing: Strong production in the E&E cluster • Construction: Supported by nonresidential and residential subsectors • Mining: Strong growth amid higher crude oil production • Agriculture: Contraction due to lower palm oil output Headline inflation was lower at 0.7% in 1Q • The decline in inflation was due mainly to the transport category following the downward revisions to domestic fuel prices Contribution to Inflation Annual growth, % 4.0 4Q ‘14 Category 1Q ‘15 Weight Annual growth, % 3.5 3.0 Headline inflation 100.0 2.8 0.7 Food and nonalcoholic beverages 30.3 2.7 2.5 Housing, water, electricity, gas and other fuels 22.6 3.4 2.1 Transport 14.9 4.8 -7.6 Others 32.2 1.5 1.6 2.5 2.0 1.5 1.0 0.5 0.0 Food & non-alcoholic beverages Housing, water, electricity, gas & other fuels Transport Others -0.5 -1.0 1Q 15 4Q 14 3Q 14 2Q 14 1Q 14 4Q 13 3Q 13 2Q 13 1Q 13 4Q 12 3Q 12 2Q 12 1Q 12 -1.5 Others include alcoholic beverages and tobacco; restaurants & hotels; recreation services & culture; education; health; furnishings, household equipment & routine household maintenance; communication; clothing and footwear; and miscellaneous goods and services. Source: Department of Statistics, Malaysia 10 OPR maintained at 3.25% amid steady growth prospects and contained underlying inflation % 4.0 Overnight Policy Rate • The Malaysian economy is expected to remain on a steady growth path with domestic demand remaining as the key driver of growth 3.5 3.25 • Inflation is expected to trend higher in 2015 following the implementation of GST. Underlying inflation is expected to remain contained 3.0 2.5 • The stance of monetary policy remains supportive of economic activity 2.0 • Risks to destabilising financial imbalances are contained 1.5 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 1.0 11 Ringgit movements driven by both domestic and external factors MYR performance against selected currencies THB -7.0 INR -7.0 • Regional currencies continued to face volatility during the first quarter: IDR PHP -6.1 CNY -5.9 USD -6.0 JPY ‒ Concerns on the global economic outlook -5.3 KRW TWD ‒ Uncertainty surrounding global monetary conditions -1.0 -4.2 • The ringgit also faced adjustments due to ongoing concerns on impact of low global crude oil prices -6.8 SGD -2.0 EUR 5.9 AUD 1.2 GBP -9 -6 -3 0 • The ringgit, however, has appreciated in April following some recovery and stabilisation in the global crude oil prices % change -1.0 3 1 Apr- 13 May 2015 6 9 1Q Note: +ve corresponds to ringgit appreciation Source: Bank Negara Malaysia 12 Financing remained supportive of economic activity Relatively stable total loans growth amidst continued strong growth in SME loans … Net Financing1 and Outstanding Banking System Loans Growth Gross Financing through the Banking System and Capital Market RM billion 350 Loans Disbursed Gross PDS Issued* Equity SME loan growth: 17.2% 302 300 247 2Q13 250 243 1Q13 16 282 281 2Q14 300 1Q14 Annual change (%) 20 … with sustained gross financing to the private sector 310 282 256 12 Total loan growth: 9.2% 200 8 150 Net financing growth: 8.3% 4 *Excludes issuances by Cagamas Source: Bank Negara Malaysia 13 1Q15 4Q14 3Q14 loans of the banking system and PDS outstanding 4Q13 1Outstanding 3Q13 100 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 Domestic financial stability continued to be preserved Banking sector 4Q 14 1Q 15 Common equity tier 1 (CET1) capital ratio (%) 13.3 12.5 Tier 1 capital ratio (%) 14.0 13.2 Total capital ratio (%) 15.9 15.2 Capital buffer (RM bn) 107 99 Net impaired loans ratio (%) 1.2 1.2 ROE (annualised) 15.2 12.4 Liquidity buffer (<1 mth) (% of deposits) 15.8 16.0 Insurance/Takaful sector 4Q 14 1Q 15 Capital adequacy ratio (%) - Insurance 252.1 246.5 Capital adequacy ratio (%) - Takaful 189.6 187.5 Capital buffer (RM bn) 32.9 33.1 Profit YTD (RM bn) 16.9 6.2 Source: Bank Negara Malaysia 14 • Financial intermediation continued to be supported by: – Sound financial institutions; – Orderly conditions in financial markets; and – Ample liquidity • Banks and insurers to remain resilient under stress scenarios • Public confidence in the financial system remained intact • Banking system liquidity remained ample Household debt expansion continued to moderate RM bn Household Sector: Debt and financial 2500 Annual growth (%) 16 2,070 2000 12 1500 9.2 1000 6.6 • Household debt grew by 9.2% • Aggregate financial assets remained above 2 times of household debt • Risk of delinquency remains low in near term – Continued income growth and favourable employment conditions – Prudent debt servicing ratios (DSR) associated with new household debt – Sustained debt servicing capacity 8 4 500 0 0 Financial liabilities HH debt growth (RHS) % Financial assets Financial assets growth (RHS) Banking System: Impaired Loans and Loans-in-arrears (LIA) Ratios of Households 3.0 2.5 2.0 1.5 1.5 1.2 1.0 0.5 0.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2011 2012 Household: LIA 1-<3 months ratio 2013 2014 2015 Household: Impaired loans Source: Bank Negara Malaysia 15 Sustained debt servicing capacity amid improved leverage position of businesses Business sector: Leverage and debt servicing capacity % times 10 60 50 41.5% 8 40 • Quality of banking sector credit exposure to businesses remained healthy – Low impairment and arrears – Supported by sustained financial performance and strong financial buffers of businesses 4 20 2 10 0 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2011 2012 Debt-to-equity ratio Current ratio (RHS) 6.0 Growth in domestic borrowings (loans, private debt securities and sukuk) by businesses moderated to 7.4% (Dec 2014: +8.5%) 6 30 % • 2013 2014 Interest coverage ratio (RHS) Banking system: Impaired loan and loans-in-arrears (LIA) ratios of Businesses 5.0 4.0 3.0 2.5 2.0 1.0 0.3 0.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2011 2012 2013 2014 2015 Business: Impaired loans Business: LIA-1-<3 months ratio Source: Bank Negara Malaysia 16 Looking ahead, the Malaysian economy is expected to remain on a steady growth path • The global economy to improve although at a moderate pace − Pace of recovery of the advanced economies to remain modest and uneven − While growth in the regional economies is slower, it will continue to remain an important growth center in the global economy − Downsides risks remain, with the international financial markets affected by shifts in global liquidity and investor sentiments. • Domestic demand to remain as the key driver of growth of Malaysian economy − Private consumption is expected to be affected by the introduction of GST, but will continue to be supported by the steady rise in income and employment − Investment activity to be led by capital spending in export-oriented industries, services sector and infrastructure projects − The recovery in global growth, although moderate, will provide support to manufactured exports 17 Announcement on Rebase of Malaysia’s GDP to Base Year 2010 18 Malaysia’s GDP rebased to the 2010 base year 1. GDP rebasing is a planned periodic exercise and is in line with international best practices 2. Rebasing of Malaysia’s GDP ensures the continued relevance and improves the quality of GDP estimates − Reflects latest structure of the Malaysian economy − Adopts international best practices in statistical compilation − Incorporates latest comprehensive surveys, censuses and data sources 3. The rebasing exercise has minimal implications on Malaysia’s economic profile − Modest increase in nominal GDP − Minimal changes to the structure and underlying drivers of growth in the economy − Unchanged GDP growth and underlying momentum 19 Structure of the economy broadly unchanged Services and manufacturing remain the largest sectors % 60.0 Private sector domestic demand remains the key driver of growth Share of real GDP (by economic activity) in 2014 55.3 % 60 53.5 Share of real GDP (by expenditure) in 2014 52.5 51.8 2005 base 50.0 2010 base 2005 base 50 40.0 2010 base 40 30.0 24.6 30 23.0 20.0 17.5 16.6 20 6.9 9.2 7.9 9.0 10 9.8 9.5 8.0 9.3 Net exports 10.0 Public investment 13.2 13.6 3.9 4.3 20 Public consumption Private consumption Source: Department of Statistics, Malaysia Private investment 0 Construction Mining Agriculture Manufacturing Services 0.0 Nominal and real GDP growth relatively unchanged Underlying growth momentum of the economy remains relatively the same Nominal GDP growth Real GDP growth Yoy, % Yoy, % Old base 12.0 New base Old base 8.0 New base 11.0 11.0 10.0 6.0 8.6 8.4 8.0 5.3 5.2 6.5 6.0 5.6 6.0 5.5 4.7 4.7 4.0 6.4 6.0 4.9 4.8 4.0 2.0 2011 2012 2013 2014 2011 Source: Department of Statistics, Malaysia 21 2012 2013 2014 Questions