Bank Negara Malaysia: Economy To Expand In 2023, Albeit At Moderate Pace

3
121
Bank Negara Malaysia (BNM) - Pic for illustration purposes.

Despite the global economy facing a challenging and uncertain landscape, Bank Negara Malaysia envisions moderate growth, driven by firm domestic demand

KUALA LUMPUR – Malaysia’s Central Bank (Bank Negara – BNM) released its annual report on Wednesday, indicating that GDP growth forecast is 4-5% vs 4.5% in retabled budget. We present here some of the salient points and slides from the presentation.

Despite global challenges, moderate growth is expected for Malaysia in 2023, according to Bank Negara's Annual Report released Wednesday.

Despite global challenges, moderate growth is expected for Malaysia in 2023, according to Bank Negara’s Annual Report released Wednesday.

In 2022, Malaysia’s financial position was stable with total assets at RM619.04 billion, international reserves at RM503.33 billion, giving it a net profit of RM6.99 billion. Dividend paid to the government was RM2.75 billion.

The report added that there has been higher growth across most sectors.

Among the other salient points indicated in the report were:

2. Unemployment rate is forecast at 3.5%, at the low of the range in retabled budget 3.5-3.7%. 

3. Inflation forecast is 2.8-3.8%, same as the retabled budget.

4. Exports growth is just a tiny 1.5% vs 1.6% mentioned in retabled budget. 

5. Current account surplus is expected to be 2.5-3.5% vs 3% mentioned in retabled budget. 

6. BNM assumes oil price to be USD80-90/b. This is higher than current market price. 

7. BNM assumes CPO to be in the range of RM3800-4200, slightly higher than market price as well.

8. Malaysia embraces Basel III. 

9. BNM opines that local banks have high total capital ratios of more than 18%, a lot higher than minimum requirements of 8%.

10. BNM regards Malaysia banks are more conservative. 

11. BNM said will respect hierarchy of capital, debt holders are always ahead of shareholders. 

12. PIDM RM250k covers 96% of all depositors in Malaysia that is considered ideal by international standards.

13. On gap between 3mK and OPR. It reflects market expectations (OPR would be hiked further).

14. On FX reserves, BNM said stabilised gross reserves indicates total intervention capacity.

15. On build up of forward position, it is through domestic sourced funds. They help to buffer intervention capacity.

16. On onshore borrowing rates, BNM opines that they are not excessively high. BNM js not targeting any level, but will monitor magnitude of movement. BNM may allow market to make full adjustments.

17. Crucial to seize opportunities to implement key structural reforms in enhancing Malaysia’s growth potential and competitiveness

18. On the domestic side, particularly households and businesses, repayment capacity have improved, but pockets of risks remain. The good news is that household spending is underpinned by continued income growth.

19. Reforms to the social protection framework are important to address economic fragilities, facilitated by a multi-pillar approach.

20. There must be necessary reforms to ensure Malaysia’s retirement savings framework is future-ready.

21. Strong focus on financial scams that have become a significant problem globally.

22. Key countermeasures implemented to combat financial scams and ensure the banking and payment systems remain safe.

23. Digital payments continue to accelerate amid intensified efforts to secure cheaper, faster and more transparent cross border payments.

24. On green economy, an orderly transition to a green economy will allow Malaysia’s growth to become more resilient, sustainable and inclusive.

25. There is a need for carbon accounting framework and response to biodiversity loss to support and complement climate action.

In summary,

  • The Malaysian economy is projected to expand between 4% and 5% in 2023, anchored by firm domestic demand.
  • Both headline and core inflation are projected to average between 2.8% and 3.8%.
  • Risks to the growth outlook are fairly balanced with downside risks emanating primarily from external factors
  • Capital and liquidity positions of banks remain sound to absorb potential shocks and support intermediation.
  • Implementation of key structural reforms is important to ensure sustainable growth going forward. – mediahit

Also Read:-

Standard Chartered Expects BNM To Keep OPR Unchanged