Economic Insight
2014/17 | 21 March 2014
BNM Annual Report 2013: Malaysia to chart 4.5% to 5.5% growth in 2014
TABLE 1: REAL GDP BY EXPENDITURE (2005=100)
2013p
2014f
Annual change
(%)
1
Domestic Demand
Private sector
expenditure
Consumption
Investment
Public sector
expenditure
Consumption
Investment
Change in stocks
Net exports of goods
and services
Exports
Imports
Real Gross Domestic
Product (GDP)
•
Bank Negara Malaysia (BNM) widened its growth forecast range
for 2014 to 4.5%-5.5% from 5.0%-5.5% (MOF). We opine this
would be due to concerns for the moderating domestic demand
given the government’s on-going fiscal consolidation exercise
to trim Malaysia’s budget deficit going forward. Furthermore,
the expectations that the improving advanced economies outlook
to lift emerging-market economies’ exports this year is not
without uncertainty. Hence, the wider range at the lower end of
the forecast.
•
The Malaysian economy which had expanded by 4.7% in 2013
(2012: 5.1%) was driven by the continued growth in the domestic
demand, led by robust private sector activity. The strong growth
in the private sector expenditure was boosted by the favourable
employment conditions (unemployment rate 2013: 3.1%) and
supportive wage growth, denoted by the growth of real wage
per employee in the manufacturing sector (2013p: 5.6%; 2012:
4.7%; 2011: 0.6%).
•
The uneven global recovery during the first half of 2013 had
moderated the external sector in the first half (current account:
+RM11.2 billion), but exports later picked up to widen the current
account balance to RM26.1 billion in the second half of the year
as the advanced economies began to gain traction. This resulted
in an overall current account balance for the year to stand at
RM37.3 billion (2012: RM57.3 billion).
•
In 2014, a better external sector performance is expected as
the improvement in global growth continues (3.7% vs 2013e:
3.0%)1. Nevertheless, downside risks to growth remains, due
to structural constraints and high level of indebtedness in the
domestic economy. However, the most vulnerable group
(household income of up to RM3000) comprised less than one
third of total households borrowings (2013:27%, 2012:33%).
Nevertheless, 49.6% of total borrowers are from households
earning RM5,000 and above.
•
Going forward, domestic demand will continue to anchor growth
led by the private sector expenditure, as growth by the private
sector investment is expected to remain robust at 12.6% in
2014 (2013: 13.6%). The above historical average figure (20002012: 8.8%) was supported by the improvement in external
demand and continued expansion in domestic consumption. The
on-going ETP projects and development of regional corridors
would lend support in sustaining private sector investment.
•
Headline inflation estimate for 2014 had been revised from last
year’s 2% - 3% to 3% - 4%, which is above the 1991-2013
historical average of 3.0%. The new range accounts for higher
prices due to the government’s fiscal consolidation exercises.
However, the spillover effects from the cost-push factor inflation
2013p
2014f
Contribution to
percentage growth
(percentage point)
7.6
6.9
6.9
6.4
9.0
7.6
13.6
8.3
6.9
12.6
5.9
3.8
2.1
5.7
3.6
2.1
3.7
6.3
0.7
2.9
3.0
2.9
0.9
0.8
0.1
‐0.2
0.7
0.4
0.3
‐0.5
‐22.9
‐0.3
1.9
‐10.3
2.1
3.1
‐2.0
‐0.6
4.7
4.5 ‐ 5.5
4.7
4.5‐5.5
1 Excl udi ng s tocks
p prel i mi na ry
f forecas t
Note: Fi gures may not neces s ari l y a dd up due to roundi ng
Source: Depa rtment of Sta ti s ti cs , Ma l a ys i a and Ba nk Nega ra Ma l a ys i a
TABLE 2: REAL GDP BY SECTOR (2005=100)
2013p
% of GDP
Services
Manufacturing
Mining & quarrying
Agriculture
Construction
Real GDP
1
55.2
24.5
8.1
7.1
3.7
100.0
2013p
2014f
Annual change
(%)
5.9
3.4
0.5
2.1
10.9
4.7
2013p
2014f
Contribution to
percentage growth
(percentage point)
6.2
3.2
3.4
3.5
0.2
0.9
1.6
0.0
0.1
3.8
0.2
0.3
10
0.4
0.4
4.5 ‐ 5.5
4.7
4.5‐5.5
1
1 Figures may not necessarily add up due to rounding and exclusion of import import duties compon
p preliminary
f forecast
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
DISCLAIMER: This report is for information purposes only. We have based the data and information in these reports from sources we believe to be reliable. However, we do not guarantee
as to the accuracy or completeness of the information provided. Any recommendation or opinion that is provided in this document, if any, does not have regard to the investment objective
and particular needs of any specific addressee. No parts of this publication may be reproduced or redistributed in any form or any means whitout a prior written permission of the publisher.
individual financial institutions. The institutions’ various
risks, operating costs, and profit margin are reflected
by the spread above the Base Rate, which are unique
to each financial institution. This new reference rate
framework was announced by BNM to be effective Jan
2nd 2015.
would be contained by the moderation in domestic
demand and the benign global inflation. Hence, keeping
price pressures in check going forward. We are
maintaining our inflation forecast of 3.1%-3.5% in 2014.
•
•
As such, it remains BNM’s focus via its Monetary Policy
Committee to ensure price stability that would contribute
to sustainable economic growth. It is hoped that via
the replacement of Base Lending Rate (BLR) with a Base
Rate which is more transparent, the consumers would
have better decision making power and also provides a
better transmission from the changing of monetary
stance to the pricing of retail financing products.
The Base Rate will be determined by the benchmark
costs of funds and Statutory Reserve Requirement of
•
We maintain that the OPR would remain at the 3.00%
level in 2014, with an upside risk of 25 basis points at
most in 2H14 should inflation exceed BNM’s tolerance
level.
1
forecast by the International Monetary Fund
e estimate
p preliminary
DISCLAIMER: This report is for information purposes only. We have based the data and information in these reports from sources we believe to be reliable. However, we do not guarantee
as to the accuracy or completeness of the information provided. Any recommendation or opinion that is provided in this document, if any, does not have regard to the investment objective
and particular needs of any specific addressee. No parts of this publication may be reproduced or redistributed in any form or any means whitout a prior written permission of the publisher.