ISSN 2637-0239
9 772637 023004
COVER ECONOMIC OUTLOOK.indd All Pages 27/10/2018 12:50 AM economic outlook 2019
T.PAGE/PREFACE NEW.indd 1 10/27/18 12:53 AM Copyright Reserved
All rights reserved. No part of this publication may be reproduced, stored in retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording and/or otherwise without the prior permission of:
Undersecretary, Fiscal and Economics Division, Ministry of Finance Malaysia, Level 9, Centre Block, Kompleks Kementerian Kewangan, No. 5, Persiaran Perdana, Precint 2, Federal Government Administrative Centre, 62592 Putrajaya.
Fax: 03-88823881 E-mail: [email protected]
The Economic Outlook is an annual publication released on the same day as the Annual Budget.
The 2019 edition is released on 2 November 2018.
Sale copies are obtainable from:
Percetakan Nasional Malaysia Berhad, Jalan Chan Sow Lin, 50554 Kuala Lumpur. Tel.: 03-92366888/92366894 Fax: 03-92011008/92224773 E-mail: [email protected]
This publication is also available for download at: www.treasury.gov.my
Cover Design by Fiscal and Economics Division
PRINTED BY PERCETAKAN NASIONAL MALAYSIA BERHAD KUALA LUMPUR, 2018 www.printnasional.com.my email: [email protected] Tel.: 03-92366895 Fax: 03-92224773
ii Economic Outlook 2019
T.PAGE/PREFACE NEW.indd 2 10/27/18 12:53 AM FOREWORD
PRIME MINISTER MALAYSIA
Support of a majority of Malaysians that determined the success of Pakatan Harapan in the general election of 9 May 2018 is a remarkable achievement that will be part of the nation’s history.
This marks the first change of a ruling party 61-years since independence. Such an achievement certainly come with a big responsibility and high expectation.
This responsibility is even more challenging with the scale of wrongdoings of the past kleptocratic Government that needs to be addressed immediately. Nevertheless, the new Government does not see this as a burden but accepts it as responsibility that is entrusted upon.
Towards this end, the Government will adopt changes in policies, strategies and way of implementation to fulfil the people’s expectations and to rebuild and restore the nation’s glory.
The Government is confident of its ability to transform the country towards a New Malaysia based on principles of justice, good governance, integrity and the rule of law.
In attaining a developed and inclusive nation status, the Government has implemented various reforms to enhance economic growth and the wellbeing of the people.
In this regard, the Government through the Ministry of Finance is promoting efforts to create an entrepreneurial state and promote cooperation among the 4Ps, namely, People, Professionals, Private and Public to spearhead various national development initiatives. Furthermore, to enhance prudent fiscal management, the Ministry of Finance will accelerate zero-based budgeting system, rationalise assistance programmes, improve procurement processes and broaden the revenue base.
Meanwhile, Malaysia aspires to re-position its status internationally through active participation in the global community. Towards this end, Malaysia will continue to strengthen trade ties with major and potential trading partners through a conducive and business-friendly environment in line with the principles of Zone of Peace, Freedom and Neutrality (ZOPFAN). By upholding the principle of prosper-thy-neighbour, Malaysia will continue to emphasise on strengthening cooperation with ASEAN members as well as other regional trade blocs. In addition, greater focus will be given to strengthening bilateral ties with China and Japan in line with the Look East Policy.
Economic Outlook 2019 iii
T.PAGE/PREFACE NEW.indd 3 10/27/18 12:53 AM In achieving the objectives outlined in Vision 2020, the Government will ensure the Malaysian economy continues to be on a sustainable growth trajectory by providing a conducive and favourable environment to attract investors and businesses. Hence, the industries should leverage these opportunities by embracing advanced technology to enhance productivity and competitiveness. The Government also recognises the importance of the role of the young generation in driving future growth. In tandem with Industrial Revolution 4.0, efforts will be undertaken to equip this generation to become a highly- and digitally-skilled workforce.
We believe this is the responsibility entrusted upon us. The Government is confident, with cooperation and support of the people, this responsibility will be carried out successfully to attain hopes of building a New Malaysia with dignity and integrity.
Thank You.
DR MAHATHIR BIN MOHAMAD
2 November 2018
iv Economic Outlook 2019
T.PAGE/PREFACE NEW.indd 4 10/27/18 12:53 AM PREFACE
MINISTER OF FINANCE MALAYSIA
A Revered Malaysia, A Dynamic Economy, A Prosperous Society
On 9 May 2018, the Pakatan Harapan coalition made history by winning the 14th General Election and forming the new Government. The new administration is focused on raising the economic wellbeing of the people, restoring fi scal health and implementing various institutional reforms to improve accountability and transparency. Such structural changes will ensure sustainable growth, the stability of the capital market and the monetary sector, and will also transform Malaysia from a global kleptocracy into a rules-based democracy.
The objective of enhancing the people’s economic wellbeing would only be meaningful if their purchasing power can be increased and their living costs contained. One major people-centric initiative to achieve that goal was the zero-rating of Goods and Services Tax (GST) from June to August 2018. The GST was later abolished on 1 September 2018 and it has since been replaced with the less burdensome Sales Tax and Service Tax (SST).
While the Federal Government’s revenue will be reduced by RM17 billion in 2018 as a result, it has helped to lessen the tax burden, reduce price rises and give the money back to the people. Following the zerorisation of GST, the infl ation rate dropped for three consecutive months and hit 0.2% year-on-year by August 2018, among the lowest monthly rates since 2009. This has spurred private consumption growth.
To optimise public expenditure and resources, the Government has restructured all of its ministries and agencies. Furthermore, the Government will run on the principle of Competency, Accountability and Transparency (CAT) to safeguard national interests and future-proof the public sector from abuses and corruption. These initiatives, together with various institutional reforms like the separation of roles between the Prime Minister and Finance Minister, will restore public confi dence in the Government.
At the global stage, despite headwinds due to trade wars, volatile commodity prices, fi nancial market uncertainties and geopolitical tensions, the IMF forecasts global GDP growth to expand by 3.7% in 2018 and 2019. Amid the trade wars, Malaysia should position ourselves as a safe haven for foreign companies in line with ASEAN as a Zone of Peace, Freedom and Neutrality (ZOPFAN).
The Malaysian economy is projected to grow by 4.9% next year, with services and manufacturing driving the expansion. This is an acceleration from the anticipated 4.8% growth in 2018. The expansion of the services sector will be supported by rising demand
Economic Outlook 2019 v
T.PAGE/PREFACE NEW.indd 5 10/27/18 12:53 AM in the wholesale & retail trade; finance & insurance; information & communication; as well as food & beverages and accommodation subsectors. Meanwhile, the manufacturing sector will be driven by export-oriented industries, particularly with the rising global demand for E&E products. Agriculture and mining sectoral growth will improve after a weak 2018 due to supply shocks and inclement weather, while the construction sector will grow at a moderate pace.
On the demand side, private sector expenditure will remain as the key driver of growth following record high consumer and business sentiments. Private consumption expansion will take place on the back of stable employment and wage growth, while private investment growth will be supported by a conducive business environment. Public sector expenditure will be optimised without affecting public service delivery. Despite heightening trade tensions, the external sector is expected to expand, albeit at a slower pace.
The Government recognises that as a small and open economy, Malaysia would benefit immensely from greater global integration. Malaysia will continue to adopt an open trade and investment regime to promote high-quality economic growth, attract strategic investment, create skilled jobs and embrace Industrial Revolution 4.0. Malaysia would pursue greater trade integration with ASEAN and other groupings as a way to diversify our trading partners and explore new markets.
The Government will also pursue sustainable development goals by accelerating the adoption of green technology while protecting and conserving natural resources for the benefit of future generations.
In pursuing sustainable growth that can help Malaysia escape the middle-income trap, the private sector must play a leading role. The Government seeks to forge an entrepreneurial state through a 4P Partnership involving the public sector, the private sector, professionals and people. While the Government will continue to invest in education and public infrastructure, the private sector must spearhead and operate various 4P Partnership initiatives.
For Malaysia to wake up from its slumber and roar again as an Asian Tiger, there must be clarity and certainty in policymaking to create a conducive business environment that can engender confidence among the public and investors. A rules-based government focused on institutional reforms, sustainable economic growth and economic wellbeing of the people will provide clarity, certainty and confidence.
Sayangi Malaysiaku!
Lim Guan Eng
2 November 2018
vi Economic Outlook 2019
T.PAGE/PREFACE NEW.indd 6 10/27/18 12:53 AM THE ECONOMY 2019 AT CONSTANT 2010 PRICES
EXPORTS OF SERVICES 6.6%
PRIVATE CONSUMPTION 34.7% DEMAND EXPORTS OF GOODS RM2,079,086 36.1% million
PRIVATE 1 INVESTMENT PUBLIC 10.8% CONSUMPTION 7.6% PUBLIC INVESTMENT1 4.2% AGRICULTURE 4.8% MINING 4.8% IMPORTS OF SERVICES 7.8% MANUFACTURING 14.5%
IMPORTS SUPPLY OF GOODS 30.1% CONSTRUCTION RM2,079,086 2.9% million
SERVICES 35.1%
1 Includes change in stocks. Source: Ministry of Finance, Malaysia.
Economic Outlook 2019 vii
T.PAGE/PREFACE NEW.indd 7 10/27/18 12:53 AM T.PAGE/PREFACE NEW.indd 8 10/27/18 12:53 AM `
MALAYSIA: KEY DATA AND FORECAST
AREA (Square kilometres)
Malaysia Peninsular Malaysia1 Sarawak Sabah2
330,548 132,105 124,450 73,994
201712 201813 201914
POPULATION (million) 32.0 32.4 33.3
RM change RM change RM change DOMESTIC PRODUCTION million (%) million (%) million (%)
Gross Domestic Product (constant 2010 prices) 1,174,329 5.9 1,230,336 4.8 1,290,734 4.9
Agriculture 95,968 7.2 95,748 -0.2 98,721 3.1
Mining and quarrying 98,436 1.0 97,828 -0.6 98,464 0.7
manufacturing 269,804 6.0 283,132 4.9 296,353 4.7
Construction 53,574 6.7 55,977 4.5 58,581 4.7
Services 639,568 6.2 679,870 6.3 719,837 5.9 Import duties 16,980 13.0 17,783 4.7 18,777 5.6 Gross Domestic Product (current prices) 1,353,380 9.9 1,431,392 5.8 1,530,315 6.9 Final consumption expenditure: Public 164,671 6.3 167,372 1.6 171,728 2.6
Private 748,857 10.9 816,213 9.0 896,704 9.9
Gross fixed capital formation: Public3 107,395 1.8 106,696 -0.7 101,941 -4.5
Private 234,824 11.1 247,110 5.2 263,885 6.8
Changes in inventories and valuables 3,683 - -4,638 - 952 -
Exports of goods and services 966,174 15.8 998,101 3.3 1,028,202 3.0
Imports of goods and services 872,223 16.1 899,461 3.1 933,098 3.7
NATIONAL INCOME AND EXPENDITURE Gross National Income (constant 2010 prices) 1,151,288 6.0 1,204,667 4.6 1,265,386 5.0
Gross National Income (current prices) 1,317,027 10.1 1,390,507 5.6 1,489,171 7.1 Gross National Savings (current prices) 386,177 11.0 387,759 0.4 400,774 3.4 Per Capita Income (current prices, RM) 41,128 8.7 42,937 4.4 44,686 4.1
FEDERAL GOVERNMENT FINANCE 2017 201815 201916
Revenue 220,406 3.8 236,460 7.3 261,814 10.7
Operating expenditure 217,695 3.6 235,450 8.2 259,850 10.4
Current balance 2,711 1,010 1,964
Development expenditure (net) 43,032 5.9 54,337 26.3 54,044 -0.5
Overall balance -40,321 -53,327 -52,080
% of GDP -3.0 -3.7 -3.4
Domestic borrowings (net) 40,750 51,9734 -
Offshore borrowings (net) -342 -293 -
Change in assets -87 -353 -
Economic Outlook 2019 ix
0 BI key data.indd 9 10/27/18 12:56 AM `
MALAYSIA: KEY DATA AND FORECAST (cont’d)
2017 201815 201916
RM % RM % RM % million GDP million GDP million GDP Federal Government Debt5 686,837 50.7 725,241 50.7 - - Domestic debt 665,572 49.1 704,101 49.2 - - Treasury bills 4,500 0.3 7,500 0.5 -- Malaysian Government Investment Issues 268,000 19.8 291,500 20.4 -- Malaysian Government Securities 364,672 26.9 376,701 26.3 -- Government Housing Sukuk 28,400 2.1 28,400 2.0 -- Offshore borrowings 21,265 1.6 21,140 1.5 - - Market loans 15,580 1.2 15,527 1.1 -- Project loans 5,685 0.4 5,613 0.4 -- 201712 201813 201914 BALANCE OF PAYMENTS (NET) RM million RM million RM million Balance on current account 40,275 38,591 33,995 Goods 116,766 128,660 128,166 Services -22,815 -30,021 -33,062 Primary income -36,354 -40,885 -41,144 Secondary income -17,322 -19,163 -19,965 Balance on capital and financial accounts 3,773 - - Net errors and omissions -27,639 - - Overall balance 16,409 - -
RM change RM change RM change EXTERNAL TRADE million (%) million (%) million (%) Gross exports 934,927 18.8 976,453 4.4 1,014,506 3.9 of which: Manufactured 765,858 18.6 816,510 6.6 849,142 4.0 Agriculture 78,072 10.9 69,328 -11.2 73,044 5.4 Mining 81,836 25.8 82,999 1.4 86,233 3.9 Gross imports 836,422 19.7 869,885 4.0 905,125 4.1 of which: Intermediate goods 478,932 20.0 456,690 -4.6 476,096 4.2 Capital goods 115,567 15.3 117,435 1.6 120,834 2.9 Consumption goods 71,036 6.1 72,635 2.3 74,854 3.1 Total trade 1,771,349 1,846,338 1,919,631 Trade balance 98,505 106,568 109,381
Index change Index change Index change PRICES (%) (%) (%) Consumer Price Index (2010 = 100) 119.5 3.7 – 1.5—2.5 – 2.5—3.5 Producer Price Index: Local Production 107.9 6.7 106.9 -0.96 – – (2010 = 100)
Thousands change Thousands change Thousands change LABOUR (%) (%) (%) Labour force 14,952.6 1.9 15,278.38 2.28 15,575.88 1.98 Unemployment7 502.6 (3.4) 511.18 (3.3)8 514.08 (3.3)8
x Economic Outlook 2019
0 BI key data.indd 10 10/27/18 12:56 AM `
MALAYSIA: KEY DATA AND FORECAST (cont’d)
2017 2018
End-August End-August RM change RM change FINANCIAL AND CAPITAL MARKETS million (%) million (%) Money supply M1 393,744 10.9 410,935 4.4 M2 1,678,732 5.4 1,784,929 6.3 M3 1,686,812 5.3 1,794,147 6.4 Banking system (including Islamic banks) Fund9 1,765,962 5.7 1,854,201 5.0 Loans 1,470,599 5.3 1,551,676 5.5 Loan-to-fund ratio (%) 83.3 83.7
Interest rates (average rates, %) August August 3-month interbank 3.32 3.66 Commercial banks Fixed deposits: 3-month 2.89 3.16 12-month 3.10 3.33 Savings deposit 0.96 1.05 Weighted base rate (BR) 3.64 3.90 Base lending rate (BLR) 6.67 6.91 Treasury bills (3-month) – 3.25 Malaysian Government Securities10 1-year 3.17 3.37 5-year 3.56 3.70 End-September End-September RM change11 RM change11 Movement of ringgit per unit of (%) per unit of (%) Special Drawing Rights (SDR) 5.9681 -2.9 5.8052 2.8 US dollar 4.2275 -1.9 4.1405 2.1 Euro 4.9817 -6.7 4.8229 3.3 100 Japanese yen 3.7539 8.9 3.6472 2.9 Bursa Malaysia FBM KLCI 1,755.58 1,793.15 Market capitalisation (RM billion) 1,845.49 1,835.43
1 Includes the Federal Territory of Kuala Lumpur and Federal Territory of Putrajaya. 2 Includes the Federal Territory of Labuan. 3 Includes investment of public corporations. 4 Excludes net Treasury bills issuance of RM2 billion. 5 For 2018, data as at end-June 2018. 6 January to August 2018. 7 Figures in parentheses is unemployment rate. 8 Forecast by Economic Planning Unit, Ministry of Economic Affairs. 9 Funds comprises deposits (exclude deposits accepted from banking institutions and Bank Negara Malaysia) and all debt instruments issued (including subordinated debt, debt certificates/sukuk, commercial papers and structured notes). 10 Market indicative yield. 11 Annual rate of appreciation (+) or depreciation (-) of the ringgit. 12 Preliminary. 13 Estimate. 14 Forecast. 15Revised estimate. 16Budget estimate, excluding 2019 Budget measures. Note: Total may not add up due to rounding. Economic Outlook 2019 xi
0 BI key data.indd 11 10/27/18 12:56 AM CONTENTS
FOREWORD iii PREFACE v ACRONYMS AND ABBREVIATIONS xvii
CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS Overview 3
Outlook 4
Economic Management 5
Feature Article 1.1 - Impact of Population Ageing on the Malaysian 8 Economy
Strategic Initiatives – 2019 Budget 12
Feature Article 1.2 - Increasing Productivity of Small and Medium 13 Enterprises via Digital Technology
Feature Article 1.3 - Reviewing the Minimum Wage in Malaysia: 17 An Empirical Analysis
Feature Article 1.4 - Profile of Unemployment in Malaysia 19
Conclusion 24
References 25
CHAPTER 2 GLOBAL ECONOMIC OUTLOOK Overview 31
Global Economy 31
Feature Article 2.1 - International Tax Standards: Where Are We At? 35
Information Box 2.1 - ASEAN Economic Community Blueprint 2025: 42 Issues, Challenges and Opportunities
Conclusion 46
References 47
CHAPTER 3 MACROECONOMIC OUTLOOK Overview 53
Sectoral 53
Feature Article 3.1 - Disruptive Technology: Opportunities 56 and Challenges
Domestic Demand 64
External Sector 66
xii Economic Outlook 2019
Content.indd 12 10/27/18 12:57 AM Feature Article 3.2 - Impact of Trade War on the Malaysian Economy 71
Prices 74
Feature Article 3.3 - Determinants of Inflation in Malaysia 75
Labour Market 78
Conclusion 79
References 80 CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS Overview 83
Monetary Developments 83
Financial Sector Developments 84
Feature Article 4.1 - Financing for Small and Medium Enterprises: 86 Financial Market and Capital Market
Conclusion 95
References 96
STATISTICAL TABLES 97 ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA 141
Economic Outlook 2019 xiii
Content.indd 13 10/27/18 12:57 AM FIGURES
The Economy 2019
Figure 3.1. Selected Indicators for the Services Sector 55
Figure 3.2. Output of Manufacturing Sector 60
Figure 3.3. Supply Indicators of Residential Property 63
Figure 3.4. Malaysia House Price Index 63
Figure 3.5. Supply Indicators of Non-Residential Property 63
Figure 3.6. Gross National Savings and Savings-Investment Gap 65
Figure 3.7. Direction of External Trade 68
Figure 3.8 International Reserves 70
Figure 3.9 CPI and PPI Trends 78
Figure 4.1. Monetary Aggregates 83
Figure 4.2. Performance of Ringgit against Selected Currencies 84
Figure 4.3. Banking System: Impaired Loans and Net Impaired Loans Ratio 86
Figure 4.4. Malaysian Government Securities Indicative Yields 91
Figure 4.5. Share of Foreign Holdings in Total MGS Outstanding 91
Figure 4.6. 5-Year Corporate Bond Yields 91
Figure 4.7. Performance of Bursa Malaysia 92
Figure 4.8. Performance of Selected Stock Markets 92
Figure 4.9. Global Sukuk Outstanding by Country 95
xiv Economic Outlook 2019
Content.indd 14 10/27/18 12:57 AM TABLES
Table 2.1. Real GDP for Selected Economies 32
Table 2.2. Inflation Rate for Selected Economies 33
Table 3.1. GDP by Sector 53
Table 3.2. Services Sector Performance 54
Table 3.3. Manufacturing Production Index 59
Table 3.4. Value Added in the Agriculture Sector 60
Table 3.5. Oil Palm: Areas, Yield and Production 61
Table 3.6. Rubber: Areas, Yield and Production 62
Table 3.7. GDP by Aggregate Demand 64
Table 3.8. Savings-Investment Gap 65
Table 3.9. External Trade 66
Table 3.10. Gross Exports 66
Table 3.11. Exports of Manufactured Goods 67
Table 3.12. Gross Imports by End Use 68
Table 3.13. Current Account of the Balance of Payments 69
Table 3.14. Consumer Price Index 74
Table 3.15. Producer Price Index 74
Table 3.16. Labour Market Indicators 78
Table 3.17. Employment by Sector 79
Table 4.1. Factors Affecting M3 84
Table 4.2. Banking System: Loan Indicators 85
Table 4.3. Banking System: Loans Outstanding by Sector 85
Table 4.4. Funds Raised in the Capital Market 90
Table 4.5. New Issuance of Corporate Bonds by Sector 91
Table 4.6. Bursa Malaysia: Selected Indicators 92
Table 4.7. Islamic Banking: Key Indicators 94
Economic Outlook 2019 xv
Content.indd 15 10/27/18 12:57 AM Content.indd 16 10/27/18 12:57 AM ACRONYMS AND ABBREVIATIONS ACRONYMS AND ABBREVIATIONS
AEC ASEAN Economic Community CPTPP Comprehensive and Progressive Agreement for AEOI Automatic Exchange of Trans-Pacific Partnership Information CSAP Consolidated Strategic Action AETS Agreed Exports Tonnage Plan Scheme DE development expenditure AI artificial intelligence DFIs development financial ALR average lending rate institutions
AMS ASEAN member states DFTZ Digital Free Trade Zone
ARDL Autoregressive Distributed Lag DOSM Department of Statistics ASEAN Association of Southeast Malaysia Asian Nations DPS Demand Promotion Scheme
B40 Bottom 40% households DTAA Double Taxation Avoidance BDA Big Data analytics Agreement
BEPS Base Erosion and Profit DTAP Digital Transformation Shifting Acceleration Programme
BFR Base Finance Rate E&E electrical and electronics
BNM Bank Negara Malaysia ECB European Central Bank
BoE Bank of England ECF Equity Crowdfunding
bps basis points ECRL East Cost Rail Link
BR base rate EEC Eastern Economic Corridor
Brexit British exit EMDEs emerging market and developing economies BRIDGe Brokerage Industry Digitisation Group EOI exchange of information
BSAS Bursa Suq Al-Sila’ EOIR Exchange of Information on Request CAT competency, accountability and transparency EPF Employees Provident Fund
CEFs Closed-End Funds ETFs Exchange Traded Funds
CFC Controlled Foreign Corporation ETS Electric Train Service
CGC Credit Guarantee Corporation EU European Union
CGE computable general FBM KLCI FTSE Bursa Malaysia Kuala equilibrium Lumpur Composite Index
CIS Collective Investment Scheme FBM Mid 70 FTSE Bursa Malaysia Mid 70 Index CMAA Convention on Mutual Administrative Assistance in FDI foreign direct investment Tax Matters Fed US Federal Reserve
CMSA Capital Markets and Services FFB fresh fruit bunches Act FIFA Fédération Internationale de CPI Consumer Price Index Football Association CPO crude palm oil FIs financial institutions
Economic Outlook 2019 xvii
Acronyms & Abbreviations (BI) New.indd 17 10/27/18 12:57 AM ACRONYMS AND ABBREVIATIONS
FM70 mini FTSE Bursa Malaysia kg kilogramme Mid 70 Index Futures Contract LCR Liquidity Coverage Ratio
FPOL Palm Olein Futures Contract LEAP Leading Entrepreneur Accelerator Platform FSMI2 Fund for Small and Medium Industry 2 LIMA’19 Langkawi International Maritime and Aerospace FTAs Free Trade Agreements Exhibition
FTSE Financial Times Stock LNG liquefied natural gas Exchange LRT3 Light Rail Transit Line 3 GCI Global Competitiveness Index M&E machinery and equipment GDP gross domestic product M40 Middle 40% households GEI Global Entrepreneurship Index Main LR Main Market Listing GIACC National Centre for Requirement Governance, Integrity and Anti-Corruption MCAA CbC Multilateral Competent Authorities Agreement GLCs government-linked companies on Country-by-Country Reporting GNI Gross National Income MCAA CRS Multilateral Competent GNS gross national savings Authorities Agreement on GST Goods and Services Tax Common Reporting Standard
HSR High Speed Rail MDEC Malaysia Digital Economy Corporations IAI Initiative for ASEAN Integration MEEPA Malaysia-European Free Trade Association Economic IBS industrial building system Partnership Agreement
ICM Islamic Capital Market MEF Micro Enterprise Fund
ICT Information and MFRS 9 Malaysia Financial Reporting Communication Technology Standard 9
IDSS Intraday Short Selling MGII Malaysian Government Investment Issues IHLs institutions of higher learning MGS Malaysian Government ILMIA Institute of Labour Market Securities Information and Analysis MIDA Malaysia Investment ILO International Labour Development Authority Organisation MIDF Malaysia Industrial IMF International Monetary Fund Development Finance Berhad
IoT Internet of Things MIPTA Malaysia-Iran Preferential IP Internet Protocol Trade Agreement
IPOs Initial Public Offerings MNCs Multinational Corporations
IR 4.0 Industrial Revolution 4.0 MNEs multinational enterprises
iSSBNT Securities Borrowing and MoF Ministry of Finance Lending Negotiated MoH Ministry of Health Transaction
xviii Economic Outlook 2019
Acronyms & Abbreviations (BI) New.indd 18 10/27/18 12:57 AM ACRONYMS AND ABBREVIATIONS
MoHR Ministry of Human Resources REITs Real Estate Investment Trusts
MRT Mass Rapid Transit SC Securities Commission Malaysia MRT3 Mass Rapid Transit Line 3 SDGs Sustainable Development MSMEs micro, small and medium Goals enterprises SMEs small and medium enterprises MyAGE Malaysian Applied General Equilibrium SMR20 Standard Malaysian Rubber 20
NCDs non-communicable diseases SMS Supply Management Scheme
NEF2 New Entrepreneur Fund 2 SOCSO Social Security Organisation
NGOs non-governmental SPED Rural Development Financing-i organisations Scheme
O&G oil and gas SRI Sustainable and Responsible Investment OECD Organisation for Economic Co-operation and SRR Statutory Reserve Requirement Development SSP Sungai Buloh - Serdang - Putrajaya OER oil extraction rate SST Sales Tax and Service Tax OPIMIS Oil Palm Industry Mechanisation Incentive TEUs twenty-foot equivalent units Scheme TIEA Tax Information Exchange OPR Overnight Policy Rate Agreement
P2P Peer-to-Peer TIMSS Trends in International Mathematics and Science PE Private Equity Study
PETRONAS Petroliam Nasional Berhad TPUB-i Bumiputera Entrepreneur Project Fund-i POs Participating Organisations TVET technical and vocational PPI Producer Price Index education and training
PPP public private partnership UK United Kingdom
PPP purchasing power parity UN United Nations
Q1 first quarter UNICEF United Nations Intenational Q2 second quarter Children’s Emergency Fund
Q3 third quarter US United States
Q4 fourth quarter VC Venture Capital
R&D research and development y-o-y year-on-year
RAPID Refinery and Petrochemical Integrated Development
RBD Refined, Bleached and Deodorised
RCEP Regional Comprehensive Economic Partnership Agreement
Economic Outlook 2019 xix
Acronyms & Abbreviations (BI) New.indd 19 10/27/18 12:57 AM Acronyms & Abbreviations (BI) New.indd 20 10/27/18 12:57 AM ECONOMIC MANAGEMENT 1 AND PROSPECTS
• Overview • Outlook • Economic Management Feature Article 1.1 – Impact of Population Ageing on the Malaysian Economy • Strategic Initiatives – 2019 Budget Feature Article 1.2 – Increasing Productivity of Small and Medium Enterprises via Digital Technology Feature Article 1.3 – Reviewing the Minimum Wage in Malaysia: An Empirical Analysis Feature Article 1.4 – Profile of Unemployment in Malaysia • Conclusion
Chapter 1.indd 1 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
2 Economic Outlook 2019
Chapter 1.indd 2 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
ECONOMIC MANAGEMENT 1 AND PROSPECTS Overview In efforts to enhance households income, the Government standardised minimum wages wakening to a new beginning, on 9 May across the nation at RM1,050, effective 1 January 2018, Malaysia embarked on a journey to 2019. This is expected to benefit employees A 1 rebuild the nation and fulfil the aspiration of the in the B40 segment. Towards ensuring the people in line with the principles of fairness, good wellbeing of housewives, widows, single mothers governance, integrity and the rule of law. In this and unmarried women, the Government on respect, various efforts have been undertaken 8 August 2018 announced the i-Suri pension to institute reforms to improve the nation’s scheme which will be implemented in three economic and social structure. Meanwhile, phases. Phase one targets 359,075 Malaysians, Malaysia’s economy expanded by 4.9% in the comprising 221,980 housewives, 98,536 widows, first six months of 2018. The continued growth 28,116 single mothers and 10,443 unmarried is a testament to Malaysia’s economic resilience women under the e-Kasih database. In phase despite domestic and external challenges. two, targeted for implementation in January 2019, the Government will raise its contribution from Among the critical challenges faced by the RM40 to RM50 with RM10 for protection under Government is to ensure an inclusive economic Social Security Organisation (SOCSO). In the growth whereby people from all walks of life third stage, slated for implementation in 2020, will benefit from the nation’s wealth. Although husbands are required to channel 2% of their Malaysia recorded impressive growth over the Employees Provident Fund (EPF) contribution to last decade and had a relatively low cost of living the EPF accounts of unemployed spouses. in the ASEAN region (EIU, 2017), households continue to face escalating costs of living, Towards ensuring value for money in all while the business community is saddled with government procurements, several mega projects rising costs of doing business. The increase is were reviewed including High Speed Rail (HSR), a consequence following the implementation East Coast Rail Link (ECRL), Mass Rapid Transit of Goods and Services Tax (GST) and slow 3 (MRT3) and Light Rail Transit Line 3 (LRT3). refunds of input tax credit. In this regard, the Following the review, the total cost of LRT3 was new Government has pledged to address these reduced by 47% from RM31.7 billion to RM16.6 pertinent issues to improve the wellbeing of the billion, while the other three projects were people as well as facilitate businesses to unlock postponed. At the same time, the Institutional the true potential of the economy. Reform Committee was established on 15 May 2018 to examine the present state of key In response to the grouses of the people, the institutions and the adequacy of checks and Government implemented several measures balances. On 18 June 2018, the National Centre within its first 100 days of administration. for Governance, Integrity and Anti-Corruption Among the measures include the stabilisation (GIACC) was set up to coordinate and monitor of pump fuel prices as well as the revision all activities related to governance, integrity and of the GST beginning 1 June 2018, and the combating graft. GIACC is also responsible for reintroduction of Sales Tax and Service Tax planning, formulating strategies and evaluating (SST) on 1 September 2018. The people including policies in ensuring all government affairs are the business community is expected to benefit conducted based on good governance, integrity more than RM5 billion from the savings on fuel and zero-tolerance towards corruption. Together, prices and RM17 billion from the change in tax these initiatives augur well for the nation in its regime in 2018. aspiration in rebuilding a New Malaysia.
1 Refers to households income below RM4,360.
Economic Outlook 2019 3
Chapter 1.indd 3 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Outlook financial conditions, escalating trade threats and risks of a shift towards protectionism as well as geopolitical tensions. Global Economy
The global economy is expected to expand Domestic Economy 3.7% in 2018 and 2019, lower than the earlier The outlook for the Malaysian economy remains forecast of 3.9% (IMF, 2018). The downward resilient in the near term despite considerable revision reflects elevating policy uncertainties external and domestic headwinds. Real GDP is with several risks stemming to growth from projected to expand 4.8% and 4.9% in 2018 and escalating trade tension and outflows of capital 2019, respectively, supported mainly by domestic from emerging economies. At the same time, demand. Private sector expenditure, in particular, global growth has become less synchronised household spending will remain as the anchor with mixed developments in advanced of growth following a continuous increase in economies while projection for emerging employment and wage amid benign inflation. economies, in particular, developing Asia remains Meanwhile, private investment will be supported favourable. by new and ongoing projects in the services and manufacturing sectors. On the contrary, public Within the advanced economies, the US is expenditure is expected to grow marginally in expected to record strong growth buoyed by 2018 and contract in 2019 following the lower pro-cyclical fiscal stimulus and accommodative capital outlays by public corporations. monetary policy. Nevertheless, the euro area, the UK and Japan are forecast to expand at From the supply side, the services sector is a moderate pace. Major economies in the expected to remain as the largest contributor, euro area such as France and Germany, are namely wholesale and retail trade, finance anticipated to expand moderately given the and insurance as well as information and softer external demand and deteriorating communication subsectors, benefitting from growth in productivity. In the UK, growth is steady consumer spending. The manufacturing weighed down by anticipation of more barriers to sector is projected to register a firm growth trade following Brexit, while Japan faces primarily driven by continuous demand for E&E. declining labour force with unfavourable Agriculture and mining sectors are expected demographics. to rebound in 2019 after recording a marginal contraction in 2018 following an increase in the Growth in emerging economies, in particular, production of crude palm oil (CPO) and liquefied developing Asia is expected to remain steady natural gas (LNG). Meanwhile, the construction supported by strong domestic demand led by sector is expected to moderate following the India whereas China is projected to expand near completion of infrastructure projects as marginally slower given the regulatory tightening well as property overhang, particularly in the in the financial and property sectors. Meanwhile, non-residential segment. fuel-exporting countries are expected to benefit from higher global oil prices. Nevertheless, Malaysia’s external position is projected to growth in other emerging economies (Latin remain resilient in line with steady global America and the Caribbean) is forecast to economic and trade performances. However, be subdued reflecting dampening trade and exports are expected to moderate mainly due investment activities as well as disruptions in to slower global trade and investment activities. the financial markets. At the same time, the current account surplus is expected to narrow following widening deficits Given heightening trade tensions, investment in the services and income accounts. and industrial activities are expected to slow down. This, in turn, will reduce the demand for capital and intermediate goods which contributes Monetary and Financial significantly to global trade. Consequently, global Developments trade is projected to expand by 4.2% in 2018 and 4% in 2019 as compared to 5.2% in 2017 (IMF, Monetary policy continues to be supportive of 2018). In the near term, the outlook for global economic growth while ensuring price stability. growth is tilted downwards given the tightening The Overnight Policy Rate (OPR) was increased to
4 Economic Outlook 2019
Chapter 1.indd 4 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
3.25% in January and kept unchanged during the despite external headwinds. Islamic banking subsequent nine months of 2018 while ringgit is expected to remain favourable given strong appreciated 3.9% as compared to the same period demand from both households and businesses in 2017. The banking system remained resilient for Shariah-compliant financial products and during the period with common equity tier 1 services. Towards this end, Malaysia is expected capital and total capital ratios well above the to maintain its position as a global leader in Basel III minimum requirements. Loan quality Islamic finance. remained strong with stable net impaired loans ratio at 0.98% as at end-July 2018. At the same time, the banking system loan lost Economic Management coverage ratio stood at 128%, while liquidity remains sufficient with surplus ringgit placed The commitment to address various systemic with Bank Negara Malaysia (BNM) at RM177.8 and structural issues has restored public billion. Despite downside risks associated with confidence in the Government to manage the global uncertainties, particularly the pace of economy effectively and efficiently. The reform monetary policy normalisation in the US, the exercise has also enhanced confidence among domestic financial sector is expected to remain investors on the pledge of the Government sound supported by financial institutions to provide a more conducive and business- operating with strong capital and liquidity friendly environment for businesses to prosper buffers. and ensure healthy growth of the economy. In addition to reducing the Federal Government As at end-August 2018, market capitalisation debt to a more sustainable level and ensuring in the FTSE Bursa Malaysia Kuala Lumpur a competent, accountable and transparent Composite Index (FBM KLCI) increased 1% administration, the emphasis is also on ensuring to RM1,865.8 billion. Meanwhile, market the wellbeing of the people as well as to return velocity and volatility were at 34.3% and 8.3%, the nation to its past glory. These efforts will respectively. Foreign holdings based on market greatly assist the nation in achieving its ultimate capitalisation in the local bourse stood at 23.6% aim towards national development objectives as at end-August 2018. that give blessings and justice to all.
The Islamic banking industry continued to Towards achieving these objectives, there record strong growth with total assets expanding are several challenges to overcome. Through 11.5% to RM687 billion as at end-July 2018 mainly extensive engagements and rigorous evaluation driven by financing to the household sector. processes, the Government has identified several Similarly, total deposits of the Islamic banking issues that are of immediate concerns to the system grew by 12.6% to RM507.1 billion. With people, professionals, private and public. Against regard to sukuk, Malaysia continues to be the this backdrop, the challenge is for Malaysia main driver accounting for 50.9% of total global to develop new policies and realign existing sukuk issuances and 51.2% of total global strategies and measures with the new realities sukuk outstanding. Malaysia also pioneered of the domestic and global economy. the world’s first issuance of Green Sustainable and Responsible Investment (SRI) sukuk in Challenges and Opportunities July 2017. As at end-July 2018, five green SRI sukuk with a total size of RM2.4 billion were Trust in the Government issued. OECD (2017) reports that trust promotes growth In 2019, monetary policy will remain and economic development by encouraging the accommodative and considerations for adjustments will depend on risks surrounding efficiency of physical capital accumulation, the outlook for domestic growth and inflation. accelerating the diffusion of technology and At the same time, the domestic financial improving the well-functioning of legal, political system remains stable and intact supported and social institutions. Trust in the government by deep and liquid financial market, sound is reflected under the first pillar of the World financial institutions and sustained confidence Economic Forum Global Competitiveness Index in the system. Meanwhile, the domestic equity (GCI). This pillar refers to the institutional market is projected to continue recording gains environment where individuals, firms and
Economic Outlook 2019 5
Chapter 1.indd 5 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
governments interact to generate wealth. In the The Wellbeing of the People 2018 report, Malaysia ranks at 24th position out of 140 countries in the institution’s pillar, better The Government aims to improve the wellbeing than regional peers including Thailand (60) and of the people by promoting physical vitality, the Philippines (101). Malaysia also performs mental alacrity, social satisfaction and personal well in several indicators such as conflict of fulfilment. However, several issues pertaining to interest regulation (4), burden of government the wellbeing of the people are at the forefront regulation (5), and quality of land administration of the new administration. These include, (6). However, there are several areas that need among others, the rising cost of living in urban further improvement which include freedom of areas; malnutrition especially among urban press (118), budget transparency (77), incidence poor children; lack of connectivity in public of corruption (55) and judicial independence transportation; quality of education and health (33). The challenge now is to ensure that efforts care; lack of affordable housing; inequitable to improve public institutions, policies and economic growth; gender inequality; and factors that affect Malaysia’s competitiveness ineffective waste management. are undertaken to restore the confidence of the people in the Government. Inadequate supply amid rising demand following increasing income is the major factor that Entrepreneurship contributes to rising prices of goods and services, particularly basic necessities. Furthermore, Entrepreneurship plays an important role profiteering, as well as other factors such as in contributing to economic prosperity and escalation of oil prices and depreciation of the creating employment opportunities. Malaysia ringgit, added pressure on prices. This, in turn, ranks 58 out of 137 countries in the Global results in the rising cost of living, especially Entrepreneurship Index (GEI) 2018. Malaysia among the urban populace. performs well in several areas including process innovation, human capital, opportunities for In terms of morbidity, the prevalence of start-ups, risk acceptance as well as networking. overweight, obesity and malnutrition among However, there are several areas for improvement children are common concerns in several including start-up skills, technology absorption, ASEAN countries including Malaysia. A study product innovation, business growth and on Malaysian urban children by UNICEF (2018) risk capital. Initiatives have been undertaken reports that the number of underweight and by the Government in making Malaysia an stunting among children aged below five living entrepreneurial state through improvement in low-cost flats in the capital is double the in regulations and processes as well as better city’s average, while the number of overweight engagement and participation among all children is six times higher (23%). Among the stakeholders. At the same time, Malaysia is contributing factors include low access to ranked at 24th position out of 160 countries in affordable and nutritious food, poverty and low the 2018 World Bank Doing Business Report. nutritional literacy among parents. Areas for improvement include starting a business (111), paying taxes (73), trading across An efficient and comprehensive network of public borders (61), resolving insolvency (46) and transport improves productivity through faster enforcing contracts (44). In order to meet the movement of people, goods and services. It also expectations of businesses, especially small and creates positive externalities as it improves air medium enterprises (SMEs), the Government is quality and avoids stressful driving conditions. committed to creating a conducive environment Various initiatives have been implemented to by simplifying and introducing user-friendly enhance public transport in the Klang Valley regulations. These efforts are expected to and major cities to address the urban sprawl. enhance the efficiency and competitiveness However, according to the Malaysian Economic of enterprises, and eventually spur economic Monitor (World Bank, 2015), only 17% of growth. commuters in Kuala Lumpur use public transport
6 Economic Outlook 2019
Chapter 1.indd 6 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
as compared to 62% in Singapore and 89% in in hospitals and rising prices of medicines, Hong Kong. In addition, with greater emphasis especially for non-communicable diseases on inclusive growth, there is a need to expand (NCDs). The Government has implemented and improve the public transport system beyond various initiatives on NCDs such as encouraging Klang Valley and urban areas. the private sector to set up dialysis centre, enhancing healthy lifestyle programmes and Education is fundamental to development as it wider use of generic drugs. This is in line with the raises skills, creativity and productivity as well National Strategic Plan for Non-Communicable as promotes entrepreneurship and technological Disease 2016-2025 (MOH, 2016). However, NCDs advances. In addition, the quality of education remain one of the major causes of death among is crucial in ensuring economic and social Malaysians. progress and improving income distribution. The Government has invested significantly The expenditure on medicines has almost doubled in the sector and implemented various within five years from RM2.2 billion in 2013 to measures to strengthen the education system RM4.2 billion in 2018. Medicine expenditure will at all levels. However, the outcome of Malaysia’s increase in the future with an ageing population, education system has yet to reach its full the prevalence of chronic diseases, new patented potential. medicines and higher demand for healthcare. Therefore, the sustainability of financing the Currently, student achievements in public public healthcare system is a concern given schools in international assessments have not the current challenging fiscal position coupled been encouraging. In the Trends in International with an anticipated ageing population in the Mathematics and Science Study (TIMSS) 2015 near future. Report, Malaysia’s score in Mathematics and Science was lower than the 1999 report. At Since affordability is a function of income and the same time, other countries in the region, prices, many low-income households, especially including Singapore, Hong Kong and Republic from the urban areas are unable to own houses of Korea continue to dominate international due to the mismatch between income growth rankings in both subjects. and house prices. Between 2009 and 2016, average house prices rose 9.3% exceeding the In terms of higher education, Malaysia’s leading growth in average household income of 8.1%. universities are ranked among the top in the With a median multiple of 5 (BNM, 2018), world. The 2019 QS Ranking Report lists two house prices in Malaysia are considered as Malaysian research universities as among the top seriously unaffordable. In addition, a study by 1% globally while the remaining three are among BNM (2017) indicates that the median multiple the best 300 in the world. However, several issues in major cities such as Georgetown (10.4), including graduate employability and inadequate Kuala Lumpur (6.1), Petaling2 (6.0) and Johor infrastructure remain a concern. Furthermore, Bahru (5.1) in 2014 are severely unaffordable. there is a persistent mismatch between courses There are several challenges in ensuring offered by institutions of higher learning sufficient affordable houses for the people, (IHLs) and skills set required by employers. including overwhelming demand, scarcity of Thus, there is a need for the Government to land and escalating construction material prices. undertake necessary measures to address Furthermore, developers tend to develop more the gaps. high-end houses which generate higher returns.
Affordable and quality healthcare ensures Equitable economic growth unlocks the full a productive workforce in the economy and potential of the domestic economy by dismantling safeguards the wellbeing of the people. Although barriers and expanding opportunities for the low- the bulk of public healthcare services is income group and marginalised communities. subsidised by the Government, several issues Effective and efficient policies will generate remain, including long-waiting time, congestion quality jobs as well as increase business
2 Refers to Shah Alam, Subang Jaya and Petaling Jaya.
Economic Outlook 2019 7
Chapter 1.indd 7 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Feature Article 1.1
Impact of Population Ageing on the Malaysian Economy
Background
Population ageing is the process by which older individuals encompass a proportionally larger share of the total population (United Nations, 2002). According to the World Health Organization, when a society in which the proportion of people aged 65 years and above is 7% or higher, it is known as an “ageing society” while 14% or higher is called an “aged society” and 21% or higher is called a “super- aged society”. In Malaysia, as of 2017, the number of people aged 65 and above is approximately two million or 6.3% of the total population. Nevertheless, by 2020 it is projected to increase to 2.4 million, constituting about 7% of the total population, hence becoming an ageing nation.
At the same time, the old-age dependency ratio is expected to increase significantly in the coming decades. In 1970, only 3.3% of the Malaysian population was aged 65 years and above, and almost half of the population (44.5%) was 14 years and below. However, in 2017, the share of Malaysian population aged 14 years and below decreased to 24.1% of the total population, while those aged 65 years and above increased to 6.3%. Thus, the gap between the young and older population will be narrowing with the share of the population aged below 14 years decreasing to 18.6% of the total population, while the population aged 65 years and above reaching 14.5% by 2040.
Figure 1.1.1. Share of Population by Age Group Figure 1.1.2. Old-Age Dependency Ratio (Selected Countries)
% % 100 100 ≤ 14 years World US 15 – 64 years Malaysia Japan 80 ≥ 65 years 69.6 80 Singapore Republic of Korea 66.9 Thailand 60 52.2 UK 60 44.5 France 40 Germany 24.1 40 18.6 20 14.5
3.3 6.3 20 0 1970 2017 2040 1 0 1 Forecast. 1950 1990 2030 2070 2100 Source: Department of Statistics, Malaysia. Source: World Population Prospects (The 2017 Revision), United Nations.
Once Malaysia reaches the status of an ageing society, the speed of ageing will accelerate. It will take only about 20 years for the country to double its elderly population to become an aged society by 2040. On the contrary, France took 115 years to become an aged society from an ageing society, while Japan took 24 years and the Republic of Korea 18 years to reach that stage.
Population ageing is due to an increase in life expectancy and a reduction in fertility (United Nations, 2015). Advances in healthcare and technology increased life expectancy while higher cost of living contributed to lower fertility rate. As a result, in the future older people will make up a larger percentage of the population. In Malaysia, life expectancy increased to 74.6 years in 2017 as compared to 64.6 years in 1966, while the fertility rate decreased to 1.9 children per woman from 5.7 during the same period.
8 Economic Outlook 2019
Chapter 1.indd 8 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Table 1.1.1. Speed of Ageing (Selected Countries)
Ageing society Aged society Number of years
(Year) (Year) for transition Proportion of population ≥ 65 ≥ 7% ≥ 14% 7% to 14% France 1864 1979 115 Sweden 1887 1972 85 US 1944 2013 69 UK 1930 1975 45 Germany 1932 1972 40 Japan 1970 1994 24 Malaysia 2020 2040 20 Republic of Korea 2000 2018 18
Source: National authorities, World Bank, OECD and Department of Statistics, Malaysia.
Figure 1.1.3. Life Expectancy and Fertility Rate in Malaysia
Age Number of children 80 6.0 Life expectancy at birth 75 5.0
70 4.0
65 3.0
60 Fertility rate (right scale) 2.0 55 1.0 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 20142014 20162016
Source: Department of Statistics, Malaysia.
Impact on the Economy
The phenomenon of population ageing will affect economic growth. From a theoretical standpoint, population ageing acts as a depressant on economic growth, due to a reduction in productivity. Population ageing will tend to lower labour force participation and savings rates, therefore raising concerns about slower economic growth (Bloom et al., 2010). However, some empirical studies have shown opposite results. Even though Malaysia will face issues of ageing society by 2020, economic growth is expected to remain stable in the long run as a reduction on fertility rate implies that women will be participating more in the labour market and thus contribute to higher labour productivity and economic growth (Ismail et al., 2016).
Another impact of population ageing is increasing public expenditure. The longer life expectancy of the population, particularly the pensioners and their dependents tend to increase pension payments, given the higher number of pensioners (Chee L.K., 1997). Therefore, the current pension scheme may not be sustainable in the long run as it will pose a larger financial burden to the Government’s fiscal position.
Ministry of Finance estimates indicate that a decrease in population by 0.8% will result in lower employment, which leads to a negative deviation in real GDP by an average of 0.004 percentage points between 2018 and 2024. Following a lower GDP, household disposable income is expected to fall which in turn reduces private consumption. In the longer run, if industries remain its labour intensity, the economy may not be able to shift to capital-driven growth. Therefore, it is vital for industries to adopt automation and mechanisation to remain competitive amid lower labour input.
Economic Outlook 2019 9
Chapter 1.indd 9 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Figure 1.1.4. Total Cost of Federal Pension
RM billion 24
20
16
12
8
4
0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Ministry of Finance, Malaysia.
The Way Forward
There are several measures to mitigate the negative impact of population ageing on the economy which include:
• Increase the female labour force participation rate to offset reduction in labour force
Malaysia currently has among the lowest female labour force participation rate in ASEAN+3 countries1 (World Bank, 2018). Hence, increasing female labour force participation rate will partially reduce the downward pressure on labour following population ageing. A study by Moody’s across Asia Pacific emerging markets, suggests that closing the gap between female and male labour force participation by 50% could offset up to 1.7 percentage points of a slowdown in the labour force. In the case of Malaysia, in 2017, the female and male labour force participation rates stood at 54.5% and 80.1%, respectively. If the gap is reduced by 50%, then it would increase the labour force by an additional of 1.3 million to 16.3 million. Therefore, intensifying the implementation of various policies ranging from flexible working arrangements, provision of quality childcare facilities, skills training and entrepreneurship programmes for women will accelerate women participation in the labour force.
• Gradual retirement and re-employment opportunities for post-retirement-aged workers
Encouraging older workers to remain longer in the labour market is often cited as the most viable solution related to population ageing. A rethinking of retirement norms beyond the legal retirement age of 60 is necessary, and the gradual retirement and re-employment opportunities are some possible options. Gradual retirement involves a scheme whereby older workers could choose to work fewer hours yet remain longer in the labour market, including after retirement. For re-employment opportunities, some countries such as Japan, Singapore and the UK incentivise employers who hire older workers by giving special employment credits and wage subsidies. The gradual retirement and re-employment opportunities will be beneficial to workers, employers and the nation through continuous Employees Provident Fund (EPF) contribution and tax revenue collection. Furthermore, with their knowledge and experience, older workers could contribute to organisations and younger colleagues apart from promoting their wellbeing.
1 ASEAN, China, Japan and Republic of Korea.
10 Economic Outlook 2019
Chapter 1.indd 10 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
• Improve productivity
Productivity is a game changer for economic growth. Efforts to improve productivity are already a policy thrust in the Eleventh Malaysia Plan. These efforts should be further strengthened by technological innovation and increasing adoption of robotics, in turn partially offsetting demographic pressures on growth.
• Reform of the pension scheme
The Government should seek ways of reforming their pension systems in anticipation of fiscal burdens in the future (Holzmann, 1988). Currently, the civil service pension scheme is adopting the unfunded arrangement (pay-as-you-go) where it is disbursed directly from the Federal Government’s budget. Therefore, to ensure a sustainable fiscal position in the long run, the civil service pension scheme could be improved and modernised by introducing the defined- contribution scheme for new recruitments in the civil service.
• Elderly-friendly environment
Health and wellbeing are determined not only by genes and personal characteristics but also by physical and social living environments. Therefore, environment plays an important role in determining how people age and respond to diseases, loss of functions as well as other forms of loss and adversity at different stages of life. In this regard, facilities such as elderly-friendly housing scheme, day care centres, public spaces and transportation need to be increased. This will enable them to stay independent and actively participate in the community. Towards this end, the private sector has an important role to play in creating a conducive environment for the elderly.
• Encourage lifelong learning
The quality of education should be improved to match the available skills set with the requirements of the modern labour market. Skills upgrading should be promoted across every life cycle to keep people productive. The human resources department of organisations should adopt appropriate solutions and mechanisms to provide the necessary training and support as well as promote lifelong learning.
Conclusion
Population ageing poses challenges for the nation. Benchmarking against other countries’ best practices will help the Government in drafting and formulating comprehensive policies for population ageing. Also, a thorough study on policies for the elderly with comprehensive data will help the Government in dealing with challenges associated with ageing population. These policies should also focus on leveraging opportunities to benefit both the current and future generations. In this regard, the Government will continuously engage with relevant stakeholders including the private sector, non-governmental organisations and communities to promote wellbeing and enhance older generation’s contribution to the nation’s development.
Economic Outlook 2019 11
Chapter 1.indd 11 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
opportunities and ownership of wealth, resulting In addition, Malaysia has one of the highest solid in a stronger and more competitive economy. waste in the world. In 2012, average Malaysians Although the nation recorded strong economic disposed of 1.5 kg of waste daily, which is expansion in the last few years, growth was higher than the worldwide daily average of 1.2 mainly driven by a few states, namely, Selangor, kg (World Bank, 2012). Meanwhile, according to Kuala Lumpur, Johor and Penang which grew a study by Science Magazine (2015), with about above the national average of 5.1%3 between one million tonnes of plastic waste, Malaysia 2010 and 2016. By and large, investment is ranked at eighth position in terms of plastic flows and job creations were mainly focused waste mismanagement worldwide. This is in these states. This results in the migration mainly due to the low level of public knowledge of people from other states to these preferred and awareness on the importance of reducing, locations. reusing and recycling.
There is a growing concern about gender Overall, a holistic approach will be adopted to inequalities in the country. According to the address the issues affecting the people. The World Economic Forum Global Gender Gap Report Government aspires to enhance the wellbeing of 2017, Malaysia is ranked at 104th position out citizens by creating better opportunities for all of 144 nations, lagging behind countries such segments of Malaysia’s multi-cultural society. as the Philippines (10), Singapore (65), Thailand Thus, various assistance programmes will be (75) and Myanmar (83). The report highlights reviewed, and more targeted capacity building that lack of opportunities for women participation initiatives will be undertaken to increase the in the economy and political empowerment standard of living of the people. were the key factors weighing down Malaysia’s ranking. Strategic Initiatives – 2019 With regard to Sustainable Development Goals (SDGs), SDG Index and Dashboards Report Budget 2018 ranks Malaysia at 55th position out of 156 countries. In addition, Malaysia Sustainable The inaugural budget of the new administration Development Goals National Review 2017 paves the way towards fulfilling the aspiration for reports that Malaysia had made significant a New Malaysia. Despite domestic and external progress in eight dimensions, namely ending challenges, the Government will leverage the poverty; eliminating hunger; ensuring healthy strong fundamentals of the economy to prosper lives; and gender equality. Other dimensions and return the country to its glory days within are building resilient infrastructure; conserving the first three years of the administration. In and sustaining the use of natural resources; consonance with the Mid-Term Review of the protecting, restoring and promoting sustainable Eleventh Malaysia Plan, the immediate focus is use of territorial ecosystem; and strengthening on restoring trust in the Government, creating an the global partnership. Nevertheless, there entrepreneurial state and prospering the people. are nine dimensions where Malaysia needs to improve further, namely quality education; Restoring Trust in the Government access to clean water and sanitation; affordable and clean energy; and decent work and economic The Government has a clean slate to write a growth. The other dimensions that require new chapter in the management of the country. greater focus are inequalities; sustainable cities Efforts will be intensified to overcome the and communities; responsible consumption and trust deficit in the Government among people, production; climate action; and peace, justice professionals, private and public. The immediate and strong institutions. focus will be on addressing all policies and
3 Compound Annual Growth Rate.
12 Economic Outlook 2019
Chapter 1.indd 12 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
structural issues that have hindered the nation investment and entrepreneurship in the country. from progressing further. The principles of In this aspect, the land swap approach under competency, accountability and transparency PPP will be revised whereby it will be decoupled (CAT) will be adopted across all levels of the from land development. Both the sale of the land Government. The Budget will introduce several and land development will be done on an open measures to strengthen governance, enhance tender basis. At the same time, the Government revenue base, improve fiscal management and will reduce its involvement in business and allow government procurement as well as realign the the private sector to drive economic growth. roles of government-linked companies (GLCs). Furthermore, ministries and agencies will be The Government is committed to ensuring streamlined to avoid duplication of roles and effective implementation of the open tender functions. process, public investment and renegotiation of mega infrastructure projects. This realignment Promoting an Entrepreneurial State would assist in achieving long-term growth and fiscal sustainability. Efforts will also be In line with the Government’s new approach to intensified by widening Malaysia’s export stimulating entrepreneurship and encourage markets. For this, Malaysia’s economy will be private sector participation in economic premised along the highest level of technology activities and overall development, the Malaysia and efficiency. Firms, especially SMEs, need to Incorporated Policy will be reintroduced. The stop from being too complacent and chasing policy will create an atmosphere of trust and over short-term profits as well as holding off accessibility between people, professionals, investments. The Government will further private and public to operate within the concept encourage long-term FDI in green investments of a Malaysian company. Towards this end, many that would create jobs and a sustainable impactful initiatives and facilitation measures ecosystem. Economic growth in the future will be introduced to improve and streamline will be driven by the high-tech sectors such as administrative rules, regulations, procedures artificial intelligence (AI), Internet of Things and systems as well as public service delivery (IoT), cloud computing and Big Data analytics to support private sector activities. The policy (BDA), underlining the potential of the digital is expected to jump-start a new version of the economy in ensuring Malaysia’s transition to a public private partnership (PPP) in promoting developed and inclusive nation.
Feature Article 1.2 Increasing Productivity of Small and Medium Enterprises via Digital Technology
Introduction
Digitalisation increases productivity in the economy through the efficient use of resources, easier access to information and wider market reach. Higher productivity brings greater returns to capital which in turn encourages sustainable economic growth (Cardona et al., 2013). In this regard, by leveraging digital technologies, businesses, particularly SMEs which account for 98.5% of total establishments in Malaysia could enhance operations, output and competitiveness.
The Usage of ICT among SMEs
Increasing productivity via digital technology is crucial for SMEs to expand further. However, most of these firms are still lacking in web presence1, despite being connected to the internet. Lack of web presence has resulted in SMEs to have limited reach to potential customers and less effective in marketing their goods and services. Apart from low bandwidth and insufficient secure servers, lack of web presence by businesses has resulted in Malaysia to underperform in the Business Digital Adoption Index (World Bank, 2018), which is below2 most ASEAN countries.
1 Web presence is the representation of people, places and things on the web (Kindberg et al., 2002) 2 Except for Cambodia, Indonesia, Lao PDR and Myanmar
Economic Outlook 2019 13
Chapter 1.indd 13 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Figure 1.2.1. Usage of the Computer, Internet and Web Presence by Sector for SMEs
% 100 Computer usage Internet usage Web presence usage
80
60
40
20
0 Services Manufacturing Mining and quarrying Agriculture Construction
Source: Usage of ICT by Businesses and e-Commerce in 2015, the Economic Census 2016, Department of Statistics, Malaysia.
Most of the SMEs use the internet for browsing and communications, including receiving and sending emails, internet banking, searching and posting information as well as instant messaging. However, SMEs are still lacking in some areas that could be improved further. These areas include online customer service, product delivery as well as staff recruitments and training.
Most subsectors in the services sector are not optimising the usage of internet except real estate and business; finance and insurance; and ICT subsectors. Given that 88.9% of total SMEs are in the services sector, there is a need to accelerate digitalisation to enhance productivity. Furthermore, RM1 billion additional investments in ICT will increase output by RM1.9 billion as compared to wholesale and retail (RM1.6 billion) and real estate and business services (RM1.6 billion) subsectors. At the same time, the services sector is expected to benefit the most from the investment through multiplier effect, followed by the manufacturing and construction sectors.3
Figure 1.2.2. Productive Usage of Internet by SMEs
Staff training Delivering products online Accessing other nancial services Providing customer services Internal or external recruitments Telephoning over the internet Posting information or instant messaging Getting information about goods and services Internet banking Sending or receiving e-mail 0 10 20 30 40 50 60 70 80 %
Source: Usage of ICT by Businesses and e-Commerce in 2015, Economic Census 2016, Department of Statistics, Malaysia.
3 Ministry of Finance estimates using Input-Output Analysis.
14 Economic Outlook 2019
Chapter 1.indd 14 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Figure 1.2.3. Productive Internet Usage for SMEs in the Services Sector
Utilities 50.0 Other services 45.0 Wholesale and retail trade 40.0 35.0 Art, entertainment and recreation 30.0 Transportation and storage 25.0 20.0 15.0 Human health and social work 10.0 Accommodation 5.0 - % Education Food and beverages
Administrative and support service Information and communication
Professional, scienti c and technical Finance and insurance/takaful Real estate Source: Usage of ICT by Businesses and e-Commerce in 2015, Economic Census 2016, Department of Statistics, Malaysia.
Figure 1.2.4. Value and Share of Output by Sector for RM1 billion Investments in ICT
Services 14.9% ICT (RM283.6 million) 77.4% (RM1,470.4 million) Construction Manufacturing 1.9% 5.1% (RM36.3 million) (RM96.5 million)
Agriculture Mining Note: Total may not add up due to rounding and exclusion of import duties component. 0.4% 0.3% Source: Ministry of Finance, Malaysia estimates. (RM7.8 million) (RM6.2 million)
It is evident that investment in ICT significantly increases output. Therefore, SMEs need to transform their businesses to compete and stay relevant in the current rapidly changing environment. In this regard, the Digital Transformation Acceleration Programme (DTAP)4 was launched in early 2018 to provide a structured approach to digital transformation while leveraging experts to guide businesses to adopt emerging digital technologies. The objectives of the programme are to increase productivity, reduce dependency on foreign labour and explore new business models in the digital economy.
Services such as wholesale and retail could expand further with the e-commerce platform and reach a wider market by providing information at a lower cost as compared to traditional business models. Towards this end, Digital Free Trade Zone (DFTZ) was established as part of the national objective to boost the country’s e-commerce growth to 20.8% in 2020. While about 3,800 SMEs have onboard the DFTZ platform until September 2018, the number remains low as compared to the total number of establishments in the country. Accordingly, the formation of the e-World Trade Platform hub in Malaysia, which is first outside China, provides extensive training programmes to assist the SMEs in taking advantage of digital innovations and opportunities in global trade.
4 A partnership between Malaysia Digital Economy Corporation (MDEC) and Malaysia Investment Development Authority (MIDA).
Economic Outlook 2019 15
Chapter 1.indd 15 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Furthermore, SMEs could apply the sharing economy model which relies on digital platforms and advanced technologies such as artificial intelligence, big data and Internet of Things. This model enables instant access to resources and allows seamless communication among businesses. In this regard, SMEs need to take concerted efforts to benefit from the opportunities emerging from sharing economy.
Challenges and Way Forward
There are several factors that constraint SMEs to fully unleash the potential of digital technology which include lack of knowledge, skills and talent as well as insufficient ICT infrastructure. Lack of skilled workers occurs due to a mismatch between demand and supply of graduates. Therefore, institutions of higher learning (IHLs) need to keep pace with the rapid development in digital technologies by regularly updating their courses to meet the industries’ requirements. Towards this end, collaborations between the IHLs and industries could assist fresh graduates to gain the necessary skills to enter the labour market. At the same time, graduates, as well as the current workforce, need to upgrade their skills, knowledge and competencies, particularly in digital skills to compete and remain relevant in the dynamic business environment. Opportunities for improvement has become a lot easier with the emergence of various Massive Open Online Courses in the web, offering various topics with zero or minimal fee.
SMEs also face challenges in accessing talent, particularly in rural and suburban areas. Also, there are micro-enterprises that have reservations in hiring ICT talents due to affordability issues, thus further hampering productive usage of ICT among SMEs. Furthermore, higher salary for ICT jobs offered in other countries in the region may also contribute to the migration of talents in digital skills. For instance, the salary for a junior IT executive in Singapore is twofold the salary in Malaysia, while for senior IT executive is 62% higher.5 Lucrative salary coupled with the better standard of living motivates local talents to migrate in search for better opportunities, resulting in brain drain.
A survey in 2015 indicates that two major barriers to digital adoption by businesses are slow internet connections and lack of affordable broadband plans (FMM, 2015). Moreover, there are regional disparities in digital connectivity between highly urbanised states and the rest of the country. Even though connected to the internet, slow and unreliable connectivity does not allow SMEs to use the internet efficiently. The Government through the implementation of the new Mandatory Standard on Access Pricing is committed to reduce the price of the internet while ensuring higher speed and better quality of services amid greater competitiveness.
Conclusion
The digital economy provides opportunities for SMEs to increase productivity and streamline operations. However, SMEs are not utilising the internet optimally to unlock the opportunities available due to lack of digital skills, access to talents, high costs, low speed and unreliable connectivity. In this regard, initiatives such as the DTAP and DFTZ were introduced to assist SMEs in leveraging digital technologies in their operations. Furthermore, the Government will continue to improve the digital ecosystem including streamline related regulations and upgrade infrastructure to accelerate digitalisation among SMEs.
5 Based on data from Jobstreet Malaysia and Singapore, calculated using World Bank's purchasing power parity in 2017.
16 Economic Outlook 2019
Chapter 1.indd 16 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Prospering the People especially B40 and M404 households. In 2018, the Government allocated RM6.8 billion for cost The 2019 Budget adopts a two-pronged approach of living aid which has benefitted 7.2 million in improving the wellbeing of Malaysians by households. The programme will be continued easing their burden as well as enhancing income in 2019 with a more targeted approach. Other opportunities. With regard to the rising cost efforts to increase income include cross-skilling, of living, the budget will emphasise on efforts reskilling, upskilling and expert-skilling the to raise the disposable income of the people, existing workforce.
Feature Article 1.3 Reviewing the Minimum Wage in Malaysia: An Empirical Analysis
Introduction
Minimum wage is the minimum amount of remuneration that an employer is required to pay for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract (ILO, 2016). The first minimum wage law was enacted in New Zealand in 1894, followed by the Australian state of Victoria (1896) and the UK (1909). Currently, minimum wage exists in more than 90% of the International Labour Organisation (ILO) member states.1 The minimum wage aims to protect workers against overly low pay as well as address poverty and inequality by promoting the right to equal remuneration for work of equal value.
Minimum Wage in Malaysia
On 1 January 2013, the Minimum Wages Order 2012 was implemented with a minimum wage of RM900 a month (RM4.33 per hour) in Peninsular Malaysia and RM800 a month (RM3.85 per hour) in Sabah, Sarawak and Labuan. These minimum wages ensure employees can meet their basic needs as well as enhance the ecosystem for industries to move up the value chain by investing in technology and improving productivity. In line with the requirements of the National Wages Consultative Council Act 2011 (Act 732), the rate was reviewed on 1 July 2016 with minimum wage being increased to RM1,000 a month (RM4.81 per hour) in Peninsular Malaysia and RM920 a month (RM4.42 per hour) in Sabah, Sarawak and Labuan. Moving forward, the Government is committed to ensuring that the minimum wage policy is implemented effectively to benefit employees by standardising and reviewing the minimum wages across the country.
Impact on the Malaysian Economy
This article analyses the potential impact of reviewing the minimum wage on the Malaysian economy. An empirical analysis based on an Applied General Equilibrium (MyAGE)2 model was done to estimate the effects of increasing the minimum wage rate across the nation from RM1,050 in 2019 to RM1,500 via two scenarios: gradual (S1) and one-off (S2). S1 assumes an annual increment of RM150 starting in 2020 until 2022, while S2 incorporates a one-off increment to RM1,500 in 2020.
Household disposable income is the main determinant of private consumption, accounting for an average of 67% of private consumption growth (BNM, 2014). Initiatives that increase household disposable income such as cash transfers will likely contribute to the growth in private consumption as low-income workers have a higher propensity to consume (MOF, 2016). Therefore, changes in the minimum wage policy will have a positive impact on private consumption, increasing between 0.3 and 0.4 percentage points in S1, while 0.6 percentage points in S2. The results also reveal that there is a marginal increase in Consumer Price Index (CPI) due to demand-pull inflation.
1 187 members. 2 A dynamic computable general equilibrium (CGE) model of the Malaysian economy.
4 Refers to households income between RM4,360 and RM9,619.
Economic Outlook 2019 17
Chapter 1.indd 17 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Figure 1.3.1. Impact on Private Consumption and Consumer Price Index Short-term (2020) Medium-term (2020 – 2022) baseline deviation baseline deviation (percentage point) (percentage point) 0.7 0.7 0.6 0.6 0.5 0.5 0.4 0.4 0.3 0.3 0.2 0.2 0.1 0.1 0.0 0.0 CPI S1 Private CPI S2 Private CPI S1 Private CPI S2 Private Consumption S1 Consumption S2 Consumption S1 Consumption S2 Source: Ministry of Finance, Malaysia estimates.
Changes in the minimum wage could also cause a potential impact on businesses’ production costs and competitiveness. Businesses, in particular, SMEs relying on low-wage workers, are at the risk of losing their business due to the inability to comply with the minimum pay requirement (Rusly et al., 2017). Nevertheless, firms will be encouraged to substitute labour for capital through automation and mechanisation when the relative cost of labour increases. This will improve productivity and reduce dependency on low-skilled workers, enabling the firms to afford higher minimum wages without passing the increase in the cost of labour to consumers.
National Employment Returns 2016 survey reveals that 76.3% of establishments had not recorded increases in their labour costs following the implementation of minimum wages (ILMIA, 2017). The findings reaffirm the expectation that firms will be able to adapt to the minimum wage policy without experiencing any significant disruptions to businesses. Furthermore, a study by Croucher et al. (2012) indicates that implementation of national minimum wage encourages the substitution of labour for capital, thus enhances productivity.
The results from MyAGE model indicate that in the short-term, employment in S1 and S2 are expected to increase above the baseline with the latter rising higher than the former.3 This reflects the ability of firms to adjust to the changes in wages while continuing production to meet higher household demand. Also, the higher minimum wage is expected to promote a shift in the workforce from low- to semi-skilled and skilled workers. With an overall share of labour input in the economy at about 53%, the shift from low– to semi-skilled and skilled workers will increase productivity which will lead to higher GDP. The trend is expected to continue for the next three years whereby an increase in capital stock in the medium-term will shift firms towards capital-driven operations and hence, contribute further to GDP growth.
Figure 1.3.2. Impact on Economic Growth Short-term (2020) Medium-term (2020 – 2022) baseline deviation baseline deviation (percentage point) (percentage point) 0.04 0.07 0.06 0.03 0.05 0.04 0.02 0.03 0.01 0.02 0.01 0.00 0.00 Employment GDP Employment GDP Employment Capital GDP Employment Capital GDP S1 S1 S2 S2 S1 S1 S1 S2 S2 S2 Source: Ministry of Finance, Malaysia estimates.
3 With assumption capital stock is fi xed in the short-term.
18 Economic Outlook 2019
Chapter 1.indd 18 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
As private consumption increases, industries are compelled to produce more goods and services for the household segment, particularly food and beverages, as well as transport equipment. In the medium-term, higher demand will lead industries to move towards more capital-intensive production and create spillover effects on the economy. An expansion in GDP would increase market confidence, thus promoting investment-related industries as well as intermediation industries through intersectoral linkages.
Conclusion
The revisions in minimum wages are expected to enhance the wellbeing of workers. In this regard, a gradual increment in minimum wages is anticipated to have a lower impact on CPI while promoting economic growth as compared to a one-off increase. The success of the implementation of minimum wages policy is contingent upon the ability of firms to adopt best business practices to enhance productivity through greater automation and mechanisation. Simultaneously, industries are expected to shift from low-skilled workers to semi-skilled and skilled workers as well as reduce the dependency on low-skilled foreign workers, thus enhancing the nation’s competitiveness.
In response to health-related issues, million for school upgrading and maintenance. especially malnutrition among urban children, In 2019, both programmes will be continued to comprehensive programmes will be implemented ensure the quality of infrastructure at public to eradicate poverty, promote healthy eating and schools. active living, while funds will be channelled for various preventive healthcare programmes. At In terms of higher education, the focus is on the same time, the procurement of medicines improving graduate employability through will be carried out through an open tender to programmes to enhance skills, instil good ensure value for money. Furthermore, as the attributes and attitude as well as promote pace and extent of development spread across creative thinking, problem-solving and effective Malaysia, efforts will be intensified to provide communications. In this regard, collaborative a comprehensive network of public transport programmes between the Ministry of Education system beyond Klang Valley and urban areas. and industry including the Maybank Go Ahead Challenge, Job Creator Framework, IHLs With regard to improving the quality of education, Entrepreneurship Ecosystem Strengthening facilities at schools will be upgraded and Programme and Entrepreneurship Competency maintained to ensure that public schools are Development Programme will be continued in the school of choice. In the 2018 Budget, the 2019. In addition, greater exposure to the IR 4.0 Government allocated RM1.3 billion for rebuilding will enable undergraduates to adapt to today’s dilapidated schools nationwide through the use working environment as well as prepare them of industrial building system (IBS) and RM550 for the jobs of the future.
Feature Article 1.4 Profile of Unemployment in Malaysia
Introduction
Over the last two decades, the unemployment rate in Malaysia has been hovering below 4%, indicating that the economy is operating under full employment1 (DOSM, 2016). The unemployment rate is calculated by dividing the number of unemployed persons2 over the total labour force3 (DOSM, 2017). This article profiles the demography of unemployment by ethnicity, gender, age cohort and educational attainment in 2017.
1 OECD defines full employment as unemployment rate below 4%. 2 Unemployed persons refer to those who did not work during the reference week and are classified into actively unemployed and inactively unemployed. 3 Labour force refers to employed and unemployed persons in the working age population (15-64 years).
Economic Outlook 2019 19
Chapter 1.indd 19 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Figure 1.4.1. Computation of Unemployment in Malaysia, 2017 b
Employed Labour force 14.5 million 15.0 million Yes
a Is a person working? No Yes Unemployed 502.6 thousand Is the person looking and available for No work ? Outside labour force Unemployment rate = X 100 = 3.4% 7.1 million
Source: Adapted from Principles of Economics, 2016.
Facts and Figures Figure 1.4.2. Malaysian Citizens by Ethnic Group Malaysian Citizens 2.00 million 0.29 million (7.0%) (1.0%) Unemployment Rate by Ethnic Group
Malaysia is a multi-racial nation with 28.7 6.67 million million citizens consisting of various ethnic (23.2%) groups, namely Bumiputera4 (68.8%), Chinese 5 19.78 million (23.2%), Indians (7%) and Others (1%) (DOSM, (68.8%) 2017). In 2017, the overall unemployment rate for Malaysian citizens was 3.7% though there was some variation across ethnic groups. Bumiputera who account for the largest number of unemployed persons recorded an unemployment Bumiputera Indians rate of 4%, followed by Chinese (2.4%), Indians Chinese Others (4.7%) and Others (6.6%). Source: Department of Statistics, Malaysia.
Table 1.4.1. Unemployment by Ethnicity, 2017
Ethnic Number of labour Number of Percentage of Unemployment group force unemployed unemployed1 rate ('000) ('000) (%) (%) Total 12,678.3 463.7 100.0 3.7 Bumiputera 8,483.3 336.4 72.5 4.0 Chinese 3,206.1 77.1 16.6 2.4 Indians 929.7 43.3 9.3 4.7 Others 104.2 6.8 1.5 6.6
1 Computation by Ministry of Finance, Malaysia. Source: Department of Statistics, Malaysia.
4 Bumiputera refers to etnic group of Malays, Peninsular Orang Asli, Bumiputera Sabah and Bumiputera Sarawak. 5 Others refer to ethnic group other than Bumiputera, Chinese and Indian.
20 Economic Outlook 2019
Chapter 1.indd 20 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Unemployment Rate by Gender and Ethnicity
In 2017, the unemployment rate for citizens was higher for females (3.8%) than males (3.6%). These findings are in line with the study that indicates females are more likely to exit and re-enter the labour force in the event of family-related needs (ILO, 2016). Furthermore, females have a higher unemployment rate since employers, in general, prefer to hire males instead of females. This is premised on the higher commitment by males to long working hours (Qi, 2016). In 2017, the mean working hours for females was fewer (43.9 hours per week) as compared to males (46.5 hours per week). Similarly, gender stereotypes are likely to distort decision makers’ perceptions of job candidates (Mohd Jidi et al., 2014).
From an ethnic perspective, the unemployment rate for Bumiputera females was 4.2%, slightly higher than Bumiputera males (3.8%). Similarly, Indian females recorded a higher unemployment rate (4.9%) compared with males (4.5%). In contrast with Bumiputera and Indians, a higher unemployment rate was recorded for Chinese males (2.5%) compared with females (2.3%). The same holds for Other ethnic group where males registered a higher unemployment rate (7.8%) compared with females (4.7%).
Table 1.4.2. Unemployment by Gender and Ethnicity, 2017
Male Female Total Ethnic Total Unemployment Total Unemployment Total Unemployment group rate rate rate ('000) (%) ('000) (%) ('000) (%) All 271.9 3.6 191.8 3.8 463.7 3.7 Bumiputera 194.1 3.8 142.3 4.2 336.4 4.0 Chinese 47.8 2.5 29.3 2.3 77.1 2.4 Indians 25.0 4.5 18.3 4.9 43.3 4.7 Others 4.9 7.8 1.9 4.7 6.8 6.6 Source: Department of Statistics, Malaysia.
Unemployment by Age Group and Ethnicity
From citizen’s age group perspective, the 15–19 years cohort recorded the highest unemployment rate at 18.7%, followed by 20–24 years (11.9%). As “youth” refers to persons aged 15 to 24 years (ILO, 2016), total youth unemployment among Malaysians was 13.2% in which the highest rate was recorded by Others at 17.7%, followed by Indians (15.5%), Bumiputera (14.1%) and Chinese (8.3%). Globally, youth unemployment continues to be a concern (ILO, 2016).
The high unemployment rate among youth is partly due to lack of job experience and insufficient skills or education to compete in the labour market. This implies that experience is an important indicator of employability (ILMIA, 2016). Furthermore, 68% of employers ranked communication as the most important skill in job applications. This is followed by work experience, interpersonal skills, passion and commitment. Other preferred skills include teamwork, relevant qualifications, good academic results, desire to learn, ability to work under pressure and proactiveness (Shukri et al., 2013).
Furthermore, Malaysia’s high youth unemployment rate in 2017 was due to skills mismatch (MIDF, 2018). Many vacancies in the labour market were in low- and semi-skilled job categories, which is less preferred and not suitable for fresh graduates. Out of the 1.4 million total job vacancies in 2017, 86.9% comprises low-skilled jobs that require only primary education, followed by 8.4% in semi-skilled jobs. Skilled jobs with tertiary education6 requirement were only at 4.7% or 64,402 vacancies from the total job vacancies.
6 Refers to educational attainment above Form 5.
Economic Outlook 2019 21
Chapter 1.indd 21 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
Table 1.4.3. Unemployment Rate by Age Group and Ethnicity, 2017 Figure 1.4.3. Youth Unemployment Rate Among Malaysians, 2017 Age Total Bumiputera Chinese Indians Others % % % % % % 15–19 18.7 19.1 13.4 24.9 25.9 20 17.7 20–24 11.9 12.9 7.5 13.6 15.4 16 15.5 25–29 4.5 4.6 3.0 7.7 7.5 14.1 13.2 30–34 1.9 1.7 2.2 2.5 5.1 12
35–39 1.4 1.3 1.5 2.1 0.5 8.3 40–44 1.0 1.0 0.9 1.6 0.6 8
45–49 1.4 1.2 1.8 1.4 0.8 4 50–54 0.7 0.5 1.1 1.4 0.7 55–59 0.4 0.4 0.2 0.8 0.4 0 Total Bumiputera Chinese Indians Others 60–64 0.3 0.2 0.4 0.6 0.0 Source: Department of Statistics, Malaysia. Source: Department of Statistics, Malaysia.
Unemployment Rate by Educational Attainment and Ethnicity
In terms of educational attainment, Bumiputera with tertiary education recorded the highest unemployment rate (4.6%), while those with no formal education were the lowest (1.5%). However, Chinese (3.0%) and Indians (6.9%) with no formal education recorded the highest unemployment rate, while those with primary education registered the lowest rate of 1.2% and 2.5%, respectively. With regard to Other ethnic group, the unemployment rate was the highest among those with secondary education (8.6%), while persons with primary education recorded the lowest rate at 2.4%.
The high unemployment rate among those with tertiary education including graduates, in particular, Bumiputera (4.6% or 129,000 persons) and Indians (5.5% or 14,500 persons) is mainly due to skills gap. Furthermore, a survey conducted by the World Bank and Talent Corporation in 2014 found that 90% of companies believe that university graduates should have more industrial training by the time they graduate. However, the study also indicates that less than 10% of companies had experience in developing curricula or programmes with universities (BNM, 2017).
Figure 1.4.4. Unemployment Rate by Educational Attainment and Ethnicity, 2017
% 10 No formal education 8.6 Primary 8 Secondary Tertiary 6.9 6 5.5 5.0 4.6 4.6 4.7 4 4.0 3.0 2.9 2.5 2.3 2.4 1.9 2 1.5 1.2
0 Bumiputera Chinese Indians Others Source: Department of Statistics, Malaysia.
22 Economic Outlook 2019
Chapter 1.indd 22 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
The Government has implemented several measures to encourage companies to assist graduates to enhance their hard and soft skills via on-the-job training. As of 31 August 2018, 125,986 graduates have been directly and indirectly assisted through various programmes. Currently, 539 companies (514 private companies and 25 government-linked companies) including Maybank Group, CIMB, Axiata, Celcom, Huawei and Intel are working closely with the Ministry of Education to improve graduate employability.
Non-Malaysians
In 2017, there were 3.3 million non-citizens living Table 1.4.4. Non-citizens Unemployment, 2017 in Malaysia, making up 10.3% of the 32 million total population. The total unemployment rate for Number in the Number of Unemployment this group was 1.7%, the same for both genders. labour force unemployed rate In terms of the age cohort, non-Malaysians aged ('000) ('000) (%) 15–19 recorded the highest unemployment rate 2,274.3 38.9 1.7 (6.7%). Looking at the educational attainment, those with no formal education had the highest Source: Department of Statistics Malaysia. rate (3.4%), while the lowest unemployment rate was recorded among non-citizens with secondary education (1.2%).
Figure 1.4.5. Non Malaysians Unemployment Rate by Gender, Age Group and Educational Attainment, 2017
% 8 6.7
6
4 3.4 2.5 2.5 2.1 1.7 1.7 1.7 1.8 2 1.5 1.2 1.1 0.9 0.6 0.6 0.5 0.2 0 Total Male Female 15–19 20–24 25–29 30–34 35–39 40–44 45–49 50–54 55–59 60–64 Primary Tertiary No formal Secondary education
Source: Department of Statistics, Malaysia.
Conclusion
Unemployment is one of the crucial indicators in assessing the performance of an economy. Several key findings on the profile of unemployment in Malaysia indicates that unemployment rate differs across gender, ethnicity, age cohort and education level. Meanwhile, high youth unemployment occurred across all ethnic groups. Among the factors that contribute to youth unemployment includes insufficient skills or education, lack of job experience and skills mismatch. The Government will intervene and enhance partnership with all relevant stakeholders to address these gaps. Some of the interventions include identifying skills needed by the industries, mainstreaming technical and vocational education and training (TVET), reducing dependency on foreign workers and cultivating entrepreneurship culture in Malaysia.
Economic Outlook 2019 23
Chapter 1.indd 23 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
As for affordable housing, the Government The Government will promote the use of will continue to expand the People Housing renewable energy by encouraging businesses and Programme, People Housing Rent-to-Own consumers to accelerate the adoption of green Programme and the Integrated People Housing technology. In addition, Malaysia will pursue a Programme. The initiative will provide balanced development path, with policies that opportunities for citizens, especially the B40 enhance inclusion, integrity and sustainability, households to own or rent a house. At the same as well as delivering economic growth for the time, the 2019 Budget will encourage financial continued prosperity of all Malaysians. This is institutions to allocate more loans to facilitate to ensure economic growth translates into real house-ownership as well as introduce new benefits for the people. programmes to meet the rising demand for affordable housing. Conclusion Apart from easing the burden of the people, balanced economic development is important The Malaysian economy continued to expand in ensuring inclusive growth. Towards this end, in the first half of the year despite several challenges in the domestic economy and efforts will be intensified to promote capital uncertainties in the external front. With GDP formation across all states in the country. This, in expanding 4.9% during the first half of 2018, turn, will generate greater job opportunities, thus the Malaysian economy is expected to expand negating the necessity for migration to major 4.8% in 2018 and 4.9% in 2019 supported by cities. At the same time, funds will be allocated firm domestic demand and favourable external to upgrade facilities and infrastructure to unfold sector. Despite the anticipated expansion, business and investment potentials in locations uncertainties in the external sector as well as which are currently deemed unattractive. domestic challenges could pose a downside risk Towards achieving gender equality, policies and to the growth outlook. The Government through programmes will be further strengthened. With the 2019 Budget will implement measures to regard to sustainable development, efforts will eliminate the trust deficit in the Government, be intensified to achieve efficient management promote an entrepreneurial state and prosper of shared natural resources as well as disposal the people. The measures in the Budget will of toxic and solid wastes. In this regard, the place the nation in a stronger footing towards utilisation of the latest technology in waste achieving the objectives of greater liberty, disposal will be encouraged to minimise justice, harmony, peace and prosperity in a the negative impact on the environment. New Malaysia.
24 Economic Outlook 2019
Chapter 1.indd 24 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
References
Bank Negara Malaysia. (2014). Annual Report Department of Statistics, Malaysia. (2017). Ageing: 2013: Evolving Household Balance Sheets and August Newsletter. Putrajaya: Department of Implications for Private Consumption. Kuala Statistics, Malaysia. Lumpur: Percetakan Nasional Malaysia Berhad. Department of Statistics, Malaysia. (2016). Labour Force Survey Report. Putrajaya: Department Bank Negara Malaysia. (2017). Annual Report of Statistics, Malaysia. 2016: Demystifying the Affordable Housing Issue in Malaysia. Retrieved from http://www. Department of Statistics, Malaysia. (2017). Labour bnm.gov.my/files/publication/ar/en/2016/ Force Survey Report. Putrajaya: Department cp04_002_box.pdf of Statistics, Malaysia.
Bank Negara Malaysia. (2017). Annual Report 2016: Economic Planning Unit. (2017). Malaysia Youth Unemployment in Malaysia: Developments Sustainable Development Goals Voluntary and Policy Considerations. Retrieved from National Review 2017. Retrieved from https:// http://www.bnm.gov.my/files/publication/ar/ sustainabledevelopment.un.org/content/ en/2016/cp04_003_box.pdf documents/15881Malaysia.pdf
Bank Negara Malaysia. (2018). BNM Quarterly Economist Intelligence Units. (2017). Worldwide Bulletin - Affordable Housing: Challenges and Cost of Living Report 2017. Retrieved from the Way Forward. Retrieved from http://www. https://store.eiu.com/product/worldwide- bnm.gov.my/files/publication/qb/2017/Q4/ cost-of-living-2017/. p3ba1.pdf Federation of Malaysian Manufacturers. (2015). Bertelsmann Stiftung. (2017). SDG Index and The Adoption of ICT among Federation of Dashboards Report 2018. Retrieved from http:// Malaysian Manufacturers (FMM) members. www.sdgindex.org/assets/files/2018/01%20 Kuala Lumpur: FMM and MDEC. SDGS%20GLOBAL%20EDITION%20WEB%20 V9%20180718.pdf Global Entrepreneurship and Development Institute. (2017). 2018 Global Entrepreneurship Bloom, D. E., Canning, D., & Fink, G. (2010). Index. Retrieved from http://thegedi.org/2018- Implications of Population Ageing for Economic global-entrepreneurship-index/ Growth. Oxford Review of Economic Policy, 26(4), 583 – 612. Holzmann, R. (1988). Reforming Public Pensions (No. 5). Paris: Organisation for Economic Cardona, M., Kretschmer, T., & Strobel, T. (2013). Co-operation and Development. ICT and productivity: conclusions from the empirical literature. Information Economics Institute of Labour Market Information and and Policy, 25(3), 109-125. Analysis. (2017). National Employment Returns 2016. Kuala Lumpur: Percetakan Nasional Chee, L. K. (1997). The Malaysian Government Malaysia Berhad. Pension Scheme: Whither Its Future Direction. Jurnal Ekonomi Malaysia, 31, 87 – 106. Institute of Labour Market Information & Analysis. (2016). Quick Fact 2014-2015. Kuala Croucher, R., & Rizov, M. (2012). The impact Lumpur: Percetakan Nasional Malaysia of the national minimum wage on labour Berhad. productivity in Britain. E-Journal of International and Comparative Labour Studies, 1(3-4), 263-289. International Labour Organization. (2016). Minimum Wage Policy Guide: Full Chapters (p. 4). Geneva: International Labour Organisation.
Economic Outlook 2019 25
Chapter 1.indd 25 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
International Labour Organization. (2016). Key Mohd Jidi, M., Zakaria, N., Zani, A., Mislan, A., Indicators of the Labour Market Ninth Edition. Eshak, E. (2014). Gender Imbalance in Decision Retrieved from https://www.ilo.org/wcmsp5/ Making in Hiring Employees in Klang Valley, groups/public/---dgreports/---stat/documents/ Malaysia. 523-532. publication/wcms_498929.pdf Organisation for Economic Co-operation and International Monetary Fund. (2018). World Development. (2017). Government at a Glance Economic Outlook, October 2018. Retrieved 2017. Retrieved from https://www.oecd.org/ from https://www.imf.org/en/Publications/ gov/government-at-a-glance-2017-highlights- WEO/Issues/2018/09/24/world-economic- en.pdf outlook-october-2018 Qi. J. C. (2016). Unemployment Among Graduates Ismail, N. W., & Rahman, H. S. W. H. A. (2016). of Public and Private Universities in the Klang Aging and Economic Growth: Empirical Valley. Malaysia Labour Review. 12(1). 21-28. Analysis Using Autoregressive Distributed Lag Approach. Sains Malaysiana, 45(9), 1345 – 1350. QS Top Universities. (2018). QS World University Rankings 2019. Retrieved from https://www. Jobstreet Malaysia. (2018). Malaysia Salary Report. topuniversities.com/university-rankings/ Retrieved from https://www.jobstreet.com. world-university-rankings/2019 my/en/cms/employer/wp-content/uploads/ sites/4/2018/05/MY_Salary_Report_2018.pdf Rusly, F. H., Talib, Y. Y. A., & Salleh, D. (2017). The impact of minimum pay implementation Jobstreet Singapore. (2018). Salary Report. on small businesses operating cost and Retrieved from https://myjobstreet.jobstreet. sustainability: A case of service business. com.sg/career-enhancer/basic-salary-report. SHS Web of Conferences, 34(08006). DOI: php?param=IT%20Executive||190||sg 10.1051/shsconf/20173408006
Kindberg, T., Barton, J., Morgan, J., Becker, G., Science Magazine. (2015). Plastic Waste Input Caswell, D., Debaty, P., & Schettino, J. (2002). from Land into the Ocean. Retrieved from People, places, things: Web presence for the https://www.iswa.org/fileadmin/user_upload/ real world. Mobile Networks and Applications. Calendar_2011_03_AMERICANA/Science-2015- 7(5). 365-376. Jambeck-768-71__2_.pdf
Malaysian Industrial Development Finance. Shukri, M., Hamid. A., Manaf. N. H., Islam, R. (2018). MIDF Research: Youth Unemployment (2013). Enhancing Graduates’ Employability Rate Remains High as Skills Mismatch Stay Skills: A Malaysia Case. Retrieved from http:// Prevalent. Retrieved from http://www.midf. irep.iium.edu.my/28680/1/Rafikul_Malaysia. com.my/images/Downloads/Research/Econs- pdf Msia-2017-Youth-UE-MIDF-030518.pdf United Nations Children’s Fund. (2018). Urban Ministry of Education. (2016). Trends in Child Poverty Report. Retrieved from https:// International Mathematics and Science Study www.unicef.org/malaysia/FINAL-REPORT-1. 2015. Retrieved from https://www.moe.gov. pdf my/images/Terbitan/Rujukan-Akademik/ pubfile_file_002124.pdf United Nations. (2002). World Population Ageing 1950 – 2050. New York: United Nations. Ministry of Finance, Malaysia. (2016). Economic Report 2016/2017. Kuala Lumpur: Percetakan United Nations. (2017). World Population Prospects: Nasional Malaysia Berhad. The 2017 Revision. Volume I: Comprehensive Tables. ST/ESA/SER.A/399. New York: United Ministry of Health. (2016). National Strategic Nations. Plan for Non-Communicable Disease 2016- 2025. Retrieved from http://www.moh.gov. my/english.php/pages/view/698
26 Economic Outlook 2019
Chapter 1.indd 26 10/25/18 7:08 PM CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS
University of Minnesota. (2016). Principles of World Bank. (2015). Malaysia Economic Monitor. Economics. University of Minnesota Libraries Retrieved from http://documents.worldbank. Publishing 2016. Retrieved from https://open. org/curated/en/509991467998814353/ lib.umn.edu/principleseconomics/ pdf/97393-WP-P152893-Box391466B-PUBLIC- MEM12-Draft-v3-3b.pdf World Bank. (2018). Doing Business 2018. Retrieved from http://www.doingbusiness.org/content/ World Bank (2012). What a Waste. dam/doingBusiness/media/Annual-Reports/ Retrieved from https://siteresources. English/DB2018-Full-Report.pdf worldbank.org/INTURBANDEVELOPMENT/ Resources/336387-1334852610766/What_a_ World Bank. (2018). Labor force, female (% of Waste2012_Final.pdf total labor force). Retrieved from https://data. worldbank.org/indicator/SL.TLF.ACTI.1524. World Economic Forum. (2018). T h e FE.ZS Global Competitiveness Report 2018. Retrieved from http://www3.weforum. World Bank. (2018). Malaysia’s Digital Economy: org/docs/GCR2018/05FullReport/ A New Driver of Growth. Washington, DC: TheGlobalCompetitivenessReport2018.pdf World Bank. World Economic Forum. (2017). The Global Gender Gap Report 2017. Retrieved from http://www3. weforum.org/docs/WEF_GGGR_2017.pdf
Economic Outlook 2019 27
Chapter 1.indd 27 10/25/18 7:08 PM Chapter 1.indd 28 10/25/18 7:08 PM GLOBAL ECONOMIC 2 OUTLOOK
• Overview • Global Economy Feature Article 2.1 – International Tax Standards: Where Are We At? Information Box 2.1 – ASEAN Economic Community Blueprint 2025: Issues, Challenges and Opportunities
• Conclusion
Chapter 2.indd 29 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
30 Economic Outlook 2019
Chapter 2.indd 30 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK 2 GLOBAL ECONOMIC OUTLOOK Overview in 2019 mainly due to the escalating trade tensions between the US and its key trading lobal growth is expected to remain favourable partners that may hamper business and Gat 3.7% in 2018 and 2019. This growth financial market sentiments. Slower demand for is mainly supported by stable growth in the automobiles and agricultural raw materials may US as well as in most emerging market and also affect global trade. Meanwhile, FDI flows developing economies (EMDEs). Growth in the are projected to increase 5% to USD1.5 trillion advanced economies is expected to expand in 2018 reflecting improvement in investors’ 2.4% in 2018 and 2.1% in 2019, while the confidence amid continuous expansion in the EMDEs is projected to be sustained at 4.7% global economy. in 2018 and 2019. Risks have tilted further to the downside Among the advanced economies, growth in the despite the projected expansion of the global US is projected to be supported by fiscal stimulus economy. The anticipated tariff increase by in 2018, while in 2019, growth is expected to the US is likely to escalate retaliatory trade record a marginal slowdown mainly due to the actions by its trading partners. In addition, recently introduced trade restrictive policies. tighter financial conditions in several advanced Growth in the euro area is expected to ease economies may cause fluctuations in exchange due to lower domestic demand and exports. rates and further reduction in capital inflows Similarly, Japan is projected to record slower to emerging markets. Other downside risks growth as a result of weak private consumption include geopolitical tensions, domestic strife and investment. The GDP growth in the UK as well as economic and humanitarian costs of is expected to moderate due to low business weather-related events and natural disasters. confidence following uncertainties amid the ongoing Brexit negotiations. Global Economy Growth in the EMDEs is expected to be uneven due to various factors affecting the economies The US economy recorded a stellar performance, such as rising oil prices, higher yields in the with a growth of 2.7% during the first half of US, appreciation of the US dollar, ongoing trade 2018 driven by investment, particularly in the tensions and geopolitical conflicts. Economic non-residential segment as well as stronger growth in China is projected to moderate as a exports. The unemployment rate improved result of financial sector regulatory tightening as to 4% following additional job gains in the well as weak exports. On the contrary, India’s manufacturing and healthcare sectors, while economy is expected to improve driven by inflation recorded 2.5% due to increases in domestic demand as adverse effects from the food and energy prices. currency exchange initiative and introduction of the Goods and Services Tax (GST) wear off. For the year of 2018, the US GDP is envisaged The GDP of ASEAN is expected to be steady to expand at a stronger pace of 2.9% mainly supported by domestic demand and exports. contributed by robust domestic demand. Private consumption is expected to be sustained at 2.8% Inflation in the advanced economies is expected buoyed by the strong job market, individual to increase to 2% in 2018 and 1.9% in 2019, tax cuts as well as anticipation of interest rate following higher energy and food prices. hikes in 2019. Meanwhile, capital spending is Likewise, inflation in the EMDEs is projected expected to rise favourably by 5.7% supported to record 5% in 2018 and 5.2% in 2019 due to by lower corporate tax as well as buoyant higher energy prices. World trade is expected market sentiment. In addition, government to ease marginally from 4.2% in 2018 to 4% expenditure is projected to increase 36%
Economic Outlook 2019 31
Chapter 2.indd 31 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
following the introduction of fiscal stimulus in may result in large capital flows into the US early 2018. Exports are expected to record a which creates volatility in the US and global solid growth of 5.2% reflecting higher demand financial markets. Fiscal stimulus may also in industrial supplies and materials. On the cause the dollar to appreciate which will lead supply side, the manufacturing sector is to an expansion in the trade deficit. expected to expand markedly, particularly in the production of fabricated metal products, The UK’s economy registered a lower growth transportation equipment as well as plastics of 1.2% in the first half of 2018 due to a and rubber products. The unemployment rate is slowdown in the services sector. The services expected to improve further to 3.8% following sector grew at a slower pace of 1.4%, mainly employment gains in transportation, utilities, due to a fall in the distribution, hotels and leisure and hospitality industries. Inflation is restaurants subsector. The unemployment rate anticipated to record 2.4% due to higher energy improved to 4.1%, while inflation was slightly and food prices. Given the anticipated strong higher at 2.6% as a result of an increase in economic performance throughout the year, motor fuels. the US Federal Reserve (Fed) is expected to raise the federal fund rate in December 2018 For the year, the UK’s economic growth is following a recent increase in September to a forecast to moderate to 1.4%, arising from range of 2.00% to 2.25%. uncertainties throughout the Brexit negotiation period with the EU, which may adversely In 2019, the US economy is projected to affect investment. However, the slowdown moderate to 2.5% (2018: 2.9%). Domestic is forecast to be offset partly by planned demand will continue to sustain growth amid increases in public investment to raise the heightening policy uncertainties and medium- supply of public housing to 300,000 units per term vulnerabilities, mainly dampening exports year until 2020. The unemployment rate is and rising public debt. Capital spending is projected to register 4.1% following increases expected to grow 6% (2018: 5.7%) mainly in job creation in the services sector. Inflation contributed by private fixed investment which may increase 6.9% (2018: 6.3%). However, private consumption is expected to slow down at Table 2.1. Real GDP for Selected Economies 2.5% (2018: 2.8%) due to gradual hikes in the 2017 – 2019 interest rate. Similarly, exports are expected to decelerate to 2.7% (2018: 5.2%) mainly due to Change (%) effects from protectionism as it will increase 2017 20181 20192 material costs and weaken competitiveness World Output 3.7 3.7 3.7 of the US exports. Meanwhile, the net federal Advanced economies 2.3 2.4 2.1 public debt is expected to rise to 82.8% of GDP United States 2.2 2.9 2.5 (2018: 81.4%) following the introduction of fiscal Euro area 2.4 2.0 1.9 stimulus in early 2018, indicating potential Japan 1.7 1.1 0.9 fiscal risk to the economy. The unemployment Republic of Korea 3.1 2.8 2.6 rate is expected to improve to 3.5% (2018: Emerging market and 4.7 4.7 4.7 3.8%) owing to job gains in low-paying retail developing economies and food service industries while inflation China 6.9 6.6 6.2 is expected to record 2.1% (2018: 2.4%). The India 6.7 7.3 7.4 Fed is anticipated to increase the federal fund ASEAN rate three times in 2019 to achieve its 2% Singapore 3.6 2.5 - 3.5 2.7 inflation target and full employment over the Thailand 3.9 4.4 4.2 medium-term. Indonesia 5.1 5.1 - 5.5 5.4 - 5.8 Philippines 6.7 6.7 6.8 The medium-term prospects for the US economy Malaysia 5.9 4.8 4.9 appear burdened by downside risks. Pro- World Trade Volume 5.2 4.2 4.0 cyclical fiscal policies may heighten inflation 1 Estimate. and trigger a faster-than-expected rise in 2 Forecast. interest rates. The increase in interest rates Sources: International Monetary Fund and national authorities.
32 Economic Outlook 2019
Chapter 2.indd 32 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
Table 2.2. Inflation Rate for Selected Economies Growth in the euro area remained at 2.3% in 2017 – 2019 the first six months of 2018, supported by industrial production, construction activities Change (%) and an accommodative monetary policy. The 2017 20181 20192 labour market continued to improve with the World 3.2 3.8 3.8 unemployment rate being recorded at 8.4% Advanced economies 1.7 2.0 1.9 supported by wage growth and continued United States 2.1 2.4 2.1 job creation, especially in the services sector. Euro area 1.5 1.7 1.7 Meanwhile, inflation was recorded at 1.5%. Japan 0.5 1.2 1.3 Republic of Korea 1.9 1.7 1.8 The euro area economy is projected to expand at a Emerging market and slower pace of 2% in 2018 supported by domestic 4.3 5.0 5.2 developing economies demand and an accommodative monetary China 1.6 2.2 2.4 policy. The unemployment rate is projected India 3.6 4.7 4.9 to be at 8.3% owing to continuous creation of ASEAN jobs. Meanwhile, the inflation rate is forecast Singapore 0.6 1.0 1.3 to rise to 1.7%, as a result of higher energy Thailand 0.7 1.1 1.2 prices. The European Central Bank (ECB) will Indonesia 3.8 3.5 2.5 - 4.5 reduce the current monthly asset purchases of Philippines 2.9 4.9 3.7 EUR30 billion to EUR15 billion for the last Malaysia 3.7 1.5 - 2.5 2.5 - 3.5 quarter of 2018. The ECB plans to end this quantitative easing programme on 31 December 1 Estimate. 2 Forecast. 2018. Sources: International Monetary Fund and national authorities. In 2019, the economy is expected to grow is anticipated to be lower at 2.5% as a result at a slower pace of 1.9% (2018: 2%) due of monetary tightening by the Bank of England to weaker investment and easing external (BoE). Further, the BoE raised the policy rate demand. Furthermore, the economy is also by 25 basis points (bps) in August to 0.75%, facing increasing downside risks such as the the first increase since November 2017, and escalating global trade tensions, political shocks is expected to be reviewed in November 2018. in some member states and the uncertainties Despite easing inflation, private consumption caused by the Brexit negotiations especially growth is expected to be subdued owing to that relate to trade between the EU and the low consumer confidence. UK. The unemployment rate is projected to improve further to 8% (2018: 8.3%) following In 2019, the UK’s economic growth is forecast higher job creation. Meanwhile, inflation to record 1.5% (2018: 1.4%), sustained by is forecast to remain at 1.7% (2018: 1.7%). planned public investment to improve public The ECB is likely to maintain its interest rates housing and infrastructure until 2020. In on main refinancing operations, marginal addition, consumer spending is expected to lending facility and deposit facility at 0%, gradually recover as inflation eases. Inflation 0.25% and -0.40%, respectively, at least until is projected to record 2.2% (2018: 2.5%) as August 2019. the BoE is forecast to raise the policy rate at least once in 2019 to achieve its 2% inflation Germany, the largest economy in the euro target rate. Meanwhile, unemployment is area, grew at a slower pace of 1.9%, mainly forecast to be slightly higher at 4.2% (2018: due to lower public spending and exports. 4.1%). Government expenditure moderated 0.9%, owing to a six-month delay in forming a new UK’s scheduled departure from the EU on coalition government in March 2018 after the 29 March 2019 poses a risk to the economy federal elections. Exports softened 3.9%, dragged mainly due to the uncertainties surrounding the by lower demand, particularly from the US outcome of Brexit negotiations. Consequently, and China. The labour market continued to the UK’s trade with the EU member countries, improve with the unemployment rate at 3.6%, which accounts for 44% of total UK exports, led by employment growth in both industry is expected to be lower. and construction sectors. Inflation remained
Economic Outlook 2019 33
Chapter 2.indd 33 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
at 1.8% as higher services and energy prices inflation increased to 1.8% due to higher offset the easing food prices. energy prices as well as gradual tax hikes on tobacco products. For 2018, Germany’s GDP growth is forecast to be lower at 1.9%, on the back of weaker For 2018, France’s economy is projected to exports amid rising protectionism by the US. A grow moderately at 1.6% due to slower private fall in exports is expected as the US indicated consumption and exports. The anticipated further a major increase to its tariff on cars and strikes opposing the labour reforms are likely auto-parts imports. Business sentiment may to dampen expenditure. Similarly, business be dampened resulting in lower production in activity is expected to ease due to a fall in the manufacturing sector. Additionally, recent exports following the imposition of US tariffs on changes in China’s industrial policy following steel and aluminium. The ongoing institutional the Made in China 2025 initiative, may disrupt crisis in the euro area may dampen investors’ Germany’s automotive sector and weigh on its confidence, which will affect overall growth growth prospect. However, higher government for the year. Meanwhile, the unemployment spending in the second half of 2018 is expected rate is expected to improve to 8.8% following to support growth following the approval of employment gains, particularly in the services the digital infrastructure fund amounting to sector. Inflation is expected to increase to 1.9% EUR2.4 billion to improve internet connectivity, due to higher energy and food prices as well particularly in schools and rural areas, as as better salary increments. part of its digital strategy. The unemployment rate is anticipated to reduce further to 3.5% while Growth in 2019 is forecast to remain moderate at inflation is forecast to remain stable at 1.8%. 1.6% (2018: 1.6%) due to lower public spending and private consumption. High deficit will be In 2019, growth in Germany is projected to the main barrier of growth as the government remain at 1.9% (2018: 1.9%), supported by is committed to rein in public spending and improved domestic demand. Private consumption debt. This commitment is to avoid recurring is expected to expand following higher wages, excessive deficit procedures imposed by the particularly in the public sector. In April EU. Additionally, consumers are expected 2018, the German unions and public sector to save more following the monetary policy employers agreed to raise wages for about normalisation by the ECB, which may result 2.3 million workers by 7.5% over the next two in lower spending. The unemployment rate is years. Additionally, the government is expected expected to improve to 8.5% (2018: 8.8%) owing to significantly increase their spending on to job gains following the implementation of social security and defence expenditure. The the remaining plans under the labour market government also pledged to invest between reform. Inflation is expected to record 1.8% EUR10 billion to EUR12 billion in expanding the (2018: 1.9%) due to higher fuel prices. broadband network to make Germany a lead market for 5G application by 2025. The labour The net effect of the US tariffs, particularly market is anticipated to continue improving on steel and aluminium, will continue to with the unemployment rate at 3.4% (2018: adversely impact France’s exports. Moreover, 3.5%). Meanwhile, the inflation rate is projected the indication of more tariffs by the US, to remain stable at 1.8% (2018: 1.8%). including on imported cars and trucks, will further dampen France’s exports. Additionally, France’s economy registered a steady growth a faster-than-expected normalisation of interest of 2% for the first six months of 2018, largely rates may weigh on public and private balance on account of stronger domestic demand. sheets, which may lead to lower investments Household consumption on goods increased and growth prospects. Fiscal deficit is projected 0.9% following lower income taxes and higher to remain slightly below 3% of GDP, while job creation. Similarly, resilient corporate public debt will exceed 90% in the medium margins and profits led to a higher investment run, pointing to limited fiscal space to react of 3.2%. Labour market conditions improved to shocks under the EU excessive deficit with an unemployment rate of 9.2%. Meanwhile, procedures.
34 Economic Outlook 2019
Chapter 2.indd 34 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
Feature Article 2.1 International Tax Standards: Where Are We At?
Introduction
In the advent of a more globalised business activities and extensive cross-border transactions, it is important that the right to tax should be attributed to the jurisdictions where substantive economic activities are being carried out. This will close the gaps that allow profit to be artificially shifted to low or no tax jurisdictions. Therefore, jurisdictions are encouraged to adopt and comply with the internationally-agreed tax standards introduced by the international organisations such as the Organisation for Economic Co-operation and Development (OECD) and the United Nations (UN). These standards are also well reflected in the Double Taxation Avoidance Agreement (DTAA)1. Such commitments are needed to create a sound cross border taxation system and to strengthen cooperation among the tax authorities, especially in the aspect of monitoring and compliance.
Malaysia’s Commitment
As of September 2018, Malaysia has 72 currently enforced DTAA2, two limited agreements3 with the US and Argentina as well as one Tax Information Exchange Agreement (TIEA) with Bermuda. These agreements were entered between Malaysia and its treaty partners to maintain Malaysia’s taxing rights in accordance with the accepted tax standards including in the area of exchange of information.
Figure 2.1.1. Malaysia’s Bilateral Tax Treaties4 with Major Trading Partners
⦁ US ⦁ UK ⦁ China ⦁ Germany ⦁ Japan ⦁ Republic of Korea ⦁ India ⦁ Thailand
Malaysia ⦁ Singapore ⦁ Indonesia
⦁ Australia
4 Bilateral tax treaties, in the context of Malaysia, refer to DTAA, limited agreement and TIEA. Source: Ministry of Finance, Malaysia.
1 Double Taxation Avoidance Agreement (DTAA), also referred as tax treaty, is an agreement between two (or more) countries for the avoidance of double taxation. A tax treaty may be titled a Convention, Treaty or Agreement (OECD Glossary). 2 List of DTAA: Albania (1994), Australia (1980), Austria (1989), Bahrain (1999), Bangladesh (1983), Belgium (1973), Bosnia and Herzegovina (2007), Brunei Darussalam (2009), Canada (1976), Chile (2004), China (1985), Croatia (2002), Czech Republic (1996), Denmark (1970), Egypt (1997), Fiji (1995), Finland (1984), France (1975), Germany (1977), Hong Kong (2012), Hungary (1989), India (2012), Indonesia (1991), Iran (1992), Ireland (1998), Italy (1984), Japan (1999), Jordan (1994), Kazakhstan (2006), Kuwait (2003), Kyrgyz Republic (2000), Lao PDR (2010), Lebanon (2003), Luxembourg (2002), Malta (1995), Mauritius (1992), Mongolia (1995), Morocco (2001), Myanmar (1998), Namibia (1998), Netherlands (1988), New Zealand (1976), Norway (1970), Pakistan (1982), Papua New Guinea (1993), Poland (1977), Philippines (1982), Qatar (2008), Republic of Korea (1982), Romania (1982), Russia (USSR) (1987), San Marino (2009), Saudi Arabia (1993), Senegal (2010), Seychelles (2003), Singapore (2004), South Africa (2005), Spain (2006), Sri Lanka (1997), Sudan (1993), Sweden (2002), Syria (2007), Thailand (1982), Turkey (1994), Turkmenistan (2008), UAE (1995), UK (1996), Uzbekistan (1997), Venezuela (2006), Viet Nam (1995) and Zimbabwe (1994). 3 These limited agreements refer to an Agreement between the Government of Malaysia and the Government of the United States of America for Reciprocal Exemption with Respect to Taxes on Income of Shipping and Air Transport Enterprises between the Two Countries; and Agreement between the Government of Malaysia and the Government of the Argentina Republic for Reciprocal Exemption with Respect to Taxes on Income from the Operation of Ships and Aircraft in International Traffic.
Economic Outlook 2019 35
Chapter 2.indd 35 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
In 2013, OECD countries and G20 members worked together in developing Base Erosion and Profit Shifting (BEPS) Action Plan to close the gaps in international tax rules that allow multinational enterprises (MNEs) to artificially shift their profits to low or no-tax jurisdictions. BEPS Action Plan aims to create a set of consensus-based international tax rules to address base erosion and profit shifting. Such initiative is to protect jurisdictions tax bases while enhancing certainty and predictability to taxpayers, beyond securing revenues by realigning taxation with economic activities along the value creation.
With this latest development in the international taxation standard, Malaysia is committed to implement BEPS Action Plan, transparency and exchange of information (EOI) for tax purposes. Malaysia participates actively in various platforms on tax collaboration and policy-making. This includes being a signatory to four OECD-led multilateral instruments, namely Multilateral Competent Authorities Agreement on Common Reporting Standard (MCAA CRS); Multilateral Competent Authorities Agreement on Country-by-Country Reporting (MCAA CbC); Convention on Mutual Administrative Assistance in Tax Matters (CMAA); and Multilateral Instrument Framework to Modify Bilateral Tax Treaties.
Issues and Challenges
Malaysia officially became an OECD BEPS Associate by joining the BEPS Inclusive Framework in early 2017. This gives Malaysia an equal footing with the OECD countries and G20 members and provides a platform to be directly involved in the formulation of the international tax standards in addressing base erosion and profit shifting. As an Associate, Malaysia needs to implement the four Minimum Standards of the BEPS Action Plan immediately, while continuing to review the rest of the Action Plan under Malaysia’s domestic laws.
Figure 2.1.2. Malaysia’s Participation in the BEPS Action Plan
REINFORCED COMMON APPROACH MINIMUM ANALYTICAL INTERNATIONAL AND BEST STANDARD REPORT STANDARD PRACTICES
Action 7 Action 2 Action 5 Neutralise the effects of Action 1 Counter harmful tax Prevent the artificial hybrid mismatch Digital economy practices avoidance of Permanent arrangements Establishment status Action 6 Action 4 Prevent treaty Action 11 Limit interest Data analysis abuse deductibility
Action 8 – 10 Action 3 Action 13 Strengthen Action 15 Re-examine transfer Aligning transfer pricing Controlled Foreign Develop a multilateral pricing documentation outcomes with value instrument creation: Intangibles; Corporation (CFC) rules Risk and capital; and Action 14 Other high-risk Action 12 Dispute resolution transactions Mandatory disclosure rules
Source: Ministry of Finance, Malaysia. Note: Malaysia’s participation as of September 2018.
36 Economic Outlook 2019
Chapter 2.indd 36 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
Recognising the importance of transparency and EOI on tax matters, Malaysia agreed to implement the Automatic Exchange of Information (AEOI) through the signing of MCAA CRS5 and MCAA CbC6 in early 2016. This signified Malaysia’s full adherence to the best practices of EOI. In this context, the first exchange commenced in September 2018.
The implementation of AEOI will facilitate the tax authorities by enhancing their enforcement efficiency to increase tax compliance. The exchange practice will be done annually by using standard format and procedure through a secured electronic platform, the Common Transmission System developed by the OECD. This initiative is an improvement to the current EOI practice, which is done between the tax authorities through Exchange of Information on Request (EOIR), either under the DTAA or TIEA. Therefore, its effectiveness will depend on the response of the treaty partners.
As a developing country, the implementation of the BEPS Action Plan with a higher standard on the aspect of transparency and the EOI system posed significant challenges to Malaysia’s tax authorities as well as to the MNEs. Any shortfalls in the BEPS Action Plan implementation and compliance may result in exposure to unilateral action including trade sanctions by international organisations and trading partners. Therefore, Malaysia continues to take proactive measures to review its domestic laws and policies to ensure consistency in dealing with the cross-border transactions. The measures taken include ongoing consultations as well as engagements with the business communities and international organisations. It is also crucial for MNEs to enhance their knowledge with the latest tax developments in the respective jurisdictions to ensure their business sustainability, while adhering to the internationally-agreed tax standards.
Conclusion
The significant changes initiated by international organisations, such as the OECD and UN present an opportunity especially for developing countries to review and improve their tax systems. As a result, jurisdictions are now actively engaged in the development and implementation of new rules in critical aspects of international taxation to address tax evasion and avoidance, enhance transparency and promote effective EOI on tax matters. As a BEPS Associate and member to the EOI fora, Malaysia continues to review its international tax policy to support its sustainable economic development. Malaysia will also continue to provide competitive environment for business community, especially in attracting FDI, while assuming an active role in promoting international tax cooperation to prevent cross border tax evasion.
5 MCAA CRS requires Competent Authorities to obtain information from their financial institutions and automatically exchange with other jurisdictions on an annual basis. This obligation prescribes the financial account information to be exchanged, financial institutions required to report, different types of accounts and taxpayers covered as well as due diligence procedures to be followed by financial institutions. 6 MCAA CbC requires Competent Authorities to automatically exchange CbC Reports, prepared by the Reporting Entity of an MNE Group and filed on an annual basis with the tax authorities of the jurisdiction of tax residence of that entity with the tax authorities of all jurisdictions in which the MNE Group operates.
Economic Outlook 2019 37
Chapter 2.indd 37 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
Japan’s GDP grew at a slower pace of 1% Australia’s economy expanded markedly by 3.3% during the first half of 2018 due to weaker in the first half of 2018 mainly contributed by private consumption and private investment. stronger external demand. Exports recorded a Private consumption was significantly lower robust growth of 1.8% contributed by higher by 0.1%, partly due to the adverse weather production of iron ore, coal and liquefied natural conditions in the first few months of the gas (LNG). The unemployment rate improved year. The slow economic growth was further to 5.5% following growth in job creation for compounded by lacklustre performance in part-time work in retail and accommodation private investment spending, which contracted as well as food services industries. Inflation 7.2% following uncertainties in the global was recorded at 2.1% due to an increase in market and a deflationary outlook. Inflation alcohol and tobacco prices. increased to 1.1% owing to higher energy prices. The unemployment rate was lower at 2.5% Australia’s GDP is forecast to grow 3.2% in as a result of increased female and retirees’ 2018 mainly supported by favourable external participations in the workforce. demand. Exports are anticipated to rise 6.8% mainly contributed by higher demand for GDP growth is forecast to be at 1.1% in 2018, coal, iron ore and LNG, particularly from mainly due to slower private consumption and China, India and Japan. The unemployment private investment. Private consumption is rate is expected to improve to 5.3% supported anticipated to grow at a slower pace of 0.7% by the government’s assistance through the due to weakening consumer confidence in wage reduction of taxes for SME and provision growth. Private business fixed capital investment of targeted incentives to promote research, is expected to weaken 2%, particularly in the development and new technology. Inflation is manufacturing sector as manufacturers pull projected to register 2.2% following continuous back on machinery and equipment spending. increase in alcohol and tobacco prices largely Inflation is expected to register 1.2% due to due to scheduled increases in the tobacco higher fuel prices. The unemployment rate excise duty which was implemented since is projected to record an improvement of December 2013. 2.5%. In 2019, Australia’s GDP is estimated to record In 2019, Japan’s GDP growth is forecast to a marginal slowdown of 2.8% (2018: 3.2%) moderate to 0.9% (2018: 1.1%) primarily due driven by private spending and exports. Private to sluggish private consumption which is consumption is projected to grow 2.8% (2018: projected to grow 0.3% (2018: 0.7%). Private 2.4%) mainly contributed by personal income consumption is expected to reduce even tax rate cuts. Similarly, exports are expected to further following a planned sales tax increase increase 7.4% (2018: 6.8%) attributed to higher in October 2019. The Japanese government is demand from China, particularly in iron ore. The planning to use the proceeds from the tax hike unemployment rate is anticipated to be lower to reduce public debt which currently stands at 5% (2018: 5.3%) following job creation in the at more than twice the size of GDP and to healthcare and social assistance, construction also channel the revenue into education and as well as retail trade sectors. Inflation is healthcare activities. Inflation is expected to projected to register 2.3% (2018: 2.2%) due to record 1.3% (2018: 1.2%), lower than the Bank an increase in utility prices. of Japan’s target of 2%. The unemployment rate is anticipated to improve to 2.4% (2018: The downside risks to Australia’s economy 2.5%), supported by the creation of part-time persist. The escalating trade tensions between and temporary jobs for the Rugby World Cup the US and China would affect exports of iron Japan 2019 and Tokyo 2020 Olympic Games. ore to China. Furthermore, an anticipated Domestic risks to the economy include declining increase in interest rate to 1.75% in the third labour force due to ageing population, high quarter of 2019 may weigh on disposable fiscal deficit, prolonged deflationary pressure income stemming from monthly housing loans and weak corporate sentiment. commitment.
38 Economic Outlook 2019
Chapter 2.indd 38 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
The Republic of Korea’s GDP growth was ahead of expected tariff hikes. However, sustained at 2.9% in the first half of 2018 driven investment in fixed assets moderated 6%, by private consumption and exports. Private partly due to the suspension of infrastructure consumption rose 3.2%, partly contributed projects by state-owned enterprises to reduce by an increase in demand for non-durable debt. Inflation was recorded at 2% due to price goods. Likewise, exports increased 3.4% mainly hikes in food, tobacco and liquor. Meanwhile, attributed to higher demand for chemical the unemployment rate was sustained at 3.9%. products and semiconductors. Inflation was recorded at 1.4% due to lower prices of livestock Economic growth for China is projected to products, while the unemployment rate was moderate to 6.6% in 2018 due to softening sustained at 3.8%. external demand. Exports are expected to ease 6.6% as a result of reduced demand, particularly Korea’s economy is forecast to register a slower from the US following the imposition of tariffs growth of 2.8% in 2018 due to weak domestic on more than USD250 billion worth of China’s demand and exports. Private consumption is exports. In addition, the government’s regulatory expected to be lower as a result of weak labour tightening measures will also impact growth. market conditions, depreciation of the won Inflation is expected to increase to 2.2% on and high level of household debt. Investment account of higher food and energy prices. growth is expected to decelerate sharply by The unemployment rate is projected to be 1.1%, particularly in facilities investment due sustained at 3.9%. to the base effect from last year’s spike in the purchase of semiconductors manufacturing In 2019, growth is forecast to be at a slower equipment. Inflation is projected to be at 1.7%, pace of 6.2% (2018: 6.6%) mainly due to while the unemployment rate at 3.8%. lower domestic demand. Investment and consumption are expected to decrease following In 2019, GDP growth is projected to be marginally tightening of credit conditions. Among the lower by 2.6% (2018: 2.8%) due to weaker measures undertaken by the government to domestic demand. Investment, particularly in ease monetary policy is to continue pursuing construction, is anticipated to ease due to a fall financial deleveraging efforts. This measure in housing starts following the government’s is partly to curb shadow banking, targeted at efforts to curb overheating property prices. lending institutions, which are not regulated Inflation is expected to be recorded at 1.8% by the People’s Bank of China. The government (2018: 1.7%), while the unemployment rate is is also expected to further cut the reserve anticipated to remain at 3.8% (2018: 3.8%). requirement ratio to boost lending. Inflation Risks to the economy include subdued labour is expected to be at 2.4% (2018: 2.2%), while market condition, heightened financial market the unemployment rate is projected to remain volatility and falling asset prices. As part of the at 4% (2018: 4%). government’s effort to increase consumption, the minimum wage will be raised by 10.9% During the first half of 2018, India’s GDP in 2019, with a total increase of 55% by 2020, expanded 8%, mainly contributed by a solid to achieve income-led growth. The Fiscal growth in the manufacturing sector as well Management Plan for 2017-2021 will continue as a rebound in the construction sector. The to be the focus of the government over a five- manufacturing sector surged 11.2%, largely year term that shifts spending priorities from supported by a higher production of computer, economic activities to social welfare to promote electronic and optical products. Likewise, the inclusive growth. construction sector recorded a turnaround of 10%. Inflation, as indicated by the wholesale China’s GDP growth was sustained at 6.8% price index, was recorded at 3.5% due to a during the first half of 2018 driven by private decrease in the prices of pulses, high speed consumption and exports despite a slowdown diesel as well as eggs, meat and fish. The in investment. Private consumption increased Reserve Bank of India increased its key policy 6.7% contributed by higher online spending. repo rate twice in June and August 2018 by a Exports surged 12.8% mainly attributed to total of 50 bps to 6.50% to achieve a medium- advanced purchases by the US manufacturers term inflation target of 4%.
Economic Outlook 2019 39
Chapter 2.indd 39 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
Overall, India is projected to grow favourably higher spending on various goods, particularly at 7.3% in 2018 led by higher investment and food, clothes, shoes and transportation during private consumption. Investment is expected to Ramadan and Eid celebrations. Government accelerate as infrastructure projects continue expenditure surged 4%, particularly in organising to grow. Private consumption is expected to the Jakarta Palembang 2018 Asian Games in increase on account of higher consumer spending August. In addition, exports increased 6.9% on electronic goods such as smartphones and contributed by favourable global trade and televisions. In addition, exports are anticipated increased commodity prices. Inflation recorded to strengthen, reflecting stronger demand for 3.3% owing to lower food prices. cotton and sugar from China, as well as overall competitiveness gains on goods resulting Overall in 2018, Indonesia’s economy is projected from the implementation of the GST. On to grow between 5.1% and 5.5% supported by the contrary, the agriculture sector is expected higher investment and exports. Government to slow down due to the heavy monsoon expenditure is anticipated to increase following rains in August 2018 in Kerala, which higher investment in infrastructure, particularly flooded more than 56,000 hectares of agricultural for projects related to energy and transportation. land. Private consumption is expected to remain stable, supported by higher consumer confidence and India’s economic growth in 2019 is projected to increased non-cash transfers to low income sustain at 7.4% (2018: 7.3%) on the back of steady households. Inflation is forecast to record 3.5% domestic consumption and higher investment. due to measures undertaken to control food India’s economic risks are tilted to the downside, prices. The unemployment rate is expected to which include tax revenue shortfalls related to improve to 5.1% with the creation of jobs in continued GST implementation issues and delays the construction sector. in addressing the twin balance sheet problems. Additionally, uncertainties surrounding the Indonesia’s GDP is expected to grow between 5.4% implementation of structural reforms such as the and 5.8% in 2019 (2018: 5.1% – 5.5%) supported Insolvency and Bankruptcy Code and the new by higher investment and stronger exports. regulations on the increase in FDI limits in the Investment is projected to increase following insurance, real estate and defence subsectors various fiscal incentives for construction may weigh on business sentiment. Higher oil activities. In addition, the government’s social- prices and tighter financial conditions will also and business-centric structural reforms are hamper the pace of growth. expected to further support growth. Nevertheless, various challenges, including tax revenue The ASEAN economy recorded a steady shortfalls, larger fiscal financing due to higher growth in the first half of 2018 supported by interest rates, political uncertainty owing to the strong domestic demand and higher exports 2019 presidential elections, natural disasters following increased commodity prices. Overall, and maritime border disputes may weigh on ASEAN’s economy is expected to grow 5.2% the economy. Bank Indonesia is anticipated in 2018, supported by improved trade and to tighten its monetary policy to stabilise the solid expansion in investment, particularly rupiah. Inflation is expected to record between on public infrastructure. In 2019, the region’s 2.5% and 4.5% (2018: 3.5%). economic growth is anticipated to remain steady at 5.2% (2018: 5.2%) driven by private In the first half of 2018, Thailand’s economy consumption, investment and exports. The expanded 4.8% driven by the robust non- region’s economic growth momentum, however, agricultural sector. Growth in the non-agricultural is at risk of being undermined by increasing sector was mainly contributed by the hotels trade tensions, monetary policy tightening in and restaurants as well as the manufacturing advanced economies and higher fuel prices. subsectors which increased 11.1% and 3.5%, respectively. Inflation was recorded at 1% due Indonesia’s GDP grew 5.2% in the first half of 2018 to higher prices of electricity, fuel and water driven by strong domestic demand. Household supply, while the unemployment rate was consumption remained at 5% supported by lower at 1.1%.
40 Economic Outlook 2019
Chapter 2.indd 40 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
In 2018, Thailand’s economy is forecast to grow rate improved to 2.1% following job gains 4.4% buoyed by stronger consumption and in the construction and manufacturing exports. Private consumption is expected to be subsectors. higher attributed to favourable income conditions following strong labour market, particularly The economy is projected to grow between in the construction and services subsectors. 2.5% and 3.5% in 2018, supported by the Similarly, public consumption is anticipated goods and services producing sectors. The to expand ahead of the general elections goods producing sector is expected to grow scheduled in 2019. Exports are projected to contributed by the manufacturing subsector, be propelled by higher demand for automotive particularly transport engineering, precision and electronic goods, particularly from China, engineering products and electronics clusters. In the US and Japan. Additionally, growth is addition, growth is anticipated to be supported anticipated to be boosted by the robust tourism by the services producing sector, particularly subsector, led by new international routes the finance and insurance; wholesale and and an increase in short-haul international retail trade; and transportation and storage flights operated by low-cost airlines. Inflation subsectors. Inflation is expected to record 1% is estimated at 1.1% due to higher prices of mainly due to increases in food prices and food and non-alcoholic beverages while the housing rentals. The unemployment rate is unemployment rate is expected to improve anticipated to be lower at 2% supported by to 0.7%. job gains in the services producing sector, particularly the information and communications Thailand’s GDP is projected to moderate 4.2% subsector. in 2019 (2018: 4.4%) supported by a robust tourism subsector. The tourism subsector revenue Singapore’s GDP is expected to grow 2.7% in is expected to expand 10% to approximately 2019 (2018: 2.5% – 3.5%) supported by the USD103 billion. On the demand side, public services producing sector, particularly the finance investment is expected to contribute to and insurance; transportation and storage; growth following the government’s continuous information and communications; and the investment in infrastructure, particularly in wholesale and retail trade subsectors. Inflation the development of the Eastern Economic is anticipated to rise to 1.3% (2018: 1%) due to Corridor (EEC), with an estimated cost of USD43 higher food prices while the unemployment rate billion over a five-year period (2017 – 2021). is expected to record 1.9% (2018: 2%). Growth Inflation is anticipated to be recorded at 1.2% may be weighed down by sharp increase in (2018: 1.1%) while the unemployment rate labour cost and tighter immigration policy, is expected to remain at 0.7% (2018: 0.7%). hampering investment in some sectors. Political instability remains one of the major risks of the country as this may lead to capital The Philippines’ economy grew 6.3% in the first withdrawals. half of 2018, mainly supported by the services and industry sectors. The services sector rose In the first half of 2018, Singapore’s GDP 6.7%, spearheaded by the transport, storage expanded 4.2% driven by the goods and and communications as well as the financial services producing sectors. Growth in the goods intermediation subsectors, which grew 6.4% producing sector was mainly contributed by and 8.3%, respectively. Growth in the industry the manufacturing subsector which increased sector was higher at 7%, backed by the 10.5% following higher output from the construction as well as the electricity, gas electronics, biomedical manufacturing and and water supply subsectors, which grew transport engineering clusters. The services significantly by 11.5% and 5%, respectively. producing sector rose 3.4%, particularly Inflation recorded 4.3% owing to higher prices of contributed by an increase in the finance and rice, perishable goods and liquefied petroleum insurance; information and communications; gas. The unemployment rate improved to 5.4% and the wholesale and retail trade subsectors. following job creation in the construction Meanwhile, inflation recorded 0.3% owing to subsector, partly supported by the Build, Build, lower non-cooked food prices. The unemployment Build programme.
Economic Outlook 2019 41
Chapter 2.indd 41 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
In 2018, the Philippines’ economy is projected to Growth in the Philippines is projected to improve grow 6.7% underpinned by strong consumption 6.8% in 2019 (2018: 6.7%) as government and investment. Private consumption is consumption and investment are anticipated expected to improve following a higher ceiling to increase despite rising global uncertainties. of tax exemption under the Tax Reform for Government consumption is expected to rise Acceleration and Inclusion Act, effective 1 following higher expenditure for the general January 2018. Additionally, public spending is election in May 2019. Investment is projected to anticipated to expand as the government plans expand following ongoing construction activities. to spend approximately USD150 billion on Inflation is projected at 3.7% (2018: 4.9%) due infrastructure projects from 2017 to 2022, in to lower food prices, particularly rice. However, line with its Build, Build, Build programme. quantitative restriction involving tariff and The unemployment rate is expected to improve deregulation of rice imports under the proposed further to 5.5%. Meanwhile, inflation is forecast reform in the rice industry may be a downside to register 4.9% following higher utility, tobacco risk to the economy. The unemployment rate and oil prices. is anticipated to remain at 5.5% (2018: 5.5%).
Information Box 2.1 ASEAN Economic Community Blueprint 2025: Issues, Challenges and Opportunities
Introduction
In 2007, the ASEAN Leaders adopted the ASEAN Economic Community (AEC) Blueprint 2015 to establish the AEC 2015 to promote single market and production base, competitive economic region, equitable economic development and integration into the global economy. AEC 2015 was achieved, among others by the elimination of tariffs as well as reduction of non-tariff barriers and administrative costs to facilitate the free flow of goods, services, capital and skilled workers among ASEAN Member States (AMS). The AEC offers economies of scale to attract foreign investors into the region and enable more manufacturers to participate in a competitive and integrated global value chain.
The AEC Blueprint 2025 charts the region’s economic integration landscape over the next decade while retaining the key vision of the AEC 2015. The AEC Blueprint 2025 emphasises the use of science and technology, development of human resources and enhancement of good governance as well as promotes connectivity. The Blueprints have outlined key characteristics and elements as in Table 2.1.1.
Table 2.1.1. Key Characteristics and Elements of AEC Blueprint 2015 and AEC Blueprint 2025
AEC Blueprint 2015 AEC Blueprint 2025
I. Single Market and Production Base I. A Highly Integrated and Cohesive Economy . Free flow of goods . Trade in goods . Free flow of services . Trade in services . Free flow of investment . Investment environment . Free flow of capital . Financial integration, inclusion and . Free flow of skilled labour stability . Priority Integration Sectors . Facilitating the movement of skilled labour and business visitors . Food, agriculture and forestry . Enhancing participation in the global value chain
42 Economic Outlook 2019
Chapter 2.indd 42 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
AEC Blueprint 2015 AEC Blueprint 2025
II. Competitive Economic Region II. A Competitive, Innovative and Dynamic . Competition policy ASEAN . Consumer protection . Effective competition policy . Intellectual property rights . Consumer protection . Infrastructure development (includes . Strengthening intellectual property rights transportation and ICT) cooperation . Taxation . Infrastructure development (includes transportation and ICT) . E-Commerce . Taxation cooperation . Sustainable economic development
III. Equitable Economic Development III. Enhanced Connectivity and Sectoral . SME development Cooperation . Initiative for ASEAN Integration (IAI) . Transport . ICT . E-Commerce . Energy . Food, agriculture, forestry . Tourism, healthcare, minerals as well as science and technology
IV. Integration into the Global Economy IV. A Resilient, Inclusive, People-Oriented and . The coherent approach towards external People-Centred ASEAN economic relations . Strengthening the role of micro, small and . Enhanced participation in global supply medium enterprises (MSMEs) networks . Narrowing the development gap (includes IAI) . Strengthening the role of the private sector . Public private partnership . The contribution of stakeholders in real estate and infrastructure
V. A Global ASEAN . Covering Free Trade Agreements between ASEAN and its trading partners (ASEAN+1 FTAs) and Regional Comprehensive Economic Partnership (RCEP)
Source: Dr. Sanchita Basu Das. (2016). Huge challenges await AEC 2025.
In order to complement the AEC Blueprint 2025, the AEC 2025 Consolidated Strategic Action Plan (CSAP) 2016 – 2025 was established as a single reference document for stakeholders on the implementation of the Blueprint. The AEC CSAP comprises key actions from all the 23 AEC Sectoral Work Plans, among others, the Strategic Action Plan 2016 - 2025 for Financial Integration, ASEAN Taxation Cooperation and the AEC 2025 Trade Facilitation Strategic Action Plan.
Economic Outlook 2019 43
Chapter 2.indd 43 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
Realising AEC 2025 through Financial Sector Integration
Regional economic integration is imperative for robust growth in an evolving domestic and external environment. The financial sector plays a crucial role in ensuring sustainable and inclusive economic growth. Hence, the Strategic Action Plan 2016 – 2025 for Financial Integration was developed with three strategic objectives, namely financial integration, inclusion and stability; and three cross-cutting areas which are capital account liberalisation, payment and settlement systems as well as capacity building.
Financial integration plays a significant role in accelerating economic growth in ASEAN through the creation of common financial infrastructure to facilitate intra-ASEAN trade and investment. In this context, AMS needs to further collaborate by increasing the role of ASEAN indigenous banks as well as having more integrated insurance sector and connected capital markets. The integration will be supported by a financial market infrastructure that is more connected, cost- efficient and safe.
Financial inclusion accelerates financial integration and supports inclusive growth by targeting poor and unbanked households as well as MSMEs to have greater access to finance. Increased awareness and access to financial products and services such as insurance, savings and credit facilities enable households to invest in education and skills as well as improve their health conditions. In addition, MSMEs are able to shift from informal to formal financial services and further expand their businesses.
Financial stability can be sustained through the continuous strengthening of regional infrastructure to cushion against external economic volatilities. Among the measures for financial stability is to intensify the existing process of macroeconomics and financial surveillance by identifying financial system risks and vulnerabilities. In addition, prudential regulations should be more cohesive and aimed at achieving greater consistency with international best practices and regulatory standards.
Issues and Challenges
Given the current global challenges, as ASEAN moves towards deeper and more cohesive economic integration, the interdependence of financial market intensifies the risk of contagion. Hence, AMS must undertake relevant measures to complement the liberalisation and integration of their financial markets. These measures include establishing necessary capacity building as well as pursuing sound and consistent macroeconomic policies to minimise the effects of contagion risk. Other factors that may weaken ASEAN economic integration include global trade tensions, a slowdown in China’s economic growth as well as interest rates normalisation.
Trade protectionism through border measures to protect the domestic market of an economy may hamper regional economic integration and disrupt trade. For example, the imposition of 25% tariff on steel and 10% tariff on aluminium items by the US effective 23 March 2018 has caused trade tensions between the US and its trading partners. While the US remains a relatively small but growing market for ASEAN’s steel and aluminium exports, these inward-looking policies will still pose a risk to regional growth and integration in the long run.
China remains the largest trading partner for the last nine years with USD514.8 billion of trade volume in 2017. The escalating trade tension between the US and China is anticipated to pose a greater impact on ASEAN’s trade and economy. This is due to ASEAN’s position in the integrated global value chain.
44 Economic Outlook 2019
Chapter 2.indd 44 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
Major central banks in the advanced economies are gradually normalising monetary policy to achieve stronger economic growth, favourable labour market conditions and targeted inflation. For instance, the US Federal Reserve raised its federal fund rates several times in 2018, and the increase is anticipated to continue until its 2% inflation target is achieved. The monetary policy adjustments by advanced economies may lead to capital flow reversals and currency movements following tightening global financial conditions. Consequently, these adjustments will cause adverse repercussions on the AMS central banks’ balance sheets.
Opportunities
Notwithstanding the challenges faced by ASEAN coupled with varying political systems and levels of economic development of AMS, the AEC presents immense opportunities to the region. In this regard, the AEC Blueprint 2025 guides ASEAN’s transformation into a high performing trading region and an attractive investment destination focusing on financial sector integration benefits as follows: (i) free flow of trade in services, which allows ASEAN suppliers to provide a wider range of financial services to a broader consumer base and establish companies across national borders within the region, subject to domestic regulations; (ii) freer flow of capital, which allows economic agents in any member state to invest in or borrow funds more freely, subject to prudential regulations; (iii) integrated capital markets in ASEAN, which provides investors greater access to capital markets with lower transaction costs; and (iv) harmonised ASEAN payments and settlement systems, which allow businesses and individuals to make or receive electronic payments with greater convenience and security.
The regional economic integration has benefited ASEAN. The benefits are reflected by ASEAN’s stable economic growth and improving trade in goods and services as well as FDI inward flows to the region as in Table 2.1.2.
Table 2.1.2. Selected Key Macroeconomic Indicators of ASEAN 2010 – 2017
Indicators 2010 2011 2012 2013 2014 2015 2016 2017 Real GDP Growth (%) 7.5 5.0 6.2 5.2 4.7 4.8 4.8 5.3
Total FDI Inward Flows 108 88 117 122 130 122 123 137 (USD billion) Intra-ASEAN (%) 15.1 18.0 20.1 15.2 17.1 17.1 21.0 19.4 Extra-ASEAN (%) 84.9 82.0 79.9 84.8 82.9 82.9 79.0 80.6 Total Trade in Goods (USD billion) 2,001 2,398 2,480 2,533 2,535 2,273 2,237 2,575 Intra-ASEAN (%) 25.1 24.3 24.4 24.4 24.0 23.2 23.1 22.9 Extra-ASEAN (%) 74.9 75.7 75.6 75.6 76.0 76.8 76.9 77.1 Total Trade in Services 440 519 569 623 658 651 663 703 (USD billion) Total Exports (USD billion) 214 254 279 307 322 324 337 361 Total Imports (USD billion) 226 265 289 316 336 327 325 343 Source: ASEAN Secretariat Database accessed September 2018.
Economic Outlook 2019 45
Chapter 2.indd 45 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
Conclusion
ASEAN economic integration can be realised through concerted efforts of AMS. As such, AMS needs to increase awareness of stakeholders on AEC measures, strengthen the domestic industries to enable them to participate in the global value chain, place importance on improving regional infrastructure and allocate additional financial and human resources towards regional integration. Therefore, it is crucial for the stakeholders to strengthen their collaboration to overcome the challenges towards making AEC 2025 a success.
Conclusion be subjected to tariff rates increase. In addition, deterioration in global financial conditions Global economy is expected to grow moderately due to rising corporate debt will weigh on mainly supported by strong domestic demand investment. Emerging market imbalances in the EMDEs, in particular, China, India, due to weakening currency as well as dollar- Indonesia and the Philippines. On the contrary, denominated debt, such as in Turkey and growth in the advanced economies is projected Argentina, may cause a downward trend in to register a slowdown due to lower private growth. Furthermore, advanced economies’ consumption following normalisation of interest reliance on highly supportive macroeconomic rates and waning fiscal stimulus. Risks are policies is projected to hinder sustainable global skewed to the downside and growth remains growth. For example, the fiscal stimulus in the vulnerable to changes in trade, fiscal and US will lead to faster-than-expected interest monetary policies, global financial conditions rates increases, which may shrink capital and geopolitical stability. Trade tensions are flows to developing Asia. In addition, expected to escalate in anticipation of additional prolonged geopolitical concerns in the Middle protectionist and retaliatory measures posed East and the possibility of more countries by the US and its key trading partners, which exiting the euro area are among the persistent may include expanding list of items that will risks.
46 Economic Outlook 2019
Chapter 2.indd 46 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
References
AMRO. (2018). China Watch – Pressures are Building. Bureau of Labor Statistics, Washington: US Retrieved from https://insights.abnamro. Department of Labor. (2018). Press Release, nl/en/2018/08/china-watch-pressures-are- 5 October 2018: The Employment Situation – building/ September 2018. Retrieved from http://www. bls.gov ASEAN Secretariat. (2018). Retrieved from https:// data.aseanstats.org/sits-by-reporters-and- Cabinet Office, Government of Japan. (2018). services Quarterly Estimates of GDP. Retrieved from http://www.esri.cao.go.jp/en/sna/sokuhou/ Australia Bureau of Statistics. (2018). Australian sokuhou_top.html National Accounts: National Income, Expenditure and Product (5206.0). Retrieved from http:// Central Bank of Philippines. (2018). Inflation. www.abs.gov.au/ausstats/[email protected]/ Retrieved from http://www.bsp.gov.ph/ mf/5206.0?opendocument&ref=HPKI publications/regular_inflation.asp
Australia Bureau of Statistics. (2018). Consumer Deloitte. (2018). South Korea: Economy Showing Price Index, Australia (6401.0). Retrieved from Signs of Resilience. Retrieved from https:// http://www.abs.gov.au/AUSSTATS/[email protected]/ www2.deloitte.com/insights/us/en/economy/ mf/6401.0?opendocument&ref=HPKI asia-pacific/south-korea-economic-outlook. html Australia Bureau of Statistics. (2018). Labour Force, Australia (6202.0). Retrieved from Department of Statistic, Singapore. (2018). http://www.abs.gov.au/ausstats/[email protected]/ Data and News. Retrieved from https://www. mf/6202.0?opendocument&ref=HPKI singstat.gov.sg/
Bank Indonesia. (2018). Inflation Report. Retrieved Department of Statistic, Singapore, Consumer from https://www.bi.go.id/en/moneter/inflasi/ Price Index. (2018). CPI for August 2018. data/Default.aspx Retrieved from https://www.singstat.gov.sg/-/ Bank of England. (2018). Monetary Policy Summary media/files/publications/economy/cpiaug18. and minutes of the Monetary Policy Committee pdf meeting ending on 12 September 2018. Retrieved Destatis (Germany Federal Statistical Office). from https://www.bankofengland.co.uk/-/ (2018). Fact and figures. Retrieved from https:// media/boe/files/monetary-policy-summary- www.destatis.de/EN/Homepage.html and-minutes/2018/september-2018.pdf Dr. Sanchita Basu Das. (2016). Huge challenges Bank of Japan. (2018). Outlook for Economic Activity await AEC 2025. Retrieved from https:// and Prices. Retrieved from https://www.boj. www.iseas.edu.sg/images/pdf/ISEAS_ or.jp/en/mopo/outlook/gor1807b.pdf Perspective_2016_48.pdf Bank of Korea. (2018). Real Gross Domestic Product: Economist Intelligence Unit. (2018). Germany. 2nd Quarter of 2018 (Advance Estimate). Retrieved from http://viewswire.eiu.com/ Retrieved from http://www.bok.or.kr/eng/bbs/ index.asp?layout=VWCountryVW3®ion_ E0000634/view. do?nttId=10046199&menu id=&country_id=1360000136 No=400069&pageIndex=2
Bank of Thailand. (2018). Inflation. Retrieved from European Central Bank (ECB). (2018). Monetary https://www2.bot.or.th/statistics/ ReportPage. Policy Decisions. Retrieved from https://www. aspx?reportID=409&language=eng ecb.europa.eu/press/pr/date/2018/html/ecb. mp180913.en.html Bureau of Economic Analysis, Washington: US Department of Commerce. (2018). News European Commission. (2018). Eurostat – Your key Release, 27 September 2018: Gross Domestic to European Statistics. Retrieved from https:// Product: Second Quarter 2018 (Third Estimates). ec.europa.eu/eurostat/news/news-releases Retrieved from https://www.bea.gov
Economic Outlook 2019 47
Chapter 2.indd 47 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
Federal Open Market Committee, Washington: Ministry of Statistics and Programme Board of Governors of the Federal Reserve Implementation, Central Statistics Office. System. (2018). Press Release 26 September (2018). Press Release – Quick Estimates of Index 2018, Federal Reserves (September 2018). of Industrial Production and Use-Based Index. Retrieved from https://www.federalreserve. Retrieved from http://www.mospi.gov.in/sites/ gov default/files/press_release/iip_PR_12mar18. pdf Focus Economics. (2018). Germany. Retrieved from https://www.focus-economics.com/ Ministry of Trade and Industry Singapore GDP. countries/germany (2018). MTI 2018 GDP Growth Forecast. Retrieved from https://www.mti.gov.sg/NewsRoom/ Germany Federal Ministry of Finance. (2018). Pages/MTI-Maintains-2018-GDP-Growth- Monthly reports. Retrieved from https://www. Forecast-at-2.5-to-3.5-Per-Cent.aspx bundesfinanzministerium.de/Web/EN/Home/ home.html; jsessionid= 5CA8B30881FF61974 MUFG Bank Ltd. (2018). The Outlook for the 5EA007E47F4DA19 Japanese Economy. Retrieved from http://www. bk.mufg.jp/report/ecojap2018e/outlook_ HM Treasury. (2018). Spring Statement 2018: what japan20180531e.pdf you need to know. Retrieved from https://www. gov.uk/government/news/spring-statement- National Bureau of Statistics. (2018). Preliminary 2018-what-you-need-to-know Accounting Results of GDP for the First Quarter of 2018. Retrieved from http://www.stats. IMF Staff Country Report. (2017). Indonesia: gov.cn/english/pressrelease/201804/ 2017 Article IV Consultation-Press Release; Staff t20180419_1595000.html Report. Retrieved from https://www.imf.org/ media/Files/Publications/CR/2018/cr1832.ashx National Institute of Statistics and Economic Studies (INSEE). (2018). Statistics. IMF Staff Country Report. (2018). Singapore: Retrieved from https://www.insee.fr/en/ 2018 Article IV Consultation-Press Release; Staff statistiques?theme=27 Report. Retrieved from https://www.imf.org/en/ Publications/CR/Issues/2018/07/27/Singapore- Office for Budget Responsibility. (2018). Office 2018-Article-IV-Consultation-Press-Release- for Budget Responsibility: Economic and fiscal Staff-Report-and-Statement-by-the-46131 outlook. Retrieved from https://cdn.obr.uk/ EFO-MaRch_2018.pdf International Monetary Fund. (2018). World Economic Outlook, October 2018: Challenges to Office for National Statistics. (2018). GDP Steady Growth. Retrieved from https://www.imf. quarterly national accounts, UK: April to June org/en/Publications/WEO/Issues/2018/09/24/ 2018. Retrieved from https://www.ons.gov.uk/ world-economic-outlook-october-2018 economy/grossdomesticproductgdp/bulletins/ quarterlynationalaccounts/apriltojune2018 Ministry of Commerce and Industry, Office of the Economic Adviser. (2018). Wholesale Price Office of the National Economic and Social Index Press Release Archive. Retrieved from Development Board, Philippines. (2018). GDP http://eaindustry.nic.in/wpi_press_release_ & Components. Retrieved from http://www. archive.asp nesdb.go.th/nesdb_en/more_news.php
Ministry of Statistics and Programme Organisation for Economic Co-operation and Implementation. (2018). Press Note on Estimates Development. (2018). Developments in Individual of Gross Domestic Product for the First Quarter OECD and Selected Non-Member Countries - (April – June) 2018-2019. Retrieved from Korea. Retrieved from http://www.oecd.org/ http://www.mospi.gov.in/sites/default/files/ eco/outlook/economic-forecast-summary- press_release/PR_GDP_Q1_31aug18.pdf korea-oecd-economic-outlook.pdf
48 Economic Outlook 2019
Chapter 2.indd 48 10/25/18 8:13 PM CHAPTER 2 GLOBAL ECONOMIC OUTLOOK
Organisation for Economic Co-operation and The Star (2018). Thai central bank raises GDP Development. (2018). OECD Economic Outlook growth forecast to 4.4%. Retrieved from https:// and Interim Economic Outlook, 20 September www.thestar.com.my/business/business- 2018: High Uncertainty Weighing On Global news/2018/06/21/thai-central-bank-raises- Growth. Retrieved from http://www.oecd. gdp-growth-forecast-to-44/ org/eco/outlook/High-uncertainty-weighing- on-global-growth-OECD-interim-economic- Trading Economics. (2018). Indicators. Retrieved outlook-handout-20-September-2018.pdf from https://tradingeconomics.com/germany/ indicators Organisation for Economic Co-operation and Development. (2018). United Kingdom - Economic Trading Economics. (2018). Thailand GDP Growth forecast summary (May 2018). Retrieved from Rate. Retrieved from https://tradingeconomics. http://www.oecd.org/eco/outlook/united- com/Thailand/gdp-growth kingdom-economic-forecast-summary.htm World Bank. (2018). Press Release, 5 June 2018: Philippines Statistics Authority. (2018). PSA Global Economy to Expand by 3.1 percent in Calendar of Press Release for 2018. Retrieved 2018, Slower Growth Seen Ahead. Retrieved from http://psa.gov.ph/content/psa-calendar- from http://www.worldbank.org/en/news/ press-release-2018 press release/2018/06/05/global-economy- to-expand-by-3-1-percent-in-2018-slower- Reserve Bank of Australia. (2018). Statement growth-seen-ahead on Monetary Policy. Retrieved from https:// www.rba.gov.au/publications/smp/2018/aug/ World Bank. (2018). Global Economic Prospects, economic-outlook.html June 2018: The Turning of the Tide?. Retrieved from file:///C:/Users/ITDuser/ Reserve Bank of India. (2018). Minutes of the Downloads/9781464812576.pdf Monetary Policy Committee Meeting June 4-6, 2018 [Under Section 45ZL of the Reserve Bank World Bank. (2018). Philippines Growth to Remain of India Act, 1934]. Retrieved from https:// Strong Despite Global Uncertainty. Retrieved rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/ from https://www.worldbank.org/en/news/ R3320556E3589C58C497 8B8E24686472796DD. press-release/2018/07/13/philippines-growth- PDF to-remain-strong-despite-global-uncertainty
Statistics Indonesia. (2018). Data and News. World Trade Organisation. (2018). Trade Statistics Retrieved from https://www.bps.go.id/ and Outlook Press Release, 27 September 2018: WTO Downgrades Outlook for Global Trade As Statistics Japan. (2018). Labour Force Survey: Risks Accumulate. Retrieved from https://www. Statistical Figures. Retrieved from http://www. wto.org/english/news_e/pres18_e/pr822_e.htm stat.go.jp/english/data/roudou/lngindex.html
Economic Outlook 2019 49
Chapter 2.indd 49 10/25/18 8:13 PM Chapter 2.indd 50 10/25/18 8:13 PM MACROECONOMIC 3 OUTLOOK
• Overview • Sectoral Feature Article 3.1 – Disruptive Technology: Opportunities and Challenges • Domestic Demand • External Sector Feature Article 3.2 – Impact of Trade War on the Malaysian Economy • Prices Feature Article 3.3 – Determinants of Inflation in Malaysia • Labour Market • Conclusion
Chapter 3.indd 51 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
52 Economic Outlook 2019
Chapter 3.indd 52 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK 3 MACROECONOMIC OUTLOOK Overview in the production of crude palm oil (CPO) and liquefied natural gas (LNG). The construction rospects for the Malaysian economy remain sector is anticipated to expand, albeit at a Pfavourable largely supported by sound moderate pace largely due to near completion domestic demand. In addition, steady global of several mega projects as well as property growth and trade, continuous expansion in overhang, particularly in the non-residential E&E as well as higher oil prices are expected subsector. In 2019, the sector is expected to to support export growth. Consequently, real improve marginally following an increase in GDP is expected to expand 4.8% in 2018 after new planned supply in the affordable homes recording a growth rate of 4.9% during the first and industrial segments. half of the year. In 2019, growth is forecast to increase further to 4.9%. Despite the resilient The external sector is expected to remain economic performance, risks to growth are resilient in 2018 supported by steady global tilted downside emanating from heightening economic and trade performances. Nevertheless, uncertainties in the global environment, in 2019, exports are anticipated to expand including rising trade conflict, volatility in moderately in line with slower global trade global financial markets and oil prices as well activities. Meanwhile, current account surplus as geopolitical tension. is estimated to narrow with widening deficits in the services and income accounts. Private sector expenditure will remain as the key driver of growth, cushioning the effects of lower public sector spending in 2018 and 2019. Sectoral Stable employment and wage growth, conducive financing condition and benign inflation will Services Sector continue to support private consumption which accounts for about 55% of GDP. Meanwhile, Services sector grew 6.5% (y-o-y) during the first private investment is anticipated to expand half of 2018 led by the wholesale and retail with capital outlays mainly channelled into trade; finance and insurance; information and the services and manufacturing sectors. On communication; as well as food & beverages the contrary, public expenditure is projected to record a slower growth following initiatives Table 3.1. GDP by Sector taken by the Government to review and 2017 – 2019 reprioritise expenditure without jeopardising (At constant 2010 prices) the economic growth as well as lower capital spending by public corporations. Share Change (%) (%) 1 1 2 On the supply side, growth is expected to 2018 2017 2018 2019 be driven by the services and manufacturing Services 55.3 6.2 6.3 5.9 sectors. The services sector is projected to Manufacturing 23.0 6.0 4.9 4.7 remain firm supported by consumption and Mining 8.0 1.0 -0.6 0.7 domestic tourism activities as well as strong Agriculture 7.8 7.2 -0.2 3.1 demand for ICT, transport and finance. The Construction 4.5 6.7 4.5 4.7 manufacturing sector is estimated to record a GDP 100.0 5.9 4.8 4.9 steady growth in tandem with developments in the global semiconductor industry. Though the 1 Estimate. growth in agriculture and mining sectors are 2 Forecast. Note: Total may not add up due to rounding and exclusion of import duties expected to decline marginally in 2018, it is component. projected to rebound in 2019 following an uptick Source: Department of Statistics and Ministry of Finance, Malaysia.
Economic Outlook 2019 53
Chapter 3.indd 53 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
and accommodation subsectors. Accounting The growth of the segment is mainly supported for about 55% of GDP, the growth in the by higher passenger movement driven by services sector is projected to grow 6.3% and festive seasons, school holidays and general 5.9% in 2018 and 2019, respectively, reflecting election. In addition, the increase will be expansion across all subsectors as the sector contributed by additional capacity of Electric has diversified over the years. Train Service (ETS) with the procurement of new train units. Meanwhile, the air transport The wholesale and retail trade subsector is segment is expected to grow mainly attributed expected to remain resilient at 7% and 6.3% in to introduction of new routes and aircraft; 2018 and 2019, respectively. This is in line with competitive fares; and expedited visa approvals. higher consumption activities, especially with However, overall international tourist arrivals the 3-months zero-rated Goods and Services Tax and receipts is expected to moderate following (GST) and upward revision of minimum wage strong competition within the region and high rate. In addition, growth of the subsector will congestion at the entrance gateway in Johor be supported by higher sales via e-commerce Bahru. The water transport segment is forecast platforms. As of September 2018, about 3,800 to expand supported by port-related activities SMEs joined the Digital Free Trade Zone (DFTZ) in line with steady trade performance as well platform. as improvement and expansion of several major ports. Nevertheless, the segment faces issues In 2018, the finance and insurance subsector of realignment of global shipping alliances is expected to increase 5.5% supported by primarily due to cost competitiveness. insurance activities following higher premium income amid lower claims. However, the finance The food & beverages and accommodation segment is projected to grow at a slower pace subsector is expected to record a strong growth on account of lower fee-based income. In of 8.1% in 2018 mainly supported by domestic 2019, the subsector is anticipated to expand tourism activities and increased patronage 5.3% underpinned by sustained bank lending of restaurants. The subsector is projected to backed by steady economic activities. expand 6.9% in 2019 in tandem with aggressive
The growth in the information and communication subsector is projected to increase 8.1% in 2018 and 8% in 2019 mainly due to higher usage Table 3.2. Services Sector Performance of broadband services and smart applications. 2017 – 2019 Furthermore, increased digitalisation activities (At constant 2010 prices) in the economy are expected to bode well Share Change for the subsector. The implementation of (%) (%) the Mandatory Standard on Access Pricing 2018¹ 2017 2018¹ 2019² is expected to reduce broadband prices and Wholesale and retail trade improve service quality, benefitting consumers 15.4 7.1 7.0 6.3 and boosting growth of the subsector. Finance and insurance 6.8 4.6 5.5 5.3 Information and 6.2 8.4 8.1 8.0 communication The real estate and business services subsector Real estate and business is expected to increase 7.3% in 2018 driven by 4.6 7.4 7.3 6.6 services sustained demand for professional services, Transport and storage 3.6 6.2 5.8 5.5 particularly legal and accounting. However, the real estate segment is expected to moderate Food & beverages and 3.0 7.4 8.1 6.9 accommodation in line with slower growth in the property market. In 2019, the subsector is forecast to Utilities 2.5 2.9 4.7 4.6 increase 6.6% mainly supported by business Other services 4.4 5.1 5.3 5.1 services segment following greater efficiency Government services 8.7 4.9 4.4 4.2 with expansion in ICT-related services. Services 55.3 6.2 6.3 5.9
The transport and storage subsector is anticipated ¹ Estimate. to expand 5.8% in 2018 before recording 5.5% ² Forecast. Note: Total may not add up due to rounding. in 2019 led by the land transport segment. Source: Department of Statistics and Ministry of Finance, Malaysia.
54 Economic Outlook 2019
Chapter 3.indd 54 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Figure 3.1. Selected Indicators for the Services Sector
Tourist Arrivals and Receipts Distributive Trade Volume Index (2010 = 100) RM billion Million Index 120 42 200 Tourist receipts Distributive trade Retail trade 100 Tourist arrivals (right scale) 35 180 Wholesale trade Motor vehicle 80 28 160 60 21 140 40 14
120 20 7
0 0 100 2014 2015 2016 2017 2018 1 JAJOJAJOJAJ 2016 2017 2018
Container Handling and Ship Calls Information and Communication Index Million Units Index (2010 = 100) 30 60,000 250 TEUs Information and communication 25 Ship calls (right scale) 50,000 Computer and information service 220 Telecommunications Publishing and broadcasting activities 20 40,000 190 15 30,000 160 10 20,000
130 5 10,000
0 0 100 2014 2015 2016 2017 2018 1 Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1 2014 2015 2016 2017 2018
Air Passengers and Cargo Electricity Consumption Million tonne Million Million kilowatt-hours 1.5 125 18,000 Air cargo Domestic and public lighting Passenger traf c (right scale) 15,000 Industrial, commercial and mining 1.2 100
12,000 0.9 75 9,000 0.6 50 6,000
0.3 25 3,000
0.0 0 0 2014 2015 2016 2017 2018 1 JAJOJAJOJAJ 2016 2017 2018 1 Estimate. Source: Department of Statistics, Malaysia; Malaysia Tourism Promotion Board; seven major ports (Bintulu, Johor, Klang, Kuantan, Kuching, Pulau Pinang and Tanjung Pelepas); Malaysia Airports Holdings Berhad and Senai International Airport.
Economic Outlook 2019 55
Chapter 3.indd 55 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Feature Article 3.1
Disruptive Technology: Opportunities and Challenges
Introduction
Technological innovations have advanced rapidly transforming the world at an incredible speed, enabling businesses to be more prominent and efficient. New technologies have displaced many traditional machines and equipment such as typewriters, floppy disks, dot matrix printers and fixed line telephones. Disruptive technology redefines boundaries through improved connectivity and replacing traditional market operations.
Digitalisation is both an enabler and a disruptor of businesses (IMF, 2018). Digital technology such as Big Data analytics (BDA), artificial intelligence (AI), Internet of Things (IoT) and cloud computing assists businesses and individuals in enhancing their capabilities. Disruptive technology will change the way society live, work and play. Adopters of these technologies are transforming their industries, by providing more flexible, precise, higher quality and customised goods and services. As a result, many products including driverless cars, buses and trains; autonomous robots; drones; smart cities and streaming virtual reality are innovations in the market.
Figure 3.1.1. Advanced Digital Technology
Autonomous Robots
Artificial Simulation Intelligence
System Big Data Integration Analytics
Augmented Internet of Reality Things
Additive Cybersecurity Manufacturing
Cloud Computing
Source: SME Corp. Malaysia.
Opportunities in Disruptive Technology
Disruptive technology multiplies growth in the digital economy and optimises the digital investment. In line with this, many firms have benefitted from digital advancement to improve their operations and business models further. Various initiatives were embarked by leading global firms such as Airbnb and Trivago in the hotel industry; LAZADA and Alibaba in retail; as well as UBER and GRAB in the transport sector. Many software companies are mushrooming leveraging the advancement of digital technology, to develop applications for the smart factory, smart camera, transportation, smart home and other online businesses.
Smart Factory
There are many software applications available for firms to transform operational data into business insights known as smart factory, a new manufacturing concept that will enhance competitiveness. The factory of the future operates autonomously to identify and repair any malfunctions through combined technologies such as a smart sensor, AI, BDA and IoT. These technologies enable all relevant information to be flashed for real-time monitoring without disrupting factory operations and production lines.
56 Economic Outlook 2019
Chapter 3.indd 56 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Sensor Technology
Smart cameras featuring a range of megapixel resolutions, camera dimensions, advanced technologies and value added analytic functions are already taking place. These developments satisfy the needs of a diverse range of applications to achieve unobstructed monitoring of wide and open areas such as airport terminals, shopping malls, train stations and offices. With this technology, it provides high accuracy of counting people and objects analysis, while optimising security management and able to enhance in-store management through traffic data and visual analytics.
Transportation
Meanwhile, e-hailing app companies focus on strengthening their registration system to improve the safety of its drivers and passengers. Through IoT for example, Moovit promotes a platform for car rental application and CatchThatBus app to book bus tickets in Malaysia. In addition, the Smart Selangor Parking app was developed to address the traffic problems and parking payment difficulty. Utilising the IoT and BDA, this app allows enforcement officers to check if the parking fees have been paid by scanning the car registration number. At the same time, enforcement officers can issue compounds and enable offenders to make immediate payment through the app.
Social and Commerce Activities
In Malaysia, smartphones remain the most popular means for users to access the internet enabling the country to attain a mobile-oriented society.1 In 2017, there were 35.3 million mobile broadband subscriptions as compared to 2.6 million fixed broadband subscriptions. The majority of internet users subscribe internet for communication, social networking, obtaining information and entertainment, study, work-related, online shopping, Government services and financial activity (MCMC, 2017).
Figure 3.1.2. Internet Users by Online Activities
Communicate by text Visit social networking sites Getting information Listen to music/online radio Streaming/downloading video/Watch TV Downloading audio/images/reading materials Study Work related Online shopping Government services Financial activity Games Online job application Internet telephony Cloud storage Selling goods/services Maintain blogs/homepages 0 20 40 60 80 100 % Source: 2017 Internet Users Survey, Malaysian Communication and Multimedia Commission.
The survey reflects the rising popularity of digital platforms and more broadly the role of technology in driving social and economic activity. In this regard, technology has certainly transformed our daily activities for social networking, online commerce and information seeking. This development is expected to drive e-commerce’s contribution to GDP to surpass RM170 billion by 2020 and further projected to reach RM400 billion by 2025 (MDEC, 2017).
Challenges
Rapidly changing technologies and its low adoption remain a challenge for Malaysia, especially for the businesses. The low-speed and high-price of broadband is a barrier to the development and adoption of digital technology. At the moment Malaysia is ranked fifth after Singapore,
1 About 90% of users access the internet using smartphones (DOSM, 2017).
Economic Outlook 2019 57
Chapter 3.indd 57 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Viet Nam, Brunei and Myanmar in average 4G speeds in Southeast Asia (OpenSignal, 2018). Moreover, the adoption index by SMEs is below other peer countries in this region (World Bank, 2018). Figure 3.1.3. Dimensions of Digital Transactions
Nature Product Actors (‘how’) (‘what’) (‘who’)
Corporations Digitally Goods ordered Households
an o Government Platform Services enabled an o Non-profit Institutions Digitally Serving Information/Data delivered Households
Source: Measuring Digital Trade, OECD.
Accordingly, the improvement of broadband services to accelerate Malaysia’s development in the digital economy is vital. Also, there is a need to have a comprehensive regulatory framework in cybersecurity (World Bank, 2018). There are rooms for improvement, especially in developing best practices and guidelines to manage security as well as cloud security services in Malaysia. The Government also needs to address the issue of a critical talent gap in areas such as digital forensic, security administration and security analyst. A safe and sound ecosystem is crucial to establish the trust of customers and users to enhance e-commerce and e-payment platforms further. In this regard, the value of Malaysia’s overall cybersecurity services which is expected to reach USD632.6 million by 2021 (MDEC, 2018) is a new potential growth area to be explored further.
Figure 3.1.4. Average 4G Speed in Southeast Asia Figure 3.1.5. Price for 10GigE IP Transit
Hong Kong Singapore Singapore Japan Viet Nam Taiwan Republic of Korea Brunei Australia Myanmar New Zealand Thailand Malaysia India Malaysia Cambodia Indonesia Thailand Philippines Lao PDR Philippines Viet Nam Indonesia China 0 20 40 60 80 100 120 0 10 20 30 40 50 USD per Mbps1 per month 1 Megabits per second. Mbps1 1 Megabits per second. Source: 2018 The State of LTE, OpenSignal. Source: 2017 IP Transit Pricing Data, TeleGeography.
Conclusion
Digital era has brought enormous changes to the social economic and security landscape. Advancement in digital technology is expected to create more disruptions in the future. Thus, it is imperative for Malaysia to transform itself at an accelerated pace and embrace advanced digital technologies, especially by businesses. Some of the top challenges that hinder the digital readiness of Malaysian key industries are the lack of a structured approach and digitally skilled workforce as well as a perception that digital transformation is too fast and complex. Despite these challenges, the digital economy offers tremendous opportunities in investment, technology convergence and megatrends. Hence, with concerted efforts, the daily operations could be further improved by investing in the conducive ecosystem as well as soft and hard infrastructures.
58 Economic Outlook 2019
Chapter 3.indd 58 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
promotional activities for Visit Malaysia 2020 strong growth in the production of export- and attractive tour packages offered via online oriented manufactured goods. These include travel fairs. In addition, the operationalisation E&E, petroleum, chemical, rubber and plastic of several new shopping centres and supporting products. Meanwhile, the domestic-oriented retail components in Klang Valley, Pulau Pinang industries will remain steady supported and Johor are anticipated to provide additional by sustained demand for consumer- and impetus to the growth of the subsector. construction-related products.
The other services subsector is projected Steady performance in the E&E subsector is to expand 5.3% in 2018 and 5.1% in 2019. supported by strong demand for electronic This is due to strong demand for private integrated circuits and semiconductors; education and healthcare services. Meanwhile, telecommunications equipment; and the government services subsector is anticipated consumer electronics. Output of petroleum, to record growth of 4.4% in 2018 and 4.2% chemical, rubber and plastic products in 2019. subsector will be mainly supported by rising Manufacturing Sector demand in the healthcare industry, particularly for rubber gloves, plastic medical appliances The manufacturing sector increased 5.1% and pharmaceutical products. Meanwhile, (y-o-y) during the first half of 2018 and for the production of chemical will be driven year is expected to grow 4.9% largely driven by expansion in petrochemicals and by export-oriented industries. This is in line oleochemicals industries. Production in the with the increase in Manufacturing Production transport equipment and other manufactures Index which grew 4.9% (y-o-y) and sales at subsector will be supported by manufacture 7.3% (y-o-y) during the first eight months of of motor vehicles, trailers and semi-trailers; 2018. Continuous expansion in the electronics manufacture of other transport equipment; as cycle and favourable global industrial activities well as repair and installation of machinery are expected to translate into firm demand and equipment (M&E). This is in tandem with for Malaysian manufactured exports, hence the higher sales of vehicles following the
Table 3.3. Manufacturing Production Index January – August (2015 = 100)
Change Share Index (%) (%) 2017 2018 2017 2018 2017 2018 Export-oriented industries Petroleum, chemical, rubber and plastic products 106.9 111.4 3.7 4.1 29.6 29.4 Electrical and electronics products 113.0 119.6 8.1 5.8 27.7 27.9 Wood products, furniture, paper products and printing 109.2 114.1 6.4 4.4 6.7 6.7 Textiles, wearing apparel, leather products and footwear 112.2 117.5 7.7 4.8 2.0 2.0 Domestic-oriented industries Non-metallic mineral products, basic metal and 108.4 114.1 5.0 5.2 13.3 13.3 fabricated metal products Food, beverages and tobacco 109.4 113.9 11.5 4.1 12.6 12.5 Transport equipment and other manufactures 103.2 108.9 6.0 5.6 8.1 8.2 Manufacturing production index 109.0 114.3 6.5 4.9 100.0 100.0
Note: Total may not add up due to rounding. Source: Department of Statistics, Malaysia.
Economic Outlook 2019 59
Chapter 3.indd 59 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Figure 3.2. Output of Manufacturing Sector Agriculture Sector (% change) % The agriculture sector moderated 0.1% (y-o-y) 10 Industrial production index during the first half of 2018 following lower Manufacturing production index growth in the oil palm subsector coupled with 8 a contraction in the rubber subsector. These two
6 subsectors accounted for 50.3% to the overall agriculture sector. In 2018, the agriculture sector
4 is expected to decline 0.2% mainly due to lower production and prices for both CPO and rubber.
2 Nevertheless, in 2019, the sector is projected to rebound 3.1% driven by improvement in 0 all subsectors, except forestry and logging. JAJOJAJOJAJ 2016 2017 2018 In 2018, value added of the oil palm subsector Source: Department of Statistics, Malaysia. is projected to decline 0.1% weighed down by a decrease in CPO production following lower fresh fruit bunches (FFB) yield. This is mainly zero-rated GST. In addition, the aerospace caused by prolonged dry season in Sabah industry including design and manufacturing and Sarawak. The reduction in CPO is also of aircraft components; system integration; partly contributed by the base-effect following as well as maintenance, repair and overhaul post-recovery of El Niño phenomenon in 2017. activities; is expected to benefit from rising In addition, the performance of the subsector is orders for aircraft in the Asia Pacific region. expected to be affected by lower demand from Meanwhile, growth in the domestic-oriented China following substitution to other vegetable industries will be driven by continued demand oils. Exports to India are also expected to be for food-related products as well as sustained lower on account of higher import tariffs on production of construction-related materials CPO and refined palm oil. Meanwhile, the oil extraction rate (OER) is expected to improve amid new and ongoing infrastructure projects. mainly contributed by better quality of FFB processed in several major CPO producing In 2019, the manufacturing sector is forecast states. Palm oil closing stock is expected to to expand 4.7% supported by export-oriented record 2.9 million tonnes as compared to 2.7 industries following continuous expansion in E&E as well as chemicals and chemical product subsectors. Growth in E&E output will continue Table 3.4. Value Added in the Agriculture Sector 2017 – 2019 to surge driven by the increasing use of wearable (At constant 2010 prices) gadgets and smart home applications. This is in line with the convergence towards digital Share Change (%) (%) technology and electronic integrated circuit 20182 2017 20182 20193 design innovation in embracing IR 4.0. In the Oil palm 46.7 16.0 -0.1 4.1 chemical industry, production of petrochemicals Rubber 6.0 9.3 -18.0 5.0 and oleochemicals are expected to benefit from Livestock 12.2 5.3 6.7 4.6 the abundance of feedstock in the form of O&G Other agriculture1 19.5 2.1 4.6 4.0 as well as palm oil coupled with sustained Fishing 10.4 -2.1 -0.6 0.1 demand from China, Indonesia and Thailand. Forestry and logging 5.2 -15.7 -7.8 -8.9 The domestic-oriented industries are expected Agriculture 100.0 7.2 -0.2 3.1 to be driven by robust growth of the food 1 Including paddy, fruits, vegetables, coconut, tobacco, tea, flowers, pepper, cocoa subsector following strong household demand and pineapple. while the construction-related subsector will 2 Estimate. 3 Forecast. be supported by continuous expansion in the Note: Total may not add up due to rounding. construction activities. Source: Department of Statistics and Ministry of Finance, Malaysia.
60 Economic Outlook 2019
Chapter 3.indd 60 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Table 3.5. Oil Palm: Areas, Yield and Production The rubber subsector is projected to decline 2017 – 2019 18% in 2018 following unfavourable weather conditions coupled with lower prices, which Change (%) in turn discourages tapping activities. Price 2017 2018² 20193 2017 20182 20193 of Standard Malaysian Rubber 20 (SMR20) is Planted areas estimated to hover low at around RM5.50 per 5,811 6,000 6,159 1.3 3.3 2.6 (‘000 hectares) kilogramme (kg). This is due to weak global Matured areas demand amid higher output following expansion 5,111 5,250 5,450 2.2 2.7 3.8 (‘000 hectares) of more than 1.2 million hectares of new planted Production areas between 2010 and 2012 backed by higher Crude palm oil 19,919 19,800 20,500 15.0 -0.6 3.5 prices during the period. Total rubber production (‘000 tonnes) is expected to decrease as smallholders shift to Yield1 17.9 17.0 17.5 12.4 -5.0 2.9 other profitable activities. In addition, increase (tonnes/hectare) in production costs in estates due to higher 1 Fresh fruit bunches yield. expenditure on administrative, maintenance, 2 Estimate. upkeep and cultivation is expected to weigh 3 Forecast. Note: Total may not add up due to rounding. down the production. Average annual yield per Source: Malaysian Palm Oil Board and Ministry of Finance, Malaysia. hectare for smallholders is expected to decline to 1,420 kg while estate owners to remain at 1,560 kg due to price factor. million tonnes last year following weaker exports. In 2018, the price of CPO is expected In 2019, value added of the rubber subsector is to average at RM2,300 per tonne following expected to rebound 5% following increase in weaker soybean oil price in the global market. matured areas, mainly in Peninsular Malaysia and Sabah with smallholders accounting In 2019, the subsector is forecast to turnaround for about 90% of overall rubber plantations. 4.1% with higher output of palm oil backed Total rubber plantation area is expected to by improvement in prices at RM2,400 per increase to 1,085 hectares due to expansion tonne coupled with an increase in matured in matured areas. In Sabah and Sarawak, a areas which is expected to reach 5.5 million total of 6,000 hectares of new crop areas have hectares. Palm oil closing stock is expected been targeted per year, while additional 40,000 to decline to 2.2 million tonnes on account of hectares is targeted for replanting in Malaysia higher exports to major trading partners. FFB to support future demand. The price of SMR20 yield per hectare is estimated to improve, while is projected to be sustained at RM5.50 per kg OER is projected to remain steady through due to anticipation of excess global supply enhancement in crops grading procedure. by 0.4 million tonnes and lower demand Efforts to improve harvesting and transporting from automotive sector, particularly in China. FFB with the continuous implementation of Oil Nevertheless, the Rubber Production Incentive Palm Industry Mechanisation Incentive Scheme provided by the Government is expected to (OPIMIS) are expected to enhance palm oil increase tapping activities by smallholders production and reduce dependency on foreign despite low prices. labour. Furthermore, initiatives to replace low yield and old trees with new and high-yield The Government will continuously work with seedlings are expected to increase OER and FFB other countries under the framework of the yield per hectare by 2020 to meet the rising International Tripartite Rubber Council1 through demand from domestic downstream activities. its mechanism namely, Supply Management In addition, further market diversification, Scheme (SMS), Agreed Exports Tonnage Scheme particularly to ASEAN, parts of the African (AETS) and Demand Promotion Scheme (DPS) to continent as well as Central and Eastern stabilise rubber prices and ensure smallholders Europe is expected to augur well for the oil obtain fairer prices. SMS is a long-term measure palm subsector. to ensure the member countries do not exceed
1 Consists of Indonesia, Malaysia and Thailand.
Economic Outlook 2019 61
Chapter 3.indd 61 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Table 3.6. Rubber: Areas, Yield and Production programmes such as aquaculture integrated 2017 – 2019 zones and cage fish farming. However, marine Change fish landing is estimated to decline in both (%) years mainly affected by monsoon season. 2017 2018¹ 2019² 2017 2018¹ 2019² Mining Sector Total areas 1,082 1,083 1,085 0.4 0.1 0.2 (‘000 hectares) The mining sector decreased 1% (y-o-y) during Smallholdings 1,007 1,009 1,012 0.6 0.3 0.3 the first half of 2018 on account of lower output Estates 75 74 73 -2.2 -1.3 -1.3 of LNG following unplanned supply outages. Yield (kg per hectare) For 2018, the sector is expected to decline Smallholdings 1,440 1,420 1,450 4.3 -1.4 2.1 0.6% following lower production of natural Estates 1,560 1,560 1,580 0.6 0.0 1.3 gas due to supply disruptions in Kebabangan Total production 740 600 650 9.8 -18.9 8.3 and Kinabalu fields in Sabah. Nevertheless, (‘000 tonnes) the crude oil and condensates subsector is Smallholdings 691 550 595 11.3 -20.4 8.2 projected to grow in line with stable global Estates 49 50 55 -7.5 2.0 10.0 demand. Though the US sanction has reduced % of world 5.5 4.3 4.5 Iran’s exports, the recovery in Libya’s production production and anticipation of higher supply from Saudi Arabia are expected to stabilise crude oil 1 Estimate. prices in 2018. 2 Forecast. Note: Total may not add up due to rounding. Source: Malaysian Rubber Board. Value added of the mining sector is expected to rebound 0.7% in 2019 driven by recovery the target set for allowable planted areas for in the production of natural gas following the period from 2015 to 2020. AETS, on the resumption of operation in Kebabangan and other hand, is a short-term measure aimed Kinabalu fields as well as expectation of new to restrict exports through quota, to address production from Bakong and Larak fields in the imbalances between supply and demand. the second half of 2019. In addition, stronger Meanwhile, the DPS is aimed to enhance demand from domestic petrochemical industry domestic consumption of natural rubber by and new contracts secured including from development and commercialisation of new Japan for electricity generation is expected to rubber products. support the growth of this sector. Furthermore, innovative and flexible operational solutions Output of food commodities is projected to such as LNG break bulk services via ship-to- support the agriculture sector, contributing ship by PETRONAS have increased demand about 42% in 2018 and 2019 on account of from Asian region. Meanwhile, crude oil and higher demand following increasing household condensates subsector is forecast to decline due income. The livestock subsector is anticipated to production constraints in Sabah Gumusut to increase 6.7% and 4.6% in 2018 and 2019, Kakap and Malikai fields. respectively backed by higher output of poultry and eggs segments. In addition, ongoing Construction Sector efforts to achieve self-sufficiency level and sustained demand from households will benefit Value added of the construction sector grew 4.8% the subsector. Meanwhile, other agriculture (y-o-y) during the first half of 2018 supported subsector is projected to grow 4.6% in 2018 and by civil engineering subsector. For the year, the 4% in the following year supported by higher sector is expected to expand, albeit moderately output of vegetables and fruits. Farmers are at 4.5% following near completion of several anticipated to continue with Good Agricultural mega projects and overhang, particularly in Practices, utilising agricultural inputs to increase the non-residential subsector. The growth productivity, encouraged by strong demand momentum is expected to improve slightly in and favourable prices. The fishing subsector is 2019, with the sector expanding 4.7%, following projected to decline 0.6% in 2018 and improve an increase in new planned supply in the marginally to 0.1% in 2019. Aquaculture affordable homes and industrial segments. produce is expected to be supported by various However, review of several infrastructure
62 Economic Outlook 2019
Chapter 3.indd 62 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Figure 3.3. Supply Indicators of Residential projects as well as subdued activities in non- Property residential subsector is expected to weigh down Units Units the sector’s performance. ('000) ('000) 6,000 Existing stock 700 Planned supply The civil engineering subsector is expected to 5,500 right scale Incoming supply 600 remain as the driver of the construction sector
5,000 in 2018 and 2019 largely supported by ongoing 500 projects. Among the infrastructure projects 4,500 include the Pan Borneo Highway in Sabah and 400 Sarawak; Central Spine Road in East Coast; as 4,000 well as Mass Rapid Transit (MRT) Sungai Buloh 300 3,500 – Serdang – Putrajaya (SSP) Line and Light Rail Transit Line 3 (LRT3) in Klang Valley. Meanwhile, 3,000 200 Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1 in the petrochemical and power plant segment, 2014 2015 2016 2017 2018 ongoing projects are the Deepwater Petroleum Terminal 2 at the Refinery and Petrochemical Source: National Property Information Centre. Integrated Development (RAPID) Complex in Pengerang, Johor; Floating LNG 2 in Sabah; and the Central Processing Platform in Bokor, Figure 3.4. Malaysia House Price Index Sarawak. In addition, mixed-development (% change) projects such as the Tun Razak Exchange and % Bukit Bintang City Centre in Kuala Lumpur are 20 Malaysia House Price Index expected to support the growth of the subsector. Kuala Lumpur 16 Selangor The residential subsector is expected to grow Johor at a marginal pace following the mismatch 12 Pulau Pinang between supply and demand. Towards this end, 8 the Government suspended the development of residential properties, serviced apartments 4 and luxury condominiums priced over RM1 million in prime areas, effective November 0 2017. In addition, the developers are focusing on sales of existing projects to address the -4 Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1 2014 2015 2016 2017 2018 overhang issues. Meanwhile, the Government Source: National Property Information Centre. will continue to provide affordable housing for the low- and middle-income groups through various programmes.
Figure 3.5. Supply Indicators of Non-Residential Property
Incoming Supply Square meter Occupancy Rate Units ('000) % 100,000 3,000 86 Shops Retail spaces right scale Industrial Of ce spaces 80,000 2,400 84 Of ce spaces
60,000 1,800 82 Retail spaces
40,000 1,200 80
20,000 600 78
0 0 76 Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1 Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Source: National Property Information Centre.
Economic Outlook 2019 63
Chapter 3.indd 63 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
The non-residential subsector is projected to supported by stable labour market, benign decline following oversupply and overhang inflation and conducive financing condition. of high-end shops and shopping complexes Other factors such as zerorisation of GST; as well as downward trend in the incoming subsidised pump prices; general election; FIFA supply of commercial buildings. However, the World Cup season; and termination of toll demand for commercial buildings in prime areas collection in two highways provide further is anticipated to remain stable supported by impetus to household spending. In 2019, residential development projects in Klang Valley private consumption is forecast to expand suburbs, particularly in areas along MRT and 6.8% on account of higher household earnings LRT routes; as well as in major cities such as arising from better employment outlook; Johor Bahru, Melaka and Pulau Pinang. implementation of higher minimum wage rate; steady commodity prices; and accommodative financing condition. Furthermore, major events Domestic Demand such as the Langkawi International Maritime and Aerospace Exhibition 2019 (LIMA’19) Domestic demand growth is expected to coupled with promotional activities for Visit remain resilient at 5% and 4.8% in 2018 and Malaysia 2020 are expected to spur consumer 2019, respectively. Growth will be steered by spending. sustained private sector expenditure at 6.5% in 2018 and 6.4% in 2019, constituting about 72% Private investment is expected to grow 4.5% of GDP. Meanwhile, public sector expenditure in 2018, accounting for 17.3% of GDP with is anticipated to further decline to 0.9% in capital outlays concentrating in the services and 2019 after recording a marginal growth of manufacturing sectors. In the services sector, 0.1% in 2018 mainly due to lower investment investment will be largely in the consumer- and by public corporations. tourism-related activities such as wholesale and retail trade; as well as food & beverages In 2018, private consumption will remain as and accommodation subsectors. Investment the major growth determinant, expanding by will be also channelled into the information 7.2%. Growth in private consumption will be and communication subsector in line with the expansion in e-commerce activities. The high global demand for E&E and chemical products Table 3.7. GDP by Aggregate Demand are expected to boost investment spending in 2017 – 2019 the manufacturing sector. Continuous expansion (At constant 2010 prices) in private investment is expected in the second half of the year as reflected by the business Share Change performance survey which increased steadily (%) (%) at 11.6% (DOSM, 2018). 20182 2017 20182 20193 Domestic demand 92.4 6.5 5.0 4.8 Private expenditure 72.3 7.5 6.5 6.4 In 2019, private investment is expected to post Consumption 55.0 7.0 7.2 6.8 a higher growth of 5% attributed to capital Investment 17.3 9.3 4.5 5.0 spending in technology-intensive manufacturing Public expenditure 20.1 3.3 0.1 -0.9 and services sectors. As Malaysia moves towards Consumption 12.5 5.4 1.0 1.8 digital technologies and the IR 4.0, investment Investment 7.5 0.1 -1.5 -5.4 will focus in catalytic industries. These include External sector1 8.0 -1.9 7.7 0.7 Internet of Things (IoT), software, advanced Exports 70.9 9.4 2.0 1.6 electronics, smart machinery, automation and Imports 63.0 10.9 1.4 1.8 robotics, automated guided vehicle, aerospace GDP 100.0 5.9 4.8 4.9 and medical devices.
1 Goods and non-factor services. 2 Estimate. Public consumption is anticipated to expand 3 Forecast. Note: Total may not add up due to rounding and excluding change in stocks component. marginally by 1% in 2018. This is in line with Source: Department of Statistics and Ministry of Finance, Malaysia. the continuous efforts by the Government
64 Economic Outlook 2019
Chapter 3.indd 64 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
to rationalise and optimise expenditure Table 3.8. Savings-Investment Gap without compromising the quality of public 2017 – 2019 service delivery. Furthermore, the Government (At current prices) continues to enhance value for money in the RM million procurement of goods and services, reflecting 2017 20182 20193 prudent spending. In 2019, public consumption Public Sector is expected to expand 1.8% on account of Savings 97,387 69,617 52,428 1 higher spending on emoluments as well as Gross capital formation 107,395 106,696 101,941 Surplus/Deficit -10,008 -37,079 -49,513 supplies and services. Private sector Savings 288,790 318,142 348,346 Public investment is expected to decline 1.5% Gross capital formation1 238,507 242,472 264,837 and 5.4% in 2018 and 2019, respectively, Surplus/Deficit 50,283 75,671 83,508 mainly weighed down by public corporations’ Overall lower capital spending. Nevertheless, sustained Gross national savings 386,177 387,759 400,774 Federal Government's capital formation is % of GNI 29.3 27.9 26.9 expected to continue to support overall growth Gross capital formation1 345,902 349,168 366,778 of public investment. Despite lower capital % of GNI 26.3 25.1 24.6 spending by public corporations, some of the Surplus/Deficit 40,275 38,591 33,995 ongoing projects are expected to continue % of GNI 3.1 2.5 – 3.0 2.0 – 3.0
in the O&G industry. These include RAPID, 1 Including change in stocks. Floating LNG 2, Pengerang Cogeneration Plant, 2 Estimate. 3 Forecast. Diesel EURO-5, Integrated Bokor & Betty and Note: Total may not add up due to rounding. North Malay Basin Full Field Development. Source: Department of Statistics and Ministry of Finance, Malaysia. Furthermore, capital spending in the utilities and transport segments is projected to continue Figure 3.6. Gross National Savings and Savings-Investment Gap to expand capacity and upgrade services. The projects include Pan Borneo Highway; RM billion 560 MRT SSP Line and Electrified Double Track Savings-investment gap Gemas – Johor Bahru; Langkawi submarine Private sector savings 480 Public sector savings power cable; High Speed Broadband Phase 2 Gross national savings and Sub-Urban Broadband; as well as Jimah 400 Total investment coal-fired and Pasir Gudang combined-cycle 320 gas turbine power plants. Meanwhile, Federal
Government’s development expenditure will 240 be channelled mainly to upgrade and improve transport, infrastructure and public amenities 160 as well as enhance the quality of education 80 and training.
0 In line with steady economic growth, GNI 2015 2016 2017 20181 20192 1 in current prices is expected to grow 5.6% Estimate. 2 Forecast. in 2018 to RM1.4 trillion. Meanwhile, gross Source: Department of Statistics and Ministry of Finance, Malaysia. national savings (GNS) is anticipated to increase marginally by 0.4% to RM387.8 billion with Growth momentum in GNI is expected to private sector accounting for 82% of total continue in 2019, expanding 7.1% to RM1.5 savings. With the level of GNS continuing to trillion. At the same time, with the private sector exceed total investment, the savings-investment accounting for 86.9% of total savings, GNS is gap is expected to record a surplus between anticipated to expand 3.4%. Total investment 2.5% and 3% of GNI, enabling Malaysia to is projected to increase 5% to RM366.8 billion, continue to finance its growth primarily from leading to lower savings-investment surplus, domestic sources. ranging between 2% and 3% of GNI.
Economic Outlook 2019 65
Chapter 3.indd 65 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
External Sector data processing equipment and electronic machines apparatus. Demand for E&E products Exports from major trading partners are expected to remain favourable. Meanwhile, exports of non- Gross exports are projected to expand 4.4% in E&E are anticipated to increase 6.1% in 2018, 2018 led by continued demand for manufactured mainly driven by chemicals and chemical goods. Exports of manufactured goods, which products; manufactures of metal; petroleum account for about 84% of total exports, are products; as well as optical and scientific estimated to expand 6.6% mainly attributed equipment. to continuous expansion in electronics cycle and favourable global industrial activities. Export earnings from agriculture goods are Receipts from E&E products are estimated to expected to decline 11.2% in 2018 weighed down grow 7.3% in line with global semiconductor by lower receipts from palm oil and natural sales, which is expected to expand 15.7% in rubber. Receipts from palm oil are anticipated 2018. Growth will be supported by favourable to decrease significantly by 13.1% in tandem performance of semiconductors, automatic with lower export prices. Similarly, shipment
Table 3.9. External Trade 2017 – 2019
Change RM million (%) 2017 20181 20192 2017 20181 20192 Total trade 1,771,349 1,846,338 1,919,631 19.2 4.2 4.0 Gross exports 934,927 976,453 1,014,506 18.8 4.4 3.9 of which: Manufactured 765,858 816,510 849,142 18.6 6.6 4.0 Agriculture 78,072 69,328 73,044 10.9 -11.2 5.4 Mining 81,836 82,999 86,233 25.8 1.4 3.9 Gross imports 836,422 869,885 905,125 19.7 4.0 4.1 of which: Capital goods 115,567 117,435 120,834 15.3 1.6 2.9 Intermediate goods 478,932 456,690 476,096 20.0 -4.6 4.2 Consumption goods 71,036 72,635 74,854 6.1 2.3 3.1 Trade balance 98,505 106,568 109,381 11.8 8.2 2.6
1 Estimate. 2 Forecast. Note: Total may not add up due to rounding. Source: Department of Statistics and Ministry of Finance, Malaysia.
Table 3.10. Gross Exports January – August
Change Share RM million (%) (%) 2017 2018 2017 2018 2017 2018 Manufactured 499,813 544,207 21.0 8.9 81.6 83.7 Agriculture 52,142 44,920 18.6 -13.9 8.5 6.9 Mining 54,046 55,867 34.9 3.4 8.8 8.6 Others1 6,234 5,567 81.2 -10.7 1.0 0.9 Gross exports 612,235 650,562 22.3 6.3 100.0 100.0
1 Including gold scrap and waste; worn clothing; and special transaction not classified. Note: Total may not add up due to rounding. Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation.
66 Economic Outlook 2019
Chapter 3.indd 66 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Table 3.11. Exports of Manufactured Goods January – August Change Share RM million (%) (%) 2017 2018 2017 2018 2017 2018 E&E 220,615 245,576 21.4 11.3 44.1 45.1 Non-E&E 279,198 298,631 20.6 7.0 55.9 54.9 Petroleum products 48,196 49,459 43.0 2.6 9.6 9.1 Chemicals and chemical products 30,974 36,769 15.1 18.7 6.2 6.8 Machinery, equipment and parts 27,444 27,533 6.6 0.3 5.5 5.1 Manufactures of metal 24,198 30,335 8.3 25.4 4.8 5.6 Optical and scientific equipment 20,923 23,366 12.3 11.7 4.2 4.3 Rubber products 17,671 17,409 35.6 -1.5 3.5 3.2 Processed food 13,129 12,516 9.0 -4.7 2.6 2.3 Wood products 10,854 10,377 6.8 -4.4 2.2 1.9 Textiles, apparels and footwear 10,371 9,912 12.3 -4.4 2.1 1.8 Manufactures of plastics 9,644 9,527 13.1 -1.2 1.9 1.8 Transport equipment 10,235 12,240 18.4 19.6 2.0 2.2 Iron and steel products 8,285 9,802 102.1 18.3 1.7 1.8 Jewellery 4,518 4,141 -4.1 -8.3 0.9 0.8 Non-metallic mineral products 3,800 4,696 2.1 23.6 0.8 0.9 Beverages and tobacco 2,826 2,156 -6.6 -23.7 0.6 0.4 Paper and pulp products 3,115 3,153 13.6 1.2 0.6 0.6 Palm oil-based manufactured products 15,607 15,254 26.1 -2.3 3.1 2.8 Other manufactures 17,406 19,986 46.7 14.8 3.5 3.7 Total 499,813 544,207 21.0 8.9 100.0 100.0
Note: Total may not add up due to rounding. Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation.
of natural rubber is expected to contract 18.4% Meanwhile, exports of non-E&E products are mainly on account of lower prices and weak anticipated to grow 3.7% in line with favourable demand. Exports of mining goods are projected to manufacturing activities in the region. Demand increase 1.4% primarily driven by steady demand is expected to remain steady for organic for crude petroleum despite the contraction in chemicals and plastics in primary form as well as LNG. Shipments of crude petroleum are expected machinery and parts. As for petroleum products, to grow 23.4% contributed by improved export steady oil prices is anticipated to support exports prices and higher volume. Meanwhile, receipts of refined petroleum, while favourable demand from LNG are anticipated to decline 9.8% for industrial metals continues to spur exports attributed to lower export volume. of aluminium, copper and nickel. In addition, high demand for advanced technology products In 2019, gross exports are estimated to grow bodes well for exports of optical and scientific 3.9% supported by continuous demand for equipment, particularly measuring, controlling manufactured goods coupled with a rebound and medical instruments. in commodity exports. The manufactured exports are projected to grow 4% attributed to Agriculture exports are forecast to rebound higher demand, particularly for E&E; chemicals 5.4% supported by recovery in prices and higher and chemical products; petroleum products; demand for CPO and natural rubber. Increased manufactures of metal; machinery, equipment shipment of CPO and natural rubber to major and parts; as well as optical and scientific trading partners is expected to provide further equipment. The E&E subsector is forecast to impetus for growth in the sector. Meanwhile, expand 4.4% benefitting from the extensive use the anticipated pickup in LNG production from of semiconductors in automotive industry and existing and newly commenced facilities as well consumer electronics such as connected devices as stable prices will boost growth of mining and smart appliances. exports in 2019, estimated at 3.9%.
Economic Outlook 2019 67
Chapter 3.indd 67 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Figure 3.7. Direction of External Trade January – August 2018 (% share) Exports Imports Singapore Singapore 13.6% 11.5%
Others Others West Asia 22.6% West Asia 21.2% 4.6% 3.3% China China 13.7% 20.1% RM650.6 India RM580.1 India billion 2.8% billion 3.8% Japan 6.9% Africa EU Africa EU Japan 10.2% US 1.5% 9.9% 7.2% 1.9% 1 1 9.1% ASEAN US ASEAN 7.3% 14.8% 13.8% 1 Excluding Singapore. Note: Total may not add up due to rounding. Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation.
Imports are expected to expand 2.3% underpinned by higher demand following stable labour market Gross imports are forecast to expand at a conditions. In addition, the zerorisation of GST moderate pace of 4% in 2018 weighed down by and festivities also support import growth. a contraction in imports of intermediate goods at 4.6%. Meanwhile, imports of capital goods For 2019, imports are anticipated to grow 4.1% are anticipated to expand 1.6% supported by supported by continued imports of intermediate deliveries of lumpy items such as aircraft goods and steady re-export activity. Imports of and vessels. Imports of consumption goods intermediate goods are expected to rebound
Table 3.12. Gross Imports by End Use January – August
Change Share RM million (%) (%) 2017 2018 2017 2018 2017 2018 Capital goods 73,699 75,410 13.5 2.3 13.4 13.0 Capital goods (except transport equipment) 67,086 62,809 16.3 -6.4 12.2 10.8 Transport equipment (industrial) 6,613 12,602 -9.0 90.6 1.2 2.2 Intermediate goods 321,808 305,478 25.5 -5.1 58.6 52.7 Food and beverage, primary and processed, mainly for industry 13,766 11,761 19.4 -14.6 2.5 2.0 Fuel and lubricants, primary, processed and others 32,364 36,698 76.2 13.4 5.9 6.3 Industrial supplies, primary, processed and n.e.s.1 131,697 140,549 19.4 6.7 24.0 24.2 Parts and accessories of capital and transport equipment 143,982 116,471 23.9 -19.1 26.2 20.1 Consumption goods 46,586 48,020 6.7 3.1 8.5 8.3 Food and beverage, primary and processed, mainly for 18,910 19,079 8.3 0.9 3.4 3.3 household Transport equipment (non-industrial) 670 522 10.2 -22.2 0.1 0.1 Other consumer goods 27,006 28,419 5.5 5.2 4.9 4.9 Durables 5,931 6,659 7.6 12.3 1.1 1.1 Semi-durables 9,863 10,147 3.5 2.9 1.8 1.7 Non-durables 11,212 11,614 6.2 3.6 2.0 2.0 Others 16,797 18,933 31.0 12.7 3.1 3.3 Re-exports 90,362 132,270 28.4 46.4 16.5 22.8 Total 549,253 580,111 22.5 5.6 100.0 100.0
1 Not elsewhere stated. Note: Total may not add up due to rounding. Source: Department of Statistics, Malaysia.
68 Economic Outlook 2019
Chapter 3.indd 68 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
4.2% and continue to support manufacturing attributed mainly to residents travelling abroad for activities. Imports for re-exports are expected business, leisure, education, medical treatment to continue to grow strongly driven by the and pilgrimage. Hence, the surplus in the travel relocation of distribution hubs by MNCs into account is estimated to be lower at RM28.1 billion. Malaysia. This includes companies in the semiconductor and automotive parts industry The transport account is projected to remain as well as the e-fulfilment hub in DFTZ. Imports in deficit at RM30 billion following continued of capital goods are forecast to expand 2.9% in reliance on foreign freight services. Gross line with increasing private investment activity. payments for transport services are forecast to Imports of consumption goods are expected to increase 2.3% to RM50 billion due to higher fuel expand further by 3.1% in line with optimistic and freight costs. Gross receipts are anticipated consumer sentiments following better prospects to be broadly sustained at RM20 billion supported of employment and wages. by continued earnings from passenger fares, airport and port charges such as aircraft landing Balance of Payments and parking, ship docking, cargo handling as well as maintenance and repair works provided The current account surplus is expected to range by domestic companies. between 2.5% and 3% of GNI in 2018 largely attributed to higher goods surplus despite deficits Net outflows in the other services account in the services and income accounts. The goods are anticipated to be higher at RM28.1 billion. account is expected to record a higher surplus The outflows are mainly attributed to higher of RM128.7 billion underpinned by favourable gross payments for imported professional, exports of manufactured goods. The services construction, ICT as well as finance and account is estimated to post a wider deficit of RM30 insurance services. Other payments include billion following lower travel receipts as well as charges for use of intellectual property rights, large net payments for freight and other services. particularly during the 2018 Winter Olympics, FIFA World Cup and Asian Games. Travel receipts are expected to decline 5.3% to RM74.6 billion, particularly due to intense The deficit in the primary income account is competition from regional countries. Travel expected to widen to RM40.9 billion following outflows are expected to increase to RM46.5 billion higher repatriation of profits and dividends
Table 3.13. Current Account of the Balance of Payments 2017 – 2019 (RM million)
2017 20181 20192 Receipts Payments Net Receipts Payments Net Receipts Payments Net Balance on goods and services 966,174 872,223 93,951 998,101 899,461 98,640 1,028,202 933,098 95,104 Goods 807,012 690,246 116,766 841,966 713,306 128,660 868,924 740,759 128,166 Services 159,162 181,977 -22,815 156,135 186,155 -30,021 159,277 192,339 -33,062 Transport 19,336 48,896 -29,561 20,017 50,018 -30,001 20,696 51,592 -30,896 Travel 78,797 45,915 32,882 74,601 46,539 28,062 76,189 47,972 28,218 Other services 61,029 87,166 -26,137 61,517 89,598 -28,082 62,392 92,775 -30,383 Primary income 53,455 89,809 -36,354 54,193 95,078 -40,885 56,609 97,754 -41,144 Compensation of employees 7,077 11,850 -4,773 7,323 13,744 -6,421 7,913 14,482 -6,569 Investment income 46,378 77,959 -31,581 46,870 81,334 -34,465 48,696 83,272 -34,575 Secondary income 16,696 34,018 -17,322 16,502 35,665 -19,163 17,145 37,110 -19,965 Balance on current account 1,036,325 996,050 40,275 1,068,796 1,030,205 38,591 1,101,956 1,067,962 33,995 % of GNI 3.1 2.5 – 3.0 2.0 – 3.0
1 Estimate. 2 Forecast. Note: Total may not add up due to rounding. Source: Department of Statistics and Ministry of Finance, Malaysia.
Economic Outlook 2019 69
Chapter 3.indd 69 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
by foreign investors in Malaysia. Investment following injections of equity capital by MNCs income accruing to foreign investors is expected to subsidiaries in Malaysia. Meanwhile, direct to increase 4.3% to RM81.3 billion. Most of the investments abroad are mainly channelled investments are in manufacturing and mining into the O&G industry as well as finance and sectors as well as finance and insurance; insurance subsector. and wholesale and retail trade subsectors. Meanwhile, repatriation of investment income Portfolio investment recorded a large net accruing to Malaysian companies investing outflow of RM40.9 billion mainly attributed to abroad, particularly in the mining and services higher net sales of domestic debt securities sectors are expected to record RM46.9 billion. by foreign investors. Non-resident portfolio outflows were driven primarily by external Net outflows in the secondary income account factors, including expectations of a faster pace are expected to be larger at RM19.2 billion of US interest rate normalisation and further due to higher remittances by foreign workers escalation of trade tensions. During the same to Bangladesh, India, Indonesia, Myanmar and period, resident investors continued to acquire Nepal. Gross outflows, primarily remittances portfolio assets abroad in equity fund shares by foreign workers are expected to rise 4.8% to and debt securities. Other investments, however, RM35.7 billion in line with higher requirement recorded a significant net inflow of RM54.8 for labour in manufacturing, construction and billion mainly due to higher placement of plantation sectors. Meanwhile, remittances by currencies and deposits with domestic banking Malaysians working abroad are expected to system and higher net settlement of external remain low. loans by non-residents.
The financial account recorded a large net inflow In 2019, the current account is expected to of RM24.4 billion in the first half of 2018 mainly remain in surplus, albeit narrowing between due to higher placement of currency and deposits 2% and 3% of GNI attributed to lower goods with domestic financial institutions, offsetting surplus as well as widening services and outflows of non-resident portfolio investments. income deficits. The goods surplus is expected The direct investment account registered a net to narrow to RM128.2 billion as import growth inflow of RM10 billion supported by continued is anticipated to outpace exports, following inward direct investment which more than continued demand for capital and intermediate offset outward flows. Inward direct investment goods. The services account deficit is registered a net inflow of RM16.3 billion expected to widen to RM33.1 billion following continued reliance on foreign transport as well as technical and trade-related services. Figure 3.8. International Reserves Meanwhile, the surplus in the travel account is RM billion Months/Times expected to be higher at RM28.2 billion driven 600 12 by continued tourist arrivals and per capita Reserves Months of retained imports spending which more than offset residents’ 500 right scale 10 Reserves/short-term external debt spending abroad for leisure, business and 400 8 pilgrimage.
300 6 Primary income account is anticipated to
200 4 register a higher deficit at RM41.1 billion. This is mainly due to higher profits expected 100 2 by locally-incorporated MNCs together with a larger net outflow of compensation to foreign 0 0 OJAJOJAJOJAJ professional skills and expertise. Meanwhile, 2016 2017 2018 net outflows in the secondary income account As at 15 October 2018, Malaysia’s international reserves amounted to are expected to widen to RM20 billion following RM426.1 billion or USD102.8 billion adequate to nance 7.3 months of retained imports and 0.9 times the short-term external debt (end-December 2017: outward remittances by foreign workers, which RM414.7 billion; USD102.4 billion; 7.2 months; 1.1 times). are expected to remain substantial, reinforced Source: Bank Negara Malaysia. by the upward revision of minimum wage rate.
70 Economic Outlook 2019
Chapter 3.indd 70 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Feature Article 3.2
Impact of Trade War on the Malaysian Economy
Background
Globalisation and free trade have gained prominence over the past decades. Despite some limitations, this development has contributed to economic growth, poverty reduction and enhanced integration among countries (Dollar et al., 2001). Recently, the rise of trade war between the US and its leading trade partners, especially China has limited the progress of globalisation. The negativity stemming from the trade war could increase the cost of doing business, dampen investors’ confidence and heighten financial market volatility.
The series of trade actions initially rose in January 2018, when the US announced a steep tariff on solar panels and washing machines followed by steel and aluminium in March on all trading partners. The trade conflict became more intense when the US imposed tariffs on Chinese imports worth USD50 billion in two tranches in July and August on more than 1,000 products. Further, the US imposed a 10% tariff on Chinese imports worth USD200 billion in September comprising almost 6,000 items. This brings the total amount subjected to higher tariffs to USD250 billion in Chinese goods, on top of duties on solar panels, washing machines, steel and aluminium imposed on all trading partners.1 Subsequent retaliation by trading partners may further escalate risks to trade, investment and global growth.
China has remained as Malaysia’s largest trading partner for nine consecutive years constituting 13.5% or RM126 billion of total exports in 2017. Meanwhile, the US was the third largest export destination accounting for 9.5% or RM88.7 billion of Malaysia’s total exports. Hence, any development that takes place in these major trading partners will have both direct and indirect impact on the nation’s economic growth. This article assesses the potential impact on Malaysia, following the US tariffs on solar panels, washing machines, aluminium and steel products as well as the indirect effect of tariffs levied on USD250 billion worth of Chinese products.
Impact on the Malaysian Economy
The impact of tariffs directly imposed on Malaysia’s exports to the US, namely solar panels, washing machines, steel and aluminium is relatively minimal. Export of these products to the US only accounted for 0.8% of total exports or RM7.3 billion in 2017. Meanwhile, exports which will be indirectly implicated following the USD250 billion worth of Chinese products subjected to higher tariffs accounted for about 12% of Malaysia’s total exports or RM108 billion (USD25.1 billion) in 2017. The bulk of the products encompasses E&E, in particular, electronics,
Figure 3.2.1. Malaysia s Exports to China Encompassing Products under the USD250 billion Tariffs by the US
Basic non- 1 ferrous metal Others 3% 15% Electronic machinery 12% RadioTV equipment 1% Rubber product 2017 Of ce machinery & natural rubber E&E 15% RM108 billion 7% 46% Chemical (USD25.1 billion) Electronics 8% 72%
Metal ores & other mining 12% Crude oil & gas 9%
1 Include transport equipment, optical and scientific instrument, special machinery, fruits, vegetables, plastics, glass, yarn and wood products. Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation.
1 Information as of September 2018.
Economic Outlook 2019 71
Chapter 3.indd 71 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Figure 3.2.2. Imposition of Trade Tariffs between the United States and People s Republic of China
United States People’s Republic of China 2018 Tariffs1 January • 30% on solar panels • 20% on washing machines
Tariffs1 March • 25% on steel • 10% on aluminium April Tariffs • 25% on aluminium waste and scrap; pork • 15% on fruits, nuts, steel pipes and alcoholic products
Tariffs worth USD50 billion July Tariffs worth USD50 billion First tranche: USD34 billion First tranche: USD34 billion • 25% on products including • 25% on products including machinery, mechanical soybeans and vehicles appliances and electrical equipment
Second tranche: USD16 billion August Second tranche: USD16 billion • 25% on products comprising • 25% largely on plastics, semiconductors, plastics, chemicals, mineral fuels and chemicals and tractors medical equipment
Tariffs worth USD200 billion September Tariffs worth USD60 billion • 10% involving E&E, auto • 5% on products including parts, meat, vegetables, smaller aircraft, computers and seafood and computers textiles • 10% on products comprising chemicals, meat, wheat, wine and lique ed natural gas
1 Imposed on all trading partners. Source: US Trade Representative Of ce; Ministry of Commerce, PR China; Peterson Institute for International Economics; and Bloomberg.
72 Economic Outlook 2019
Chapter 3.indd 72 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
office machines and automatic data processing equipment as well as electrical machinery and appliances. Other products include crude oil and gas; metal ores and other mining goods; as well as chemicals, plastics and rubber products.
Almost 50% of Malaysia’s exports are incorporated into China’s final products, which are then exported to the US (OECD, 2014). Based on this assumption, Malaysia’s exports will likely decline by 0.08 percentage points, while the GDP by 0.02 percentage points over the period of 2018 – 2020. Nevertheless, if the trade war escalates and drags down global output by 0.4 percentage points by 2020, the Malaysian economy could lose up to 0.7 percentage points. This is based on an econometric analysis that indicates a 10% drop in global growth will reduce Malaysia’s GDP by 14%.2
Figure 3.2.3. Impact on Malaysia s Exports and GDP Figure 3.2.4. Worst-case Scenario baseline deviation baseline deviation (percentage point) (percentage point) 2018 2018 – 2020 2018 – 2020 2018 – 2020 0.00 0.0 -0.1 -0.02 -0.01 -0.2 -0.04 -0.02 -0.3 -0.4 -0.06 -0.4 -0.06 -0.5 -0.6 -0.08 Real GDP -0.08 -0.7 -0.7 Exports -0.8 -0.10 World GDP Malaysia GDP Source: Ministry of Finance, Malaysia estimates. Source: Ministry of Finance, Malaysia estimates.
The trade conflict between the US and China will have global repercussions, not only will it inhibit global trade and growth but there will also be disruptions to supply chains, impacting businesses, jobs and consumers. Moreover, greater-than-expected inflationary pressure may also spur faster-than-anticipated monetary tightening by the US Federal Reserve, which may further hurt investment and global restocking demand. Nevertheless, large trade gains could be derived as both the US and China substitutes its demand for imports to other emerging markets as well as relocation by MNCs seeking to bypass these trade tariffs. However, the latter will take time to materialise as firms will require greater certainty over the duration and significance of the trade war.
Conclusion
Malaysia has developed strong trading networks and diversified sectors over the years, which will enable domestic companies to navigate the disruptions and seek new opportunities and alternative markets. Furthermore, Malaysia is committed to engage and pursue trade initiatives, including through bilateral and multilateral agreements that will benefit Malaysian companies and entrepreneurs. Among the free trade agreements (FTAs) in the pipeline include, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), ASEAN – Hong Kong FTA, Regional Comprehensive Economic Partnership Agreement (RCEP), Malaysia – European Free Trade Association Economic Partnership Agreement (MEEPA) and Malaysia – Iran Preferential Trade Agreement (MIPTA).
2 Estimates by Ministry of Finance, Malaysia.
Economic Outlook 2019 73
Chapter 3.indd 73 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Prices Given the high base-effect in 2017, the transport group grew at a slower pace of 2.7%. In 2018, The Consumer Price Index (CPI) grew 1.3% (y-o-y) inflation is expected to grow at a moderate during January to August 2018. The slower pace between 1.5% and 2.5%. This is mainly expansion was attributed to lower commodity due to fixed RON95 petrol and diesel prices prices and better ringgit performance which at RM2.20 and RM2.18 per litre, respectively eased the food and non-alcoholic beverages as well as implementation of zero-rated GST prices at 2%. Similarly, prices of housing, water, from June to August 2018. Meanwhile, inflation electricity, gas and other fuels increased 2%. in 2019 is projected to increase between 2.5%
Table 3.14. Consumer Price Index January – August (2010 = 100)
Contribution to Change Weights¹ CPI growth (%) (percentage points) 2017 2018 2017 2018 Food and non-alcoholic beverages 29.5 3.8 2.0 1.16 0.64 Alcoholic beverages and tobacco 2.4 0.1 -0.2 0.00 -0.01 Clothing and footwear 3.2 -0.3 -1.5 -0.01 -0.04 Housing, water, electricity, gas and other fuels 23.8 2.2 2.0 0.49 0.45 Furnishings, household equipment and routine 4.1 2.0 0.7 0.08 0.03 household maintenance Health 1.9 2.7 1.3 0.05 0.03 Transport 14.6 13.5 2.7 1.66 0.38 Communication 4.8 -0.3 -1.8 -0.01 -0.07 Recreation services and culture 4.8 2.7 -0.6 0.12 -0.03 Education 1.3 1.6 1.1 0.02 0.01 Restaurants and hotels 2.9 2.4 1.6 0.07 0.05 Miscellaneous goods and services 6.7 1.3 -0.8 0.08 -0.05 CPI 100.0 3.9 1.3 3.88 1.26
1 Weights based on Household Expenditure Survey 2016. Note: Total may not add up due to rounding. Source: Department of Statistics, Malaysia.
Table 3.15. Producer Price Index January – August (2010 = 100)
Change Contribution to PPI growth Weights1 (%) (percentage points) 2017 2018 2017 2018 PPI 100.0 8.2 -0.9 8.22 -0.90 Agriculture, forestry and fishing 6.7 12.5 -11.6 0.87 -0.82 Mining 7.9 26.3 19.0 1.46 1.20 Manufacturing 81.6 6.5 -1.9 5.48 -1.54 Electricity and gas supply 3.4 2.6 1.0 0.10 0.04 Water supply 0.3 0.1 0.4 0.00 0.00 PPI by stage of processing 100.0 8.2 -0.9 8.22 -0.90 Crude materials for further processing 16.4 4.5 4.3 0.76 0.68 Intermediate materials, supplies and components 56.1 7.8 -2.1 4.47 -1.16 Finished goods 27.5 3.9 -2.5 1.07 -0.64
1 Weights based on Economic Census 2016. Note: Total may not add up due to rounding. Source: Department of Statistics, Malaysia.
74 Economic Outlook 2019
Chapter 3.indd 74 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Feature Article 3.3
Determinants of Inflation in Malaysia
Introduction
Malaysia’s inflation rate as measured by the Consumer Price Index (CPI) has been on an increasing trend since 2010. The inflation recorded its lowest increase in February 2015 (0.1%) and highest in March 2017 (4.9%). Meanwhile, the long-term average inflation rate has been hovering around 2.5% between 2010 and 2018. The CPI is weighed up mainly by three out of 12 groups (67.9%), namely, food & non-alcoholic beverages; housing, water, electricity, gas & other fuels; and transport.
Figure 3.3.1. Consumer Price Index (2010 100)
Index % change 125 CPI 6 CPI (right scale) GST
120 Long-term average Increase 5 (right scale) of toll fare
115 Ringgit depreciation1 minimum wage 4 Implementation of Implementation of
110 3 2.5%
105 2
100 1 Crude oil price > USD100/barrel
95 JAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJ 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 1 Period refers to ringgit depreciation against USD. Source: Department of Statistics, Bank Negara and Ministry of Finance, Malaysia.
Determinants of Consumer Price Index
There are various factors which influence the fluctuations in CPI. These factors include changes in interest rate, exchange rate, wage level, energy prices, fiscal position, economic growth as well as demand and cost-related issues (Hassan et al., 2016). Interest rate can be used as a policy instrument to control inflation. A central element of monetary policy is short-term interest rates where inflation and future output can be influenced by increasing its rates (Alvarez et al., 2001). Meanwhile, in an open economy, the exchange rate affects local prices to a certain extent, whereby when a country’s exchange rate depreciates, it will increase aggregate demand. A fall in exchange rate makes a country’s products relatively cheaper, resulting in higher exports (Zakaria et al., 2012). However, a large and persistent exchange rate depreciation would entail higher domestic inflation as imports become more expensive (BNM, 2015) compared to an appreciation.
Another influencing factor is wage where the wage-price spiral begins when firms start bidding against each other for labour, leading to higher wages, which in turn escalates prices further. This situation becomes a vicious cycle, where wages will continue to increase (Layard et al., 1994). A rise in energy prices, including crude oil, also causes prices of other goods and services to increase as it affects the cost of production (Murdipi et al., 2016) resulting in cost- push inflation as producers mark up prices to maintain a profit margin (Shaari et al., 2013). A country’s fiscal position also influences inflation. Fiscal deficits could increase the money supply in an economy resulting in higher prices (Olasunkanmi et al., 2016). Demand-driven growth also leads to demand-pull inflation as the economy uses up scarce resources amid inelastic short-run aggregate supply (Munyeka, 2014).
Economic Outlook 2019 75
Chapter 3.indd 75 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Analysis of Inflation in Malaysia
This article evaluates how exchange rate, crude oil price, external debt/export ratio and indirect tax per capita influences inflation rate in Malaysia. Towards this end, the Autoregressive Distributed Lag (ARDL) method used by Hassan et al., (2016) was adopted to estimate factors influencing inflation in Malaysia. The variables selected in this article are:
• Exchange rate The Ringgit depreciated through 2010 – 2018 mainly due to external factors such as trade war as well as the outflow of foreign funds due to interest rate normalisation in the advanced economies. The depreciation affects mainly through imported inflation, especially for food items which cost about RM25 billion per year.
• Crude oil price Household Expenditure Survey (2016) reveals that energy accounts for 38.4% of total monthly household spending. The Brent oil price fluctuated significantly between USD124.93 per barrel in March 2012 and USD30.80 per barrel in January 2016, affecting the transport group which accounts for about 15% of the CPI weight.
• External debt/export ratio
The external debt/export ratio provides a quick indicator of an economy's capability to repay its external debt through export earnings. A ratio below one suggests that debt can be repaid in less than a year. Malaysia’s external debt/export ratio increased from 7.7 in 2010 to 11.3 in 2018.
• Indirect tax per capita
The Goods and Services Tax (GST) was introduced in April 2015 at 6%, which was then zero-rated between June and August 2018. Meanwhile, Sales Tax (5% and 10%) and Service Tax (SST) at 6% were reintroduced in September 2018. On average, SST and GST per capita recorded RM127 and RM328, respectively.
Figure 3.3.2. Trend in Consumer Price Index, Exchange Rate and Crude Oil Price
USD/RM Index USD/barrel Index 5.0 Exchange rate 125 140 Crude oil price (Brent) 125 CPI (right scale) CPI (right scale) 4.5 120 120 120
4.0 115 100 115
3.5 110 80 110
3.0 105 60 105
2.5 100 40 100
2.0 95 20 95 JAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJ JAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJ 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Department of Statistics, Bank Negara and Ministry of Finance, Malaysia.
76 Economic Outlook 2019
Chapter 3.indd 76 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Figure 3.3.3. Trend in Consumer Price Index, External Debt Export Ratio and Indirect Tax Per Capita
Ratio Index RM Index 21 External debt/export ratio 125 500 Indirect tax per capita 125 CPI (right scale) CPI (right scale) 18 120 425 120 15 115 350 115 12 110 275 110 9 105 200 105 6
3 100 125 100
0 95 50 95 JAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJ JAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJ 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Department of Statistics, Bank Negara and Ministry of Finance, Malaysia.
Following the methodology, monthly data for the periods of 2010 to 2018 were used for the estimation. ARDL was deemed a suitable method to deal with the nature of the data which has high frequency and influenced by lag effects. All these data were transformed into logarithmic form.
Findings
The results revealed that exchange rate, crude oil price, external debt/export ratio as well as indirect tax per capita have significant impact on CPI. The interpretation of the results are as follows: a 1% change in exchange rate, crude oil price, external debt/export ratio and indirect tax per capita will increase the overall CPI by 0.337%, 0.112%, 0.094% and 0.073%, respectively.
Figure 3.3.4. Determinants of Consumer Price Index
USD/RM 1% CPI 0.337%
Crude Oil Price 1% CPI 0.112%
External Debt/ 1% CPI 0.094% Export Ratio Indirect Tax 1% CPI 0.073% Per Capita
Source: Ministry of Finance, Malaysia estimates.
Conclusion
In summary, exchange rate has the highest impact on CPI followed by crude oil price, external debt/export ratio and indirect tax per capita. In this regard, it is crucial to implement policies to strengthen the nation’s economic fundamentals, promote renewable energy, improve public transportation, facilitate high value added products and enhance the efficacy and efficiency of tax collection. In addition, the Local Currency Settlement Framework1 which promotes wider use of local currencies for trade and investment could be explored further to mitigate the impact of exchange rate volatility.
1 Bank Indonesia, Bank Negara Malaysia and Bank of Thailand.
Economic Outlook 2019 77
Chapter 3.indd 77 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Figure 3.9. CPI and PPI Trends (% change)
% Consumer Price Index % % Producer Price Index % 25 25 25 50 CPI PPI 20 20 20 40
15 15 15 30
10 10 10 20
5 5 5 10
0 0 0 0
-5 -5 -5 -10
-10 Food and non-alcoholic beverages -10 -10 Manufacturing -20 Housing, water, electricity, right scale Mining -15 gas and other fuels -15 -15 right scale -30 Agriculture, forestry Transport and shing -20 -20 -20 -40 JAJOJAJOJAJ JAJOJAJOJAJ 2016 2017 2018 2016 2017 2018
Source: Department of Statistics, Malaysia.
and 3.5% partly attributed to the base-effect the largest number in the services sector at 9.1 following the zerorisation of GST as well as the million or 62.2% of total employment, followed implementation of SST. The inflation outlook by manufacturing (17.3%) and agriculture (11%) will also be subjected to uncertainties in global sectors. Job vacancies decreased to 550,449, oil prices, geopolitical tensions, trade war and while the number of active job seekers declined foreign exchange rate movements. 22.3% to 241,046, of which 1.7% was new registrants. Amid favourable labour market The Producer Price Index (PPI) decreased 0.9% conditions, the number of retrenched workers (y-o-y) between January and August 2018 remained low at 9,249 persons. mainly weighed down by contraction of 1.9% in the manufacturing sector due to reduction In 2018 and 2019, the labour market is expected in the production cost following stronger to remain favourable. The unemployment rate ringgit as compared to last year. In addition, is expected to be sustained at 3.3% with more the PPI in agriculture, forestry and fishing new jobs in the economy. Total employed persons sector declined 11.6% attributed to lower are projected to increase to 14.8 million and commodity prices. On the contrary, higher 15.1 million in 2018 and 2019, respectively. In crude oil prices increased the index of the 2019, about 9.3 million persons will be recruited mining sector which recorded a double-digit growth of 19%. In 2018, the PPI is projected to grow marginally on account of lower global Table 3.16. Labour Market Indicators input cost. Nevertheless, PPI is expected to Change (‘000) trend upwards in 2019 amid higher commodity (%) prices. H11 20182 20193 H11 20182 20193 Labour force 15,137 15,278 15,576 1.6 2.2 1.9 Employment 14,629 14,767 15,062 1.7 2.2 2.0 Labour Market Unemployment 508 511 514 (3.4) (3.3) (3.3)
1 January to June 2018. During the first half of 2018, the unemployment 2 Estimate. rate remained 3.4%. Total labour force increased 3 Forecast. Note: Figures in parentheses refer to unemployment rate. 1.6% to 15.1 million. Meanwhile, total employed Source: Department of Statistics and Economic Planning Unit, Ministry of persons increased 1.7% to 14.6 million with Economic Affairs, Malaysia.
78 Economic Outlook 2019
Chapter 3.indd 78 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
Table 3.17. Employment by Sector
Share (‘000) (%) H12 20183 20194 H12 20183 20194 Agriculture, forestry and fishing 1,608.3 1,855.7 1,868.5 11.0 12.6 12.4 Mining and quarrying 95.2 81.2 81.3 0.7 0.6 0.5 Manufacturing 2,535.6 2,461.6 2,478.7 17.3 16.7 16.5 Construction 1,290.0 1,347.0 1,362.7 8.8 9.1 9.0 Services 9,099.9 9,021.5 9,270.9 62.2 61.1 61.6 Total1 14,628.9 14,767.0 15,062.1 100.0 100.0 100.0
1 Total includes ‘Activities of extraterritorial organisations and bodies’. 2 January to June 2018. 3 Estimate. 4 Forecast. Source: Department of Statistics and Economic Planning Unit, Ministry of Economic Affairs, Malaysia.
in the services sector as compared to 9 million RM85,600 or 2.9% on account of productivity in 2018. Meanwhile, total employed persons improvement in the manufacturing (3.9%) and in the manufacturing and agriculture sectors construction (3.4%) sectors, while services are projected to be sustained at 2.5 million sector declines 3%. and 1.9 million in 2018 and 2019, respectively.
As at end-August 2018, the number of registered Conclusion foreign workers decreased to 1.7 million. The current share of foreign workers remained Malaysia’s near-term growth outlook relatively low at 12% of total employment remains resilient with sound macroeconomic following the Government’s effort to reduce fundamentals, stable financial conditions as dependency on low-skilled foreign workers of well as broad-based and diversified economic not more than 15% of total employment by 2020. structure. Domestic demand continues to Foreign workers were mainly from Indonesia drive the economy while the external sector (39%), Nepal (20.9%) and Bangladesh (18%). The benefitting from steady global growth and manufacturing sector employed the highest trade activities. Nevertheless, as a highly open number of foreign workers (37.1%), followed economy, Malaysia faces several risks relating by construction (17.8%) and plantation (15.8%) to uncertainties in the external environment. sectors. Meanwhile, the number of expatriates Heightening financial market volatility as well decreased 26.3% to 108,994. The majority of as escalating protectionism and trade tensions, expatriates were from India (21.2%), followed which could have a dampening effect on global by China (15.4%) and Bangladesh (12.2%). trade and investment flows are expected to The expatriates were mainly employed in the have an adverse impact on Malaysia’s economic services (54.1%), information technology (25.4%) growth. Moving forward, the Government through and manufacturing (7.3%) sectors. various measures will continue to strengthen structural reforms and accelerate the country’s Labour productivity increased in the second convergence with developed economies. These quarter of 2018 to RM81,285 or 2% (DOSM, include addressing mismatch in the labour 2018). For the year, labour productivity is market; improving quality of education and expected to increase to RM83,300 or 2.5%. The training; further diversifying export products manufacturing sector is projected to record and markets; enhancing innovation and the highest increase of 3.8%, followed by adoption of technology; as well as unlocking construction (3.3%) and services (3.2%) sectors. the potential of the digital economy as a future In 2019, labour productivity is projected to reach driver of growth.
Economic Outlook 2019 79
Chapter 3.indd 79 25/10/2018 8:49 PM CHAPTER 3 MACROECONOMIC OUTLOOK
References
Alvarez, F., Lucas, R. E. & Weber, W. E. (2001). LTE OpenSignal. (2018). The State of LTE. Retrieved Interest rate and Inflation. The American from https://opensignal.com/reports/2018/02/ Economic Review, 91(2), 219-225. state-of-lte
Bank Negara Malaysia. (2016). Annual Report Malaysian Communication and Multimedia 2015: The Impact of Exchange Rate Depreciation Commission. (2017). Internet Users Survey on Inflation in Malaysia. Retrieved from http:// 2017. Retrieved from https://www.mcmc.gov. www.bnm.gov.my/files/publication/ar/ my/skmmgovmy/media/General/pdf/MCMC- en/2015/cp01_004_box.pdf Internet-Users-Survey-2017.pdf
Department of Statistics, Malaysia. (2017). ICT Use Malaysia Digital Economy Corporation. (2017). and Access by Individuals and Households Survey Malaysia’s National eCommerce Strategic Report. Putrajaya: Department of Statistics, Roadmap Report. Cyberjaya: Malaysia Digital Malaysia. Economy Corporation.
Department of Statistics, Malaysia. (2017). Malaysia Digital Economy Corporation. (2018). Report on Household Expenditure Survey 2016. Developing the NXGeneration Cybersecurity Putrajaya: Department of Statistics, Malaysia. Industry Presentation Paper. Cyberjaya: Malaysia Digital Economy Corporation. Department of Statistics, Malaysia. (2018). Business Tendency Statistics: Third Quarter 2018. Munyeka, W. (2014). The Relationship between Retrieved from https://www.dosm.gov.my Economic Growth and Inflation in the South African Economy. Mediterranean Journal of Department of Statistics, Malaysia. (2018). Labour Social Sciences, 5(15), 2039-2117. Productivity: Second Quarter 2018. Retrieved from https://www.dosm.gov.my Murdipi, R. & Law, S. H. (2014). Dynamic Linkages Among Price Indices and Type of Inflation in Dollar, D. & Kraay, A. (2001). Trade, Growth and Malaysia. Jurnal Ekonomi Malaysia, 50(1), 41-52. Poverty. (Working Paper No. WPS 2615). Washington, DC: World Bank Policy Research. Olasunkanmi, O. I. & Yetunde, S. H. (2016). Does Fiscal Deficit Granger Cause Impulsiveness in Fortanier, F. & Matei, S. (2017). Measuring Digital Inflation Rate in Nigeria?Economica, 12(4), 208- Trade: Results of the OECD-IMF Stocktaking 216. Survey. Retrieved from https://www.imf.org/ external/pubs/ft/bop/2017/pdf/17-07.pdf Organisation of Economic Development. (2014). Trade in Value Added Nowcast Estimates. Hassan, M. S., Islam, F. & Ijaz, M. (2016). Inflation in Retrieved from https://stats.oecd.org/Index. Pakistan: Evidence from ARDL Bounds Testing aspx?DataSetCode=TIVA_NOWCAST Approach. International Journal of Management Development, 1(3):181-195. Shaari, M. S., Tan, L. P. & Rahim, H. A. (2013). Effects of Oil Price Shocks on the Economic International Monetary Fund. (2018). Sectors in Malaysia. International Journal of Measuring the Digital Economy Policy Paper Energy Economics and Policy, 3(4), 360-366. (No. 022818). Retrieved from https://www. imf.org/en/Publications/Policy-Papers/ World Bank. (2018). Malaysia’s Digital Economy: Issues/2018/04/03/022818-measuring-the- A New Driver of Development. Washington, digital-economy DC: World Bank.
Layard, R., Nickell, S. & Jackman, R. (1994). The Zakaria, N. A., Rahim, H. A. & Merous, N. H. (2012). Unemployment Crisis. Oxford: Oxford University The Impact of Exchange Rate on Malaysia Press. Wood Export. International Journal of Business and Technopreneurship, 2(3), 511-520.
80 Economic Outlook 2019
Chapter 3.indd 80 25/10/2018 8:49 PM MONETARY AND FINANCIAL 4 DEVELOPMENTS
• Overview • Monetary Developments • Financial Sector Developments Feature Article 4.1 – Financing for Small and Medium Enterprises: Financial Market and Capital Market • Conclusion
Chapter 4.indd 81 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
82 Economic Outlook 2019
Chapter 4.indd 82 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
MONETARY AND FINANCIAL 4 DEVELOPMENTS Overview 3.9% as at end-July 2018. The weighted average lending rate (ALR) was at 5.44%. Meanwhile, n the near term, monetary and financial interest rate on savings deposit of commercial Iconditions will continue to be accommodative banks increased six bps to 1.05% as at end- and supportive of economic growth. This will July 2018. The interest rates on fixed deposits be backed by monetary operations which of 1-month to 12-month maturities ranged will ensure the orderly functioning of money between 3.08% and 3.33%, respectively. and foreign exchange markets as well as intermediation activities. The domestic financial sector is expected to remain sound supported Figure 4.1. Monetary Aggregates by financial institutions (FIs) operating with (% change) % strong capital and liquidity buffers. Similarly, 12 the domestic capital market will remain 10 M1 resilient driven by diversified instruments as 8 well as healthy market capitalisation level. 6 M3 Nevertheless, downside risks associated with 4 2 global uncertainties, particularly the pace 0 of monetary policy normalisation in the US -2 JMDSJMDSJM J1 and other major economies, geopolitical 2016 2017 2018 developments as well as escalating global trade 1 End-July 2018. Source: Bank Negara Malaysia. tensions will be of concern.
Monetary Developments Monetary aggregates continued to grow during the first seven months of 2018. M1 grew 4.7% Monetary Policy to RM411.1 billion as at end-July 2018 following higher demand deposit which increased 4.8%. In 2018, monetary policy continues to be Similarly, M3 rose 6.6% to RM1,786.9 billion supportive in providing a conducive environment contributed by claims on private sector, to promote growth while maintaining price particularly loans. Moving forward, money stability. The Overnight Policy Rate (OPR) supply is expected to be supported by the was increased 25 basis points (bps) to 3.25% extension of credit to private sector in the in January and kept unchanged during the form of loans and securities. subsequent nine months of 2018. Meanwhile, the Statutory Reserve Requirement (SRR) was The ringgit, along with all regional currencies, faced significant depreciation pressure against held steady at 3.50% of eligible liabilities since the US dollar, despite its strong performance 2016 as the current monetary policy stance in the first quarter of 2018. The ringgit’s remains supportive of economic activities. This performance in the first quarter was mainly is also in line with the anticipation of steady driven by non-resident portfolio inflows as economic growth with inflation remaining the OPR increase signalled a sustained strong benign. growth outlook for the economy. However, from April onwards, expectations of a faster Interest rates in the banking system rose in pace of monetary policy normalisation in tandem with the OPR adjustment in January 2018. the US and strengthening of the US dollar, The OPR was adjusted upwards to normalise led to non-resident portfolio outflows from the degree of monetary accommodation amid regional economies including Malaysia. The steady growth of the economy. The weighted base escalation of global trade tensions and spillover rate (BR) of commercial banks was increased to effect of the crisis in Turkey and Argentina
Economic Outlook 2019 83
Chapter 4.indd 83 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
Table 4.1. Factors Affecting M3 Financial Sector Developments January – July
Change Banking System Performance (RM billion) 2017 2018 During the first seven months of 2018, activities M3 30.9 64.3 in the banking system remain resilient with Net claims on Government 25.3 21.0 all financing indicators expanding. Loan Claims on Government 44.0 36.7 applications, approvals and disbursements Less: Government deposits 18.7 15.7 increased 5.7%, 5.1% and 7.3% to RM505 Claims on private sector 46.4 68.3 billion, RM223.1 billion and RM678.8 billion, Loans 25.6 46.2 respectively. Meanwhile, total loans outstanding Securities 20.9 22.1 expanded 5.3% to RM1,631 billion as at end- Net foreign assets1 -3.0 10.9 July 2018. The banking system is expected to Bank Negara Malaysia 3.2 8.3 remain sound, operating with strong capital Banking system -6.2 2.6 and liquidity buffers. Other influences -37.8 -35.9 Lending to businesses recorded a stable growth 1 Includes exchange rate revaluation losses/gains. Note: Total may not add up due to rounding. during the same period. Loan applications Source: Bank Negara Malaysia. rebounded 7.4% to RM221.8 billion. Total loan approvals increased 3.3% to RM100.5 billion. Meanwhile, total loan disbursements grew to other emerging markets also contributed 5.2% to RM487 billion with the business sector to the negative sentiments and depreciation accounting for about 72%. Most of the loans were pressure during the period. As at end-August channelled to manufacturing (27.4%) as well 2018, the ringgit in line with other regional as wholesale and retail trade, restaurants and currencies depreciated within the range of 0.6% hotels (26.1%) sectors. Total loans outstanding to and 7.7% against the US dollar. However, the the business sector increased 3.7% to RM588.5 ringgit performed better against other regional billion as at end-July 2018. currencies except for the Thai baht. Looking ahead, the ringgit will be more reflective Lending to households continued to record firm of the underlying fundamentals of the growth with loan disbursements increasing domestic economy when external uncertainties significantly by 13.2% to RM191.7 billion in the recede. first seven months of 2018. Loans disbursed to the household sector were mainly for consumption credit which totalled RM90.4 billion (47.2%), followed by residential properties at Figure 4.2. Performance of Ringgit against RM49.9 billion (26%) and passenger cars at Selected Currencies (% change) RM22.8 billion (11.9%). As at end-July 2018, End 2017 – End Aug 2018 total household loans outstanding expanded 6% amounting to RM936.7 billion, accounting 100 Indonesian rupiah Australian dollar for 57.4% of total loans outstanding in the 100 Philippine peso banking system. Chinese renminbi 1 100 Korean won The overall household debt valued at RM1,165.7 Pound sterling billion stood at 83.8% of GDP as at end-June Singapore dollar 2018. The debt level has been moderating since Euro 2015 following macro prudential measures 100 Thai baht implemented to rein in household debt levels. S dollar The bulk of debt comprises loans for purchase 100 Japanese yen of residential properties (53%), followed by -4 -2 0 2 4 6 8 personal use (14.4%) and passenger cars (13.8%). Source: Bank Negara Malaysia. Meanwhile, total household financial assets
1 Comprising loans granted by the banking system, development financial institutions (DFIs) and non-bank financial institutions.
84 Economic Outlook 2019
Chapter 4.indd 84 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
remain strong at RM2,458.4 billion. The debt Table 4.3. Banking System: Loans Outstanding servicing capacity of households remained intact, by Sector supported by stable income and employment (End-July) growth. Given the stable employment and Share income, the household debt level is expected RM billion (%) to remain manageable in 2018 and 2019. This is also supported by continuous measures 2017 2018 2017 2018 taken by the Government to raise awareness Business 567.4 588.5 36.6 36.1 and educate households on financial planning Non-SMEs1 275.3 285.3 17.8 17.5 and management. SMEs 292.0 303.2 18.8 18.6 Selected sectors The banking system maintained its capacity Primary agriculture 37.6 35.4 2.4 2.2 to absorb losses supported by strong capital Mining and quarrying 11.0 10.9 0.7 0.7 position. As at end-July 2018, common equity Manufacturing2 102.9 107.6 6.6 6.6 tier 1 capital, tier 1 capital and total capital Electricity, gas and 9.5 13.3 0.6 0.8 ratios stood at 13.3%, 14.2% and 17.7%, water supply respectively, well above the Basel III minimum Wholesale and retail 113.8 119.3 7.3 7.3 regulatory levels. Furthermore, the total capital trade, restaurants buffer remained high at RM149.5 billion and hotels which exceeded the minimum regulatory Construction 70.8 80.5 4.6 4.9 requirement. Real estate 111.2 117.3 7.2 7.2 Transport, storage and 40.7 37.9 2.6 2.3 Table 4.2. Banking System: Loan Indicators communication January – July Finance, insurance and 107.7 110.0 6.9 6.7 business activities RM billion Change Households 883.8 936.7 57.0 57.4 (%) of which: 2017 2018 2017 2018 Purchase of residential 473.2 513.9 30.5 31.5 Total1 properties Loans applications 477.6 505.0 4.0 5.7 Purchase of non- 79.5 79.8 5.1 4.9 Loans approvals 212.2 223.1 11.2 5.1 residential properties Loans disbursements 632.5 678.8 5.6 7.3 Purchase of passenger 146.5 146.0 9.5 9.0 Loans outstanding2 1,549.4 1,631.0 5.6 5.3 cars of which: Consumption credit 102.4 108.4 6.6 6.6 Business Sector of which: Loans applications 206.6 221.8 -4.7 7.4 Credit cards 35.3 36.3 2.3 2.2 Loans approvals 97.3 100.5 8.0 3.3 Personal use 66.9 72.0 4.3 4.4 Loans disbursements 463.2 487.0 6.0 5.2 Purchase of securities 59.6 64.9 3.8 4.0 2 Loans outstanding 567.4 588.5 6.7 3.7 Others 22.5 23.7 1.5 1.5 of which: Other sectors 98.3 105.8 6.3 6.5 SMEs Total3 1,549.4 1,631.0 100.0 100.0 Loans applications 97.5 107.7 -3.5 10.5 Loans approvals 34.3 37.5 -3.3 9.1 1 Non-SMEs refers to large corporations, including foreign entities, other domestic Loans disbursements 160.7 170.9 10.8 6.4 entities, Government and others. 2 Including agro-based. Loans outstanding2 292.0 303.2 8.1 3.8 3 Total = Business + Households + Other sectors. Households Note: Total may not add up due to rounding. Source: Bank Negara Malaysia. Loans applications 271.0 283.1 11.8 4.5 Loans approvals 114.9 122.6 14.1 6.7 Loans disbursements 169.3 191.7 4.4 13.2 Loans outstanding2 883.8 936.7 5.1 6.0 In the first seven months of 2018, the banking system recorded a higher pre-tax 1 Includes foreign entities, other domestic entities, Government and others. profit of RM22.3 billion despite a challenging 2 As at end-period. operating environment. This was supported by Note: Total may not add up due to rounding. Source: Bank Negara Malaysia. interest-/finance-related activities, contributing
Economic Outlook 2019 85
Chapter 4.indd 85 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
Figure 4.3. Banking System: Impaired Loans and Loan quality of the banking system continued Net Impaired Loans Ratio to remain sound throughout the period with (End-period) stable net impaired loans ratio2 of 0.98% as at
RM billion % end-July 2018. The banking system loan loss 32 Impaired loans 4 Net impaired loans ratio (right scale) coverage ratio stood at 128%. The banking 24 3 system’s liquidity remained sufficient with surplus ringgit placed with Bank Negara 16 2 Malaysia (BNM) amounted to RM177.8 billion 8 1 although there was a sizeable portfolio outflow in recent months. As at end-July 2018, the 0 JJMDSJMDSJMDSJMDSJM 1 0 Liquidity Coverage Ratio (LCR) of the banking 2014 2015 2016 2017 2018 system stood at 141.5%. Although financial 1 End-July 2018. Source: Bank Negara Malaysia. market is susceptible to external developments, including geopolitical and trade tensions, the outlook for domestic financial system remains approximately 70% to gross income. Meanwhile, stable and broadly intact. This is supported returns on assets and equity remained steady by deep and liquid financial market, sound at 1.5% and 13.1%, respectively. FIs and sustained confidence in the system.
Feature Article 4.1 Financing for Small and Medium Enterprises: Financial Market and Capital Market
Introduction
Small and medium enterprises (SMEs) constituting 98.5% of total establishments play an important role in the economy. It contributes 37.1% to GDP, 66% of total employment and 17.3% of total exports in 2017. The majority of SMEs are in the services sector (89.2%) followed by manufacturing (5.3%); construction (4.3%); agriculture (1.1%); and mining and quarrying (0.1%) (DOSM, 2016). Taking into cognisant of SMEs’ contribution to the economy, it is crucial to ensure broad funding options are available to support its growth, especially for working capital, improving or upgrading production process, enhancing R&D activities and consolidating debt or refinancing.
The main challenge faced by SMEs is raising funds to finance their businesses. The challenge is due to among others, lack of collateral and financial track record; insufficient loan information and documentation; unfeasible business plan and high risk-return profile. Given these constraints, SMEs obtain 32.1% of their financing needs from banks, development financial institutions (DFIs) and microcredit institutions while personal savings, shareholders and friends or relatives are the other sources of financing.
As at end-July 2018, about 94.9% of funding for businesses was from financial institutions (FIs) and the balance from the capital market. About 36.1% of total business entities have benefited from banking sector funding with 17.5% being non-SMEs while 18.6% were SMEs from various sectors. These sectors comprised of wholesale and retail trade; restaurants and hotels; real estate; finance, insurance and business services; manufacturing as well as construction.
2 Beginning January 2018, impaired loans are reported based on Malaysian Financial Reporting Standards (MFRS) 9. The adoption of MFRS 9 requirement is based on the financial year of the banks. Classification of impaired loans/financing and provisioning for loan/financing impairment are in line with MFRS 9.
86 Economic Outlook 2019
Chapter 4.indd 86 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
Figure 4.1.1. Access to SME Financing % 200
Internal funds/shareholders/personal savings 160 Banks/DFIs/microcredit institutions 14.5 Friends or relatives 120 Suppliers/trade credit/angels/NGOs 20.8 22.1 18.0 66.0 Grants or financing from Government 32.1 25.4 47.6 80 Co-operatives Financing via online platform (crowdfunding platform) Others 1 40 76.1 75.0 72.8 62.5
0 Overall Micro Small Medium Note: Data excludes wholesale and retail trade sub-sector. Establishments can choose more than one answer and the percentages can exceed 100%. 1 Others include financing from leasing/factoring/venture capitals/credit companies/licensed money lenders/pawnshops and pawnbrokers including Ar-Rahnu. Source: Economic Census 2016, Department of Statistics, Malaysia.
Figure 4.1.2. Financing through Banking and Capital Market
Banking Capital market % 5.1% 100
90 94.9%
80
70
60
50 July 2 1 4 3 2 1 4 3 2 1 4 3 2 1 4 3 2 1 4 3 2 1 4 3 2 1 4 3 2 1 4 3 2 1 July 2 1 2014 2015 2016 2017 2018
Source: Bank Negara Malaysia.
Financing Programmes
There are various financial programmes offered by FIs and capital market for SMEs. These programmes are as follows: Financing through Financial Institutions
Table 4.1.1. List of Financing Programmes through Financial Institutions
Financial No. Programmes Objectives Features Institutions 1. Fund for Small and Ensures eligible SMEs • RM50,000 – RM5 million • All commercial Medium Industry 2 receive a reasonable per group of customer and Islamic (FSMI2) cost of financing • Tenure: 5 years banks • Rate: 4% – 6% per • SME Bank annum • Agro Bank • Malaysia Industrial Development Finance Bhd (MIDF) • Sabah Development Bank
Economic Outlook 2019 87
Chapter 4.indd 87 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
Financial No. Programmes Objectives Features Institutions 2. New Entrepreneur Promotes growth • RM5 million • All commercial Fund 2 (NEF2) and expansion of (maximum) per group and Islamic Bumiputera SMEs of customer banks • Tenure: 5 years • SME Bank • Rate: 4% – 6% per annum • MIDF
3. Micro Enterprise Increases access • RM1,000 – RM50,000 • Alliance Bank Fund (MEF) to micro-financing per micro-enterprise Malaysia for enterprises with • Tenure: 5 years • AmBank viable businesses • Rate: 6% per annum • Bank Muamalat • Bank Kerjasama Rakyat • Bank Simpanan Nasional • CIMB Bank • Public Bank • Maybank • United Overseas Bank 4. Rural Development Provides financing • RM20,000 – RM250,000 • Bank Kerjasama Financing-i Scheme for the purchase (in operation <3 years) Rakyat (SPED) of machinery • RM250,000 – • SME Bank and equipment, RM500,000 (in working capital operation >3 years) and renovation or • Financing allowed up upgrading of rural to 3 times only entrepreneurs’ • Tenure: 3 – 5 years for premises in loans below RM250,000 manufacturing, • Tenure: 5 – 7 years for services, loans above RM250,000 commercial • 6-months grace period agriculture and from the disbursement countryside tourism • Service charge: 5% annual rest 5. BizMula-i Provides financing to • RM50,000 – RM300,000 • Credit Guarantee start-up businesses • Tenure: 7 years Corporation • Rate: Base Finance (CGC) Rate (BFR) by Maybank Islamic +0.30% – 1.65%
6. BizWanita-i Provides financing • RM50,000 – RM300,000 • CGC to women • Tenure: 7 years entrepreneurs • Rate: BFR by Maybank Islamic +0.30% – 1.65%
7. Bumiputera Provides working • Up to RM3 million for • CGC Entrepreneur capital for first-time application Project Fund-i Bumiputera SMEs • Up to RM5 million (TPUB-i) awarded contracts for subsequent or projects applications • For food catering services, financing is up to RM750,000
88 Economic Outlook 2019
Chapter 4.indd 88 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
Financial No. Programmes Objectives Features Institutions • For partnership and sole proprietorship, financing is up to RM500,000 • Rate: First time financing – 5% per annum • Subsequent financing – BFR by Maybank Islamic +1% per annum • Maximum tenure: 5 years based on contract or whichever is earlier
Source: A Guidebook for SME Initiatives 2017, SME Corp.
Financing through Capital Market
1) Listed Market
1.1 Leading Entrepreneur Accelerator Platform
Leading Entrepreneur Accelerator Platform (LEAP) market addresses the funding gap faced by SMEs through an alternative fundraising platform. It helps to bring together potential SMEs onto a single platform to create a conducive marketplace. LEAP is the first of its kind in ASEAN, putting Malaysia ahead of the curve in the region in capital market innovation, thus increasing competitiveness. Since its inception on 25 July 2017, the number of companies successfully listed have grown from two to six as at end-August 2018.
2) Unlisted Market 2.1 Equity Crowdfunding Equity Crowdfunding (ECF) is essentially a fundraising campaign where people invest in SME companies in exchange for shares. Investors become partial owners of the company and have the opportunity to gain profit from the sales of its shares. ECF platform has raised a total of RM22.3 million by 23 issuers in 2017 as compared to RM10.4 million in 2016 by 14 issuers (SC, 2017). The bulk of the ECF funding in 2017 was for technology- based companies accounting for 56% of total issuances. The exponential growth of funds raised in the ECF market indicates a strong and growing demand for ECF as an alternative financing avenue for SMEs.
2.2 Peer-to-Peer Financing Peer-to-Peer (P2P) financing is relatively a new technology-enabled market-based financing, particularly for businesses and retail investors. The framework of P2P financing was first issued by the Securities Commission Malaysia (SC) in 2016 and Malaysia is the first ASEAN country to regulate P2P financing. Currently, six licensed P2P financing platforms are operating in Malaysia. As at 2017, P2P financing has raised RM37.2 million through 628 campaigns across 120 issuers. The majority of issuers, accounting for 62% were in the wholesale, retail and consumer products sectors, while others were from food and beverages, real estate and hospitality industries.
2.3 Venture Capital and Private Equity
The SC has developed initiatives to expand private sector funding through the Venture Capital (VC) and Private Equity (PE) sectors. VC mostly invest in start-ups with high growth potential while PE buys established mature companies. As at end-2017, the number of
Economic Outlook 2019 89
Chapter 4.indd 89 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
registered VC corporations were 101 companies whereas the number of registered PEs were nine. Meanwhile, the total amount of committed funds in VC and PE sectors stood at RM7 billion in 2017 as compared to RM6.5 billion in 2016. The majority of the funds were invested in life sciences sectors accounting for 52.7% of total funds while the rest were in the manufacturing as well as ICT sectors.
Conclusion
The Government will continue to facilitate financing for SMEs since it is the backbone of the economy. Currently, the source of SME financing is mainly from FIs. In this regard, alternative SME financing initiatives focus on the LEAP market and other financing channels such as ECF, P2P, PE and VC to broaden investment prospects in the capital market. Alternative financing also provides the avenue to diversify investment portfolios and deepen Malaysia’s capital market. These initiatives will be complemented by capacity building programmes. Towards this end, SMEs should leverage all the opportunities offered to obtain greater access to financing in the future and eventually enhance its contribution to the economy.
Capital Market Performance Table 4.4. Funds Raised in the Capital Market January – July
Gross funds raised in the capital market RM million decreased 2.4% to RM131.4 billion during the 2017 2018 Public Sector first seven months of 2018. This was due Government securities to lower fund raising activity by the private Malaysian Government Securities 35,304.0 35,423.6 sector with gross funds raised declining 9.7% Malaysian Government Investment 32,124.7 35,246.2 to RM60.7 billion. Gross funds raised by the Issues private sector through domestic equity market New issues of debt securities 67,428.7 70,669.8 recorded a double-digit decline of 91.1% to RM0.9 Less: Redemptions 24,969.0 25,970.7 billion during the period following lower initial Net funds raised by the public 42,459.7 44,699.1 public offerings (IPOs) which declined 92.2% sector due to cautious market sentiment. Nevertheless, Private Sector 1 funds raised through new corporate bond Shares /Warrants Initial Public Offers 7,373.3 571.8 issuances increased 4.7% to RM59.8 billion. Rights Issues 2,744.2 324.7 The bulk of new issuances were medium term Warrants - - notes, accounting for 94.7% of total corporate New issues of shares/warrants 10,117.5 896.5 bonds. The majority of funds were raised Debt securities2 by the finance, insurance, real estate and Straight bonds 1,753.0 2,470.0 business services sector, accounting for 68.7% Convertible bonds -- of new corporate bond issuances. The funds Islamic bonds 1,472.7 724.6 were mainly used to finance infrastructure Medium term notes 53,871.8 56,594.1 projects and working capital. On the New issues of debt securities 57,097.5 59,788.7 back of higher investment activities, fund Less: Redemptions 18,874.1 24,835.6 Net issues of debt securities 38,223.4 34,953.1 raising in the capital market is expected to Net funds raised by the private 48,340.8 35,849.5 improve in 2019. sector Total net funds raised 90,800.5 80,548.6 Meanwhile, gross funds raised by the public 1 Excludes funds raised by the exercise of Employee Share Option Scheme, sector increased 4.8% to RM70.7 billion in Transferable Subscription Rights, Warrants and Irredeemable Convertible Unsecured the first seven months of 2018. The issuance Loan Stocks. 2 Excludes short-term papers in conventional and Islamic principles. of Malaysian Government Securities (MGS) Note: Total may not add up due to rounding. increased to RM35.4 billion, while Malaysian Source: Bank Negara Malaysia.
90 Economic Outlook 2019
Chapter 4.indd 90 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
Government Investment Issues (MGII) rose during the first eight months of 2018. The FTSE to RM35.2 billion. The Government bonds Bursa Malaysia Kuala Lumpur Composite Index continued to receive strong support from (FBM KLCI) started to pick up in the first week local institutional and foreign investors. As of January 2018 and continued its positive at end-July 2018, share of resident and non- trend. The uptrend was supported by an residents holdings of MGS stood at 59.5% and increase in OPR by 25 bps leading to buying 40.5% of total MGS outstanding, respectively. interest in finance-related stocks, resulting During the same period, share of resident and in the index surging to 1,870.52 points on non-residents holdings of MGII stood at 29 January 2018. 95.3% and 4.7% of total MGII outstanding, respectively. Figure 4.4. Malaysian o ernment Securities Indicati e Yields (End-period) Table 4.5. New Issuance of Corporate Bonds % by Sector 5.0 10-year 3-year January – July 4.5 5-year 1-year RM million Share 4.0 (%) 3.5 2017 2018 2017 2018 3.0 Agriculture, forestry 100.0 83.6 0.2 0.1 2.5 and fishing JJMDSJMDSJMDSJMDSJM 1 Manufacturing 1,080.0 1,490.0 1.9 2.5 2014 2015 2016 2017 2018 Construction 2,013.2 3,977.9 3.5 6.7 1 End-July 2018. Source: Bank Negara Malaysia. Electricity, gas and 10,277.7 8,057.1 18.0 13.5 water Transport, storage and 1,341.9 1,415.0 2.4 2.4 communication Figure 4.5. Share of Foreign oldings in Total Finance, insurance, 35,447.4 41,080.3 62.1 68.7 M S Outstanding real estate and (End-period) business services RM billion % Government and other 6,747.9 3,277.8 11.8 5.5 440 60 services Total MGS outstanding 400 Share of foreign holdings (right scale) 55 Wholesale and retail 89.4 407.0 0.2 0.7 trade, restaurant and 360 50 hotels 320 45 Total 57,097.5 59,788.7 100.0 100.0 280 40 Note: Includes corporate bonds issued by Cagamas and non-resident corporations. Total may not add up due to rounding. 240 35 JJMDSJMDSJM 1 Source: Bank Negara Malaysia. 2016 2017 2018 1 End-July 2018. Source: Bank Negara Malaysia. During the first seven months of 2018, MGS yields across all tenures trended upwards with yields on 1-year, 3-year, 5-year and 10-year ranging between 12 and 18 bps. The higher Figure 4.6. 5 Year Corporate Bond Yields yields were due to investors rebalancing global (End-period) portfolio investments towards safe-haven assets % 13 following external uncertainties. Similarly, in BBB 11 the corporate bond market, yields on the 5-year 9 AAA-rated and AA-rated securities increased 7 A 12 and 11 bps, respectively. 5 AA 3 AAA The equity market remained resilient and JJMDSJMDSJMDSJMDSJM 1 2014 2015 2016 2017 2018 continued to record gains despite heightened 1 End-July 2018. trade tensions and global monetary tightening Source: Bank Negara Malaysia.
Economic Outlook 2019 91
Chapter 4.indd 91 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
Despite the US Federal Reserve (Fed) raised maintain the benchmark rate. In addition, interest rates for the first time this year, the the reaffirmation by Fitch Ratings on FBM KLCI continued to increase and closed at Malaysia’s long-term foreign-currency issuer 1,876.87 points on 22 March 2018, the highest default rating at A- with stable outlook also level since August 2014. Meanwhile, the local contributed towards higher performance of bourse rose to a new high of 1,895.18 points the FBM KLCI. on 19 April 2018. The positive sentiment was largely driven by recovery in global crude oil In terms of trading activity, total volume for prices. Nevertheless, the FBM KLCI declined in the first eight months of 2018 rose 9.6% to the final week of May and the market remained 468.8 billion units. Meanwhile, total market subdued tracking major and regional bourses transacted value increased 11.8% to RM454.2 throughout June and July 2018. Several factors billion. Average daily trading volume and caused the market to trend downwards, among value increased to 2.9 billion units and RM2.8 others, the trade war between the US and billion, respectively. As at end-August 2018, China as well as interest rate hikes in major the market capitalisation increased 1% to economies. RM1,865.8 billion. Market velocity was sustained at 34.3%, while market volatility was at 8.3%. The FBM KLCI advanced 1,819.66 points as At the same time, foreign holdings based on at end-August 2018, supported by sound market capitalisation in the local bourse stood macroeconomic fundamentals, continued at 23.6% as at end-August 2018. In 2019, the growth of the corporate sector and the inflow domestic equity market is expected to continue of foreign funds into the equity market. to record gains despite external headwinds due Investors’ confidence was also supported by to a confluence of factors including concerns positive external developments, including over election outcomes in the euro area as well the statement by the Fed of its intention to as heightened trade and geopolitical tensions.
Table 4.6. Bursa Malaysia: Selected Indicators January – August Figure 4.7. Performance of Bursa Malaysia Billion Points 2017 2018 2,000 250 Total transaction (units) Indices1 Value of transaction (RM) 200 1 1,900 FBM KLCI 1,773.16 1,819.66 Composite Inde (right scale) FBM EMAS 12,610.07 12,719.42 150 1,800 FBM 100 12,281.66 12,526.43 100 1,700 FBM SCAP 16,747.36 14,453.18 50 1,600 FBM-ACE 6,612.74 5,283.71 0 1,500 Total turnover2 2 1 4 3 2 1 4 3 2 1 4 3 2 1 4 3 2 1 A2 Volume (million units) 427,643.61 468,760.02 2014 2015 2016 2017 2018 1 Value (RM million) 406,319.57 454,233.15 As at end-period. 2 End-August 2018. Average daily turnover2 Source: Bursa Malaysia. Volume (million units) 2,623.58 2,875.83 Value (RM million) 2,492.76 2,786.71 Market capitalisation1 (RM billion) 1,847.33 1,865.84 Figure 4.8. Performance of Selected Stock Markets Total number of listed companies1 (% change) Main Market 787 781 End 2017 End August 2018 ACE Market 115 121 S (Nasdaq) India LEAP Market - 8 S (Dow Jones) Market liquidity1 Viet Nam Malaysia Turnover value/market 22.0 24.3 Japan capitalisation (%) Thailand K Market concentration1 Singapore Indonesia 10 highest capitalised stocks/ 33.6 34.5 Hong Kong market capitalisation (%) Republic of Korea Philippines China (Shanghai) 1 As at end-period. 2 Based on market transactions and direct business transactions. -20 -15 -10 -5 0 5 10 15 20 Source: Bursa Malaysia. Source: Bloomberg.
92 Economic Outlook 2019
Chapter 4.indd 92 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
Key Capital Market Measures Several measures were undertaken in the first eight months of 2018 to enhance liquidity and efficiency in the capital market. These include the following:
Measures to Boost Domestic Capital Market The announcement by Securities Commission Malaysia (SC) and Bursa Malaysia on 6 February 2018 at the World Capital Markets 14-Feb Symposium 2018 in Kuala Lumpur on the BRIDGe following measures: Establishment of the Brokerage Industry i. waiver on stamp duty for shares of Digitisation Group (BRIDGe) by SC and Bank mid-and small-cap companies for three Negara Malaysia (BNM) to accelerate years from 1 March 2018 to 28 February digitisation of the stockbroking industry 2021; 15-Mar through the enhancement of service standards ii. waiver on trading and clearing fees for six and operational efficiencies. months for new individual investors; and iii. Intraday Short Selling (IDSS) allowed for all investors.
Regulatory Framework for Listed CIS and IDSS Framework Main LR 9-Apr Introduction of IDSS framework will enable Enhancement of the existing regulatory investors to sell securities first and buy the framework for listed Collective Investment securities later within the trading day. This Scheme (CIS) and business trust under the framework is applicable for a selected list of Main Market Listing Requirement (Main LR) to Approved Securities comprising 280 promote growth and greater business 16-Apr securities subject for review for every six efficiency. The CIS includes the Real Estate months. Investment Trusts (REITs), Exchange Traded Funds (ETFs) and Closed-End Funds (CEFs). The Capital Markets and Services Act (CMSA) 2007 was amended where Bursa Malaysia The Newly Enhanced US Dollar was mandated to approve the new issue of Denominated Refined, Bleached and securities by listed CIS and business trust. Deodorised (RBD) Palm Olein Futures These will improve the time-to-market and Contract (FPOL) reduce regulatory costs to enhance the Enhancement of the US dollar denominated efficiency of the domestic capital market. Refined, Bleached and Deodorised (RBD) Palm Olein Futures Contract (FPOL) to BURSASUSTAIN provide more trading opportunities and Establishment of BURSASUSTAIN, a 24-Apr flexibility to a wider group of domestic and comprehensive online portal designed as a foreign investors, who wish to explore one-stop knowledge and information hub on commodity derivatives. Various incentives sustainability and corporate governance. The were given to further promote the FPOL hub aims to provide a platform for users, such including a full waiver of exchange and as listed issuers, investors and other key 24-May clearing fees for the first six months of trading stakeholders to have easy access to the latest for market participants. information.
MoF China and the SC Signed a MoU on Regulatory Cooperation First Mini Futures Contract on Derivatives The Ministry of Finance (MoF) China and the 20-Aug Market SC signed a MoU for cross-border regulatory Launching of the mini FTSE Bursa Malaysia cooperation and access. The MoU has Mid 70 Index (FM70) Futures Contract. The enabled both countries to benefit in areas of FM70 is a ringgit denominated futures mutual interest relating to accounting and contract which tracks the FTSE Bursa auditing. Malaysia Mid 70 Index (FBM Mid 70) as its underlying instrument, providing investors’ 27-Aug exposure to all the 70 companies of the FBM Mid 70 via a single futures contract.
Economic Outlook 2019 93
Chapter 4.indd 93 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
Islamic Banking and Capital Market than 20,000 retail and institutional investors, domestically and internationally. Another Performance Shariah-compliant platform, Bursa Suq Al-Sila’ (BSAS), which facilitates commodity trading for The Islamic banking industry continued to record Murabahah5 and Tawarruq6 transactions have strong growth in 2018. Total assets expanded achieved daily average trading value of 11.5% amounting to RM687 billion as at end- RM21.2 billion as at end-July 2018 with July 2018. The expansion was mainly driven 151 participants, of which 39 were non- by financing to household sector. The growth residents. This signifies the acceptance was also contributed from the completion of a of BSAS as a global platform to facilitate merger involving an Islamic bank and a non- bank institution in early 2018. Total deposits of the Islamic banking system registered a Table 4.7. Islamic Banking: Key Indicators strong growth of 12.6% to RM507.1 billion as (End-July) at end-July 2018. RM billion Change (%) The outlook of Islamic banking is expected to 2017 2018 2017 2018 remain favourable given strong demand from both households and businesses for Shariah- Assets 616.3 687.0 10.2 11.5 based financial products and services. This is Financing 462.8 517.4 11.3 11.8 further supported by growing commitments Primary agriculture 15.1 15.1 15.6 -0.1 from a number of major players in promoting Mining and quarrying 5.6 5.1 4.6 -8.2 Islamic banking as the preferred financing Manufacturing1 22.2 23.0 10.3 3.7 solution. Moving forward, focus will be given Electricity, gas and 1.8 2.7 -28.3 51.4 on supporting the effective implementation water supply and operationalisation of Shariah standards, particularly in broadening the range of product Wholesale and retail 20.1 23.7 16.0 18.0 trade, restaurants and offerings and applications of a variety of hotels Shariah contracts to cater to the diverse needs Construction 21.3 28.8 16.2 35.1 of customers. Real estate 23.4 26.5 11.3 12.9 The Islamic capital market (ICM) comprising Transport, storage and 18.1 16.3 34.1 -10.1 Shariah-compliant equities and sukuk continues communication to maintain its leading position in the global Finance, insurance and 37.5 34.9 6.7 -7.1 ICM market by offering a wide range of products business activities and services. The share of ICM accounts for Education, health and 21.1 20.6 -3.1 -2.5 60.5% or RM1,963.3 billion of total domestic others market capitalisation as at end-July 2018. Households 268.8 306.2 10.7 13.9 Shariah-compliant equities contributed 58.2% Others 7.8 14.6 61.2 86.5 or RM1,142.9 billion to total ICM, while the remaining was total sukuk outstanding. Liabilities 571.7 638.5 10.2 11.7 Deposits and Investment 525.0 583.1 11.2 11.1 Bursa Malaysia-i, the world’s first end-to- Account end Shariah investment platform continues Investment 1.0 0.8 -34.3 -15.3 to make Malaysia a vibrant trading centre Savings 38.5 40.8 7.8 6.0 for Islamic-based financial offerings. The Demand 70.9 74.3 6.5 4.8 platform pioneered by nine Islamic Participating Investment account 74.8 76.0 9.6 1.6 Organisations (POs) in 2016 has expanded to 14 Islamic POs as at end-July 2018. Out Others 339.7 391.1 13.3 15.1 3 of these, one is a full-fledged PO while the 1 4 Including agro-based. remainder operate on a window basis. As at Note: Total may not add up due to rounding. end-July 2018, ICM has engaged with more Source: Bank Negara Malaysia.
3 Islamic stockbroking services provided by the PO on a fully Shariah-compliant basis. 4 Islamic stockbroking services provided by the PO other than on a full-fledged basis. 5 Sales contract with a disclosure of the asset cost price and profit margin to the buyer. 6 Purchasing an asset with deferred price, either on the basis of musawamah (sales contract without the disclosure of the asset cost price and profit margin to the buyer) or murabahah, then selling it to a third party to obtain cash.
94 Economic Outlook 2019
Chapter 4.indd 94 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
Figure 4.9. lobal Sukuk Outstanding by Country (% share)
1 Turkey Others Turkey Others1 3.0% 13.9% 3.0% 14.9% atar 4.4% atar 4.1%
nited Arab nited Arab Emirates End-2017 Emirates End-July 2018 Malaysia 7.9% Malaysia 51.2% 51.0% 7.7%
Saudi Arabia Saudi Arabia 19.8% 19.0%
1 Others include Bahrain, Bangladesh, Brunei, Gambia, Hong Kong, Indonesia, Ivory Coast, Jordan, Kuwait, Luxembourg, Maldives, Mauritius, Nigeria, Oman, Pakistan, Senegal, Singapore, South Africa, UK and US.
Note: Total may not add up due to rounding. Source: Malaysia International Islamic Financial Centre.
liquidity management. Meanwhile, to further This will be driven by growing demand for develop Shariah-compliant securities, the Shariah-compliant instruments. However, greater world’s first Shariah-compliant alternative, the innovation in ICM is pertinent to ensure that Securities Borrowing and Lending Negotiated Malaysia maintains its position as a leader in Transaction (iSSBNT) was launched in December Islamic finance at the international level. In this 2017. The iSSBNT framework is expected to regard, focus will be given to further develop provide a facilitative trading environment, ICM, especially to internationalise Shariah- particularly for market players operating based compliant intermediation activities through on Shariah principles. As at May 2018, 77% new product development, fund management of companies listed on Bursa Malaysia were and cross-border collaboration. Shariah-compliant.
Malaysia continues to be the main driver for Conclusion sukuk issuances and outstanding. In the first seven months of 2018, the sukuk issuances Monetary policy is expected to remain stood at 50.9% of total global sukuk issuances accommodative and supportive of economic while as at end-July 2018, sukuk outstanding growth while ensuring price stability. Meanwhile, was 51.2% of total global sukuk outstanding. the capital market is expected to remain Malaysia also pioneered the world’s first issuance resilient supported by favourable domestic of Green Sustainable and Responsible Investment economic conditions and steady global growth. (SRI) sukuk in July 2017. As at end-July 2018, However, external factors which include the five green SRI sukuk with a total size of RM2.4 pace of monetary policy normalisation in billion were issued. Several green SRI sukuk major economies; escalating trade threats and issuances are expected in 2019, especially protectionism; rebalancing of global investment for large-scale solar photovoltaic projects. In flows and geopolitical tensions may dampen addition, the Securities Commission Malaysia financial and capital market performance. In has established Green SRI Sukuk Grant Scheme this regard, focus will continue to be given which aims at reducing the additional cost of towards fortifying these markets by providing certifying a debt instrument of meeting the an environment which supports innovation green criteria. while ensuring that the regulatory framework is strengthened further and the principles of good Moving forward, ICM will continue to play governance, transparency and accountability a crucial role in Malaysia’s capital market. are adhered.
Economic Outlook 2019 95
Chapter 4.indd 95 25/10/2018 9:48 PM CHAPTER 4 MONETARY AND FINANCIAL DEVELOPMENTS
References
Bank Negara Malaysia. (2018). Annual Report Bursa Malaysia. (2018). Bursa Malaysia is the 2017. Kuala Lumpur: Bank Negara Malaysia. Approving Authority for New Issue of Securities by Listed Collective Investment Scheme and Bank Negara Malaysia. (2018). Economic and Business Trust. Retrieved from http://www. Financial Developments in the Malaysian Economy bursamalaysia.com/corporate/media-centre/ in the First Quarter of 2018. Retrieved from media-releases/5597 http://www.bnm.gov.my Bursa Malaysia. (2018). Bursa Malaysia Launches Bank Negara Malaysia. (2018). Economic and BURSASUSTAIN, A One-Stop Knowledge Hub Financial Developments in the Malaysian Economy on Corporate Governance and Sustainability. in the Second Quarter of 2018. Retrieved from Retrieved from http://www.bursamalaysia. http://www.bnm.gov.my com/corporate/media-centre/media- releases/5641 Bank Negara Malaysia. (2018). Financial Stability and Payment Systems Report 2017. Kuala Bursa Malaysia. (2018). Bursa Malaysia to Launch Lumpur: Bank Negara Malaysia. First Mini Futures Contract on Derivatives Market Mini FTSE Bursa Malaysia Mid 70 Bank Negara Malaysia. (2018). Monthly Highlights Index Futures Contract Targets Retail Investors. and Statistics January 2018. Retrieved from Retrieved from http://www.bursamalaysia. http://www.bnm.gov.my com/corporate/media-centre/media- releases/5765 Bank Negara Malaysia. (2018). Monthly Highlights and Statistics February 2018. Retrieved from Bursa Malaysia. (2018). Securities Commission http://www.bnm.gov.my Malaysia and Bursa Malaysia to Implement New Measures to Boost Market Vibrancy. Retrieved Bank Negara Malaysia. (2018). Monthly Highlights from http://www.bursamalaysia.com/ and Statistics March 2018. Retrieved from corporate/media-centre/media-releases/5521 http://www.bnm.gov.my Department of Statistics Malaysia. (2016). Bank Negara Malaysia. (2018). Monthly Highlights Economic Census. Putrajaya: Department of and Statistics April 2018. Retrieved from Statistics Malaysia. http://www.bnm.gov.my Securities Commission Malaysia. (2018). China’s Bank Negara Malaysia. (2018). Monthly Highlights Ministry of Finance and Securities Commission and Statistics May 2018. Retrieved from http:// Malaysia Sign MoU on Regulatory Cooperation. www.bnm.gov.my Retrieved from https://www.sc.com.my/ post_archive/chinas-ministry-of-finance-and- Bank Negara Malaysia. (2018). Monthly Highlights securities-commission-malaysia-sign-mou- and Statistics June 2018. Retrieved from http:// on-regulatory-cooperation/ www.bnm.gov.my Securities Commission Malaysia. (2018). SC & Bank Negara Malaysia. (2018). Monthly Highlights BNM Establish Joint Working Group to Accelerate and Statistics July 2018. Retrieved from http:// Digitisation of Stockbroking Industry. Retrieved www.bnm.gov.my from https://www.sc.com.my/post_archive/ sc-bnm-establish-joint-working-group-to- Bank Negara Malaysia. (2018). Monthly Highlights accelerate-digitisation-of-stockbroking- and Statistics August 2018. Retrieved from industry/ http://www.bnm.gov.my Securities Commission Malaysia. (2017). Annual Bursa Malaysia. (2018). Bursa Malaysia Implements Report. Kuala Lumpur: Securities Commission Intraday Short Selling for All Investors. Retrieved Malaysia. from http://www.bursamalaysia.com/ corporate/media-centre/media-releases/5637 SMECorp. Malaysia. (2017). A Guidebook for SME Initiatives 2017. Kuala Lumpur: SMECorp. Bursa Malaysia. (2018). Bursa Malaysia Introduces Malaysia. Enhanced US Dollar Denominated Palm Olein Futures Contract. Retrieved from http://www. bursamalaysia.com/corporate/media-centre/ media-releases/5685
96 Economic Outlook 2019
Chapter 4.indd 96 25/10/2018 9:48 PM STATISTICAL TABLES
1 BI Front page 2018.indd 97 10/25/18 9:43 PM 1 BI Front page 2018.indd 98 10/25/18 4:19 PM STATISTICAL TABLES
LIST OF STATISTICAL TABLES
Table No. I. Socioeconomic Indicators Selected Socioeconomic Statistics 1.1
II. International Economy Key Economic Data of Selected Countries 2.1 Key Economic Data of ASEAN Member Countries 2.2
III. Macroeconomy National Accounts Gross Domestic Product by Kind of Economic Activity at Constant 2010 Prices 3.1 Index of Services 3.2 Industrial Production Index 3.3 Gross National Income by Demand Aggregates 3.4 Private Consumption Indicators 3.5 Private Investment Indicators 3.6
External Sector Malaysia’s Trade with Major Trading Partners 3.7 Production, Exports Volume and Value of Major Primary Commodities 3.8 Direction of Major Exports 3.9 Exports of Manufactured Goods 3.10 Source of Major Imports 3.11 Balance of Payments 3.12
Prices Consumer Price Index by Region 3.13 Consumer Price Index by Stratum 3.14 Consumer Price Index by State 3.15 Core Index 3.16 Producer Price Index - Local Production 3.17 External Trade Indices 3.18
Labour Market Labour Force 3.19 Employment by Industry 3.20 Active Registrants 3.21 Vacancies and Placements 3.22
IV. Financial and Capital Markets Interest Rates 4.1 Broad Money (M3) 4.2 Key Exchange Rates 4.3 Commercial Banks: Loans Outstanding by Purpose and Sector 4.4 Government and Corporate Bond Yields 4.5 Bursa Malaysia: Selected Indicators 4.6 Islamic Banks: Loans Outstanding by Purpose and Sector 4.7
Economic Outlook 2019 99
2 BI Table of Content.indd 99 10/25/18 4:21 PM STATISTICAL TABLES
STATISTICAL ANNOTATION
The Statistical Appendix provides time series data on key economic variables. Each table contains current selected economic data. Percentage changes are provided for important variables as an indication of economic trends. In addition, percentage of totals and footnotes are provided where necessary. The sum of the component figures may not tally with the subtotal or total figures due to rounding. In some series, historical figures have been revised. Estimates for 2018 are based on six to eight months data and forecasts for 2019 have been provided where appropriate. Unless otherwise stated, the source of data is the Ministry of Finance, Malaysia.
Labour Productivity Labour productivity refers to the efficiency and effectiveness of each employee to generate value added or overall output. It is calculated by using the ratio of value added to the total hours worked or employment by sector in Malaysia. Other factors that influenced value added such as assets and technologies cannot be measured through this method:
Labour productivity per hour worked = Value Added Total Hours Worked
Labour productivity per employment = Value Added Employment Five components of labour productivity are: i. Output is the value of goods and services produced. This includes market production, production for own final use, and non-market production (government services and NPISHs). Production of goods and services are not necessarily for sale or turnover of establishment. ii. Intermediate consumption is the value of goods and services consumed (as input) in the production process of goods and services excluding salaries and wages, depreciation of capital and net interest paid. iii. Value added is the difference between output and intermediate consumption. It represents the value added of goods and services by economic activity. Hence, it is approximately equivalent to commercial profit, salaries and wages, depreciation and indirect taxes; plus, interest paid and less interest received. iv. Total hours worked refers to total number of hours worked during the reference period. v. Employees is all persons who, at any time during the reference week worked at least one hour for pay, profit or family gain (as an employer, employee, own-account worker or unpaid family worker). They are also considered as employed if they: -Did not work during the reference week because of illness, injury, disability, bad weather, leave, labour dispute and social or religious reasons but had a job, farmer enterprise or other family enterprise to return to. -Were temporary laid-off with pay and would definitely be called back to work. -Were employed less than 30 hours during the reference week because of the nature of their work or due to insufficient work and are able and willing to accept additional hours of work. This group is underemployed. Labour productivity is compiled by kind of economic activity based on Malaysia Standard Industrial Classification 2008 Ver. 1.0.
Acronyms and Abbreviations NPISHs Non-profit institutions serving households US United States ASEAN Association of Southeast Asian Nations IMF International Monetary Fund GDP Gross Domestic Product FBM-KLCI Financial Times Stock Exchange (FTSE) Bursa Malaysia Kuala Lumpur Composite Index MSIC Malaysia Standard Industrial Classification SITC Standard International Trade Classification PT3 Pentaksiran Tingkatan 3 PMR Penilaian Menengah Rendah SRP Sijil Rendah Pelajaran LCE Lower Certificate of Education SPM Sijil Pelajaran Malaysia MCE Malaysian Certificate of Education STPM Sijil Tinggi Pelajaran Malaysia MHSC Malaysian Higher School Certificate n.a. Not available cont’d Continued n.e.c. Not elsewhere classified
100 Economic Outlook 2019
2 BI Table of Content.indd 100 10/25/18 4:21 PM STATISTICAL TABLES
1.1. SELECTED SOCIOECONOMIC STATISTICS Malaysia
Indicator 2014 2015 2016 201710 201811
Demographic Statistics
Population1 (‘000)
Total 30,709 31,186 31,634 32,023 32,385
Male 15,868 16,112 16,346 16,543 16,722
Female 14,841 15,074 15,287 15,480 15,663
Sex ratio2 103 107 107 107 107
Population density (per square kilometre) 93 94 96 97 98
Dependency ratio (%)
Total3 44.8 44.5 44.0 43.6 43.4
Young age4 36.7 36.0 35.3 34.7 34.1
Old age5 8.2 8.4 8.7 9.0 9.3
Life expectancy at birth
Total 74.5 74.6 74.4 74.6 75.0
Male 72.4 72.5 72.1 72.3 72.7
Female 77.0 77.1 77.0 77.2 77.6
2013 2014 2015 2016 2017
Education
Primary school enrolment rate6 (%) 97.1 97.9 97.2 97.2 97.9
Secondary school enrolment rate7 (%) 90.4 90.0 88.3 90.0 91.1
Higher education institutions enrolment8 1,156,293 1,167,077 1,236,164 1,346,858 1,325,699
Pupil-teacher ratio
Primary schools 12.0 11.7 11.5 11.6 11.6
Secondary schools 13.1 12.5 12.0 12.6 12.0
Literacy rate9 (%) 94.6 95.2 95.1 95.6 95.9
1 Data between 2014 and 2018 refers to mid-year population estimates based on the adjusted 2010 Population and Housing Census of Malaysia. 2 The number of males per 100 females. 3 The ratio of the number of persons aged 0–14 years and 65 years and above to the number of persons aged 15–64 years. 4 The ratio of the number of persons aged 0–14 years to the number of persons aged 15–64 years. 5 The ratio of the number of persons aged 65 years and above to the number of persons aged 15–64 years. 6 Percentage of school aged children between 6+ and 11+ years at primary level in Government and private schools. 7 Percentage of school aged children between 12+ and 16+ years at secondary level in Government and private schools. 8 Includes public university, private higher education institutions, polytechnic and community college. 9 Aged 15 years and above with formal education, excluding non-Malaysian citizens. 10 Preliminary. 11 Estimate.
Economic Outlook 2019 101
3 BI 1.1.indd 101 10/25/18 4:21 PM STATISTICAL TABLES
1.1. SELECTED SOCIOECONOMIC STATISTICS (cont’d) Malaysia
Indicator 2013 2014 2015 2016 2017
Health
Population per doctor 633 661 656 632 n.a.
Official beds strength in public sector12 43,437 43,822 45,087 45,678 46,194
Information Technology
Mobile-cellular penetration rate 143.8 148.3 143.8 139.9 131.2 per 100 inhabitants (%)
Broadband penetration rate 22.6 68.3 99.7 99.8 117.3 per 100 inhabitants (%)
Infrastructure
Rural electricity coverage (% of housing unit) 96.9 97.6 98.3 98.8 99.0
Water coverage (% of population)
Total 95.1 95.3 95.5 95.7 95.7
Rural 92.5 92.6 93.0 93.5 93.9
Urban 97.0 97.1 97.2 97.2 97.3
2007 2009 2012 2014 2016
Poverty Structure13
Incidence of poverty (% of households)
Total 3.6 3.8 1.7 0.6 0.4
Urban 1.9 1.7 1.0 0.3 0.2
Rural 7.1 8.4 3.4 1.6 1.0
Incidence of hardcore poverty (% of households)
Total 0.7 0.7 0.2 0.0 0.0
Urban 0.3 0.2 0.1 0.0 0.0
Rural 1.4 1.8 0.6 0.0 0.0
12 Comprising Ministry of Health (MOH) hospitals (includes special medical institutions) and non-MOH Hospitals (university hospitals, military hospitals and Orang Asli Development Department hospital). 13 Based on Household Income Survey year. Source: Department of Statistics; Ministry of Education; Ministry of Health; Malaysian Communications and Multimedia Commission; Ministry of Rural Development; and Ministry of Energy, Science, Technology, Environment & Climate Change Malaysia.
102 Economic Outlook 2019
3 BI 1.1.indd 102 10/25/18 4:21 PM STATISTICAL TABLES
2.1. KEY ECONOMIC DATA OF SELECTED COUNTRIES
Real GDP GDP Consumer Unemployment Current Gross Gross Gross (% Growth) Per Capita, Price Index Rate1 Account International Exports Imports PPP (%) (%) Balance Reserves (USD billion) (USD billion) (USD) (USD billion) (USD billion)
Advanced Economies 2015 2.3 42,875 0.3 6.7 299.0 n.a. 13,446.4 13,105.3 2016 1.7 43,766 0.8 6.2 333.7 n.a. 13,358.1 12,973.5 2017 2.3 45,378 1.7 5.6 439.8 n.a. 14,442.3 14,024.6 20182 2.4 47,979 2.0 5.2 380.4 n.a. 15,734.9 15,338.2 20193 2.1 49,396 1.9 5.0 259.8 n.a. 16,310.4 16,019.8 United States 2015 2.9 54,126 0.1 5.3 -407.8 118.5 1,502.6 2,315.3 2016 1.6 54,576 1.3 4.9 -432.9 114.7 1,451.0 2,250.2 2017 2.2 55,390 2.1 4.4 -449.1 122.2 1,546.3 2,408.5 20182 2.9 56,600 2.4 3.8 -515.2 123.36 1,102.94 1,925.74 20193 2.5 57,674 2.1 3.5 -652.1 n.a. n.a. n.a. United Kingdom 2015 2.3 39,462.6 0.0 5.4 -142.4 155.9 459.6 626.2 2016 1.8 39,839.5 0.7 4.9 -139.3 162.8 409.0 636.6 2017 1.7 40,258.9 2.7 4.4 -99.2 184.7 441.1 643.5 20182 1.4 40,544.8 2.5 4.1 -99.2 182.05 326.24 447.54 20193 1.5 40,916.3 2.2 4.2 -90.3 n.a. n.a. n.a. Germany 2015 1.5 44,644.2 0.1 4.6 301.2 173.7 1,326.2 1,051.1 2016 2.2 45,240.4 0.4 4.2 297.5 187.2 1,334.4 1,055.3 2017 2.5 46,177.3 1.7 3.8 291.0 208.7 1,448.2 1,166.8 20182 1.9 46,988.5 1.8 3.5 326.9 186.55 1,056.54 866.04 20193 1.9 47,823.5 1.8 3.4 323.6 n.a. n.a. n.a. France 2015 1.0 39,026.6 0.1 10.4 -9.0 158.1 506.1 573.1 2016 1.1 39,299.4 0.3 10.1 -18.5 160.9 501.4 571.9 2017 2.3 40,066.6 1.2 9.4 -14.8 176.1 535.0 624.0 20182 1.6 40,507.8 1.9 8.8 -25.6 166.35 386.34 451.64 20193 1.6 40,978.0 1.8 8.5 -19.9 n.a. n.a. n.a. Japan 2015 1.4 37,931.8 0.8 3.4 136.4 1,289.6 624.8 648.0 2016 1.0 38,301.7 -0.1 3.1 194.9 1,282.0 644.9 607.6 2017 1.7 39,031.9 0.5 2.7 196.1 1,322.4 698.1 672.0 20182 1.1 39,573.8 1.2 2.5 183.7 1,314.05 550.55 549.45 20193 0.9 40,069.5 1.3 2.4 196.2 n.a. n.a. n.a.
Economic Outlook 2019 103
4 BI 2.1 - 2.2.indd 103 10/25/18 4:21 PM STATISTICAL TABLES
2.1. KEY ECONOMIC DATA OF SELECTED COUNTRIES (cont’d)
Real GDP GDP Consumer Unemployment Current Gross Gross Gross (% Growth) Per Capita, Price Index Rate1 Account International Exports Imports PPP (%) (%) Balance Reserves (USD billion) (USD billion) (USD) (USD billion) (USD billion)
Australia 2015 2.5 45,099.9 1.5 6.0 -57.3 45.7 187.7 200.6 2016 2.6 45,519.4 1.3 5.7 -41.4 54.3 192.5 189.3 2017 2.2 45,802.2 2.0 5.6 -36.0 66.8 231.1 221.3 20182 3.2 46,514.4 2.2 5.3 -39.5 51.54 168.64 150.84 20193 2.8 47,020.0 2.3 5.0 -45.7 n.a. n.a. n.a. Republic of Korea 2015 2.8 34,177.7 0.7 3.6 105.9 368.0 526.8 436.5 2016 2.9 35,020.4 1.0 3.7 99.2 371.1 495.4 406.2 2017 3.1 35,946.8 1.9 3.8 78.5 389.3 574.0 478.5 20182 2.8 36,789.9 1.7 3.8 82.3 401.14 399.84 354.54 20193 2.6 37,584.9 1.8 3.7 79.5 n.a. n.a. n.a. China 2015 6.9 13,457.1 1.4 4.1 304.2 3,606.8 2,273.5 1,679.6 2016 6.7 14,277.3 2.0 4.0 202.2 3,298.0 2,097.6 1,587.9 2017 6.9 15,175.3 1.6 3.9 164.9 3,421.6 2,263.4 1,843.8 20182 6.6 16,096.1 2.2 4.0 97.5 3,386.24 1,830.95 1,605.65 20193 6.2 17,012.1 2.4 4.0 98.4 n.a. n.a. n.a. India 2015 8.2 5,874 4.9 3.5 -22.1 351.6 272.4 409.2 2016 7.1 6,210 4.5 3.5 -14.4 359.7 268.6 376.1 2017 6.7 6,539 3.6 3.5 -48.7 409.8 304.1 452.2 20182 7.3 6,925 4.7 8.7 -80.4 405.9 342.5 527.2 20193 7.4 7,344 4.9 8.7 -74.0 439.2 374.8 557.9
1 Composites for the country groups are averages of national unemployment rates weighted by labour force in the respective countries. 2 Estimate. 3 Forecast. 4 As at 31 August 2018. 5 As at 30 September 2018. 6 As at 31 October 2018. Sources: IMF World Economic Outlook (October 2018), World Bank Database, World Trade Organisation Trade Statistics and various sources.
104 Economic Outlook 2019
4 BI 2.1 - 2.2.indd 104 10/25/18 4:21 PM STATISTICAL TABLES
2.2. KEY ECONOMIC DATA OF ASEAN MEMBER COUNTRIES
Real GDP GDP Consumer Unemployment Current Gross Gross Gross (% Growth) Per Capita, Price Rate1 Account International Exports Imports PPP Index (%) Balance Reserves (USD billion) (USD billion) (USD) (%) (USD billion) (USD billion)
Brunei Darussalam 2015 -0.4 74,787 -0.4 6.9 2.2 3.2 6.4 3.2 2016 -2.5 71,877 -0.7 6.9 1.5 3.3 5.0 3.1 2017 1.3 71,780 -0.2 6.9 2.0 3.3 n.a. n.a. 20182 2.3 72,497 0.4 6.9 1.1 n.a. n.a. n.a. 20193 5.1 75,218 0.5 6.9 2.6 n.a. n.a. n.a. Philippines 2015 6.1 6,885 0.7 6.3 7.3 80.7 58.8 74.8 2016 6.9 7,239 1.3 5.5 -1.2 80.7 57.4 89.4 2017 6.7 7,599 2.9 5.7 -2.5 81.6 68.7 101.9 20182 6.5 7,936 4.9 5.5 -5.0 76.8 n.a. n.a. 20193 6.6 8,296 4.0 5.5 -5.2 77.0 n.a. n.a. Indonesia 2015 4.9 10,477 6.4 6.2 -17.5 105.9 150.4 142.7 2016 5.0 10,867 3.5 5.6 -17.0 116.4 144.7 135.7 2017 5.1 11,274 3.8 5.4 -17.3 130.2 168.5 156.9 20182 5.1 11,705 3.4 5.2 -23.9 118.2 n.a. n.a. 20193 5.1 12,150 3.8 5.0 -25.2 120.1 n.a. n.a. Cambodia 2015 7.0 3,286 1.2 n.a. -1.6 7.3 8.5 12.6 2016 7.0 3,462 3.0 n.a. -1.7 9.1 10.0 12.6 2017 6.9 3,645 2.9 n.a. -1.9 12.2 n.a. n.a. 20182 7.0 3,840 3.3 n.a. -2.6 13.2 n.a. n.a. 20193 6.8 4,040 3.3 n.a. -2.8 14.0 n.a. n.a. Lao PDR 2015 7.2 6,038 1.3 n.a. -2.6 1.0 2.8 5.2 2016 7.0 6,370 1.6 n.a. -1.9 n.a. 3.0 4.7 2017 6.8 6,709 0.8 n.a. -2.2 n.a. n.a. n.a. 20182 6.8 7,064 2.3 n.a. -2.7 n.a. n.a. n.a. 20193 7.0 7,452 3.1 n.a. -2.8 n.a. n.a. n.a. Malaysia 2015 5.1 25,880 2.1 3.1 9.0 95.3 199.2 176.0 2016 4.2 26,900 2.1 3.4 7.2 94.5 189.7 168.4 2017 5.9 28,650 3.7 3.4 9.4 102.4 217.7 194.7 20182 4.8 32,345 1.5 — 2.5 3.3 9.7 102.84 244.8 218.1 20193 4.9 33,439 2.5 — 3.5 3.3 8.5 n.a. 254.3 226.9
Economic Outlook 2019 105
4 BI 2.1 - 2.2.indd 105 10/25/18 4:21 PM STATISTICAL TABLES
2.2. KEY ECONOMIC DATA OF ASEAN MEMBER COUNTRIES (cont’d)
Real GDP GDP Consumer Unemployment Current Gross Gross Gross (% Growth) Per Capita, Price Rate1 Account International Exports Imports PPP Index (%) Balance Reserves (USD billion) (USD billion) (USD) (%) (USD billion) (USD billion)
Myanmar 2015 7.0 5,111 10.0 4.0 -3.0 4.4 11.4 16.9 2016 5.9 5,370 6.8 4.0 -2.5 4.6 11.0 16.6 2017 6.8 5,695 4.0 4.0 -2.9 4.9 n.a. n.a. 20182 6.4 6,038 6.0 4.0 -3.8 5.5 n.a. n.a. 20193 6.8 6,425 5.8 4.0 -4.2 6.0 n.a. n.a. Singapore 2015 2.2 81,741 -0.5 1.9 56.5 247.7 346.6 296.7 2016 2.4 82,622 -0.5 2.1 58.8 246.6 338.1 291.9 2017 3.6 85,535 0.6 2.2 61.0 280.0 373.2 327.7 20182 2.9 87,281 1.0 2.0 64.1 288.3 n.a. n.a. 20193 2.5 88,741 1.4 1.9 65.9 302.7 n.a. n.a. Thailand 2015 3.0 15,212 -0.9 0.9 32.1 156.5 214.4 202.7 2016 3.3 15,679 0.2 0.8 48.2 171.8 215.4 194.2 2017 3.9 16,264 0.7 0.7 51.1 202.6 236.6 221.5 20182 4.6 16,990 0.9 0.7 44.8 212.5 n.a. n.a. 20193 3.9 17,628 0.9 0.7 42.5 226.4 n.a. n.a. Viet Nam 2015 6.7 5,667 0.6 2.3 -0.1 28.6 162.1 165.6 2016 6.2 5,955 2.7 2.3 5.9 36.9 176.6 174.8 2017 6.8 6,296 3.5 2.2 5.4 49.5 214.3 211.5 20182 6.6 6,646 3.8 2.2 5.2 58.4 n.a. n.a. 20193 6.5 7,010 4.0 2.2 5.2 61.1 n.a. n.a.
1 Composites for the country groups are averages of national unemployment rates weighted by labour force in the respective countries. 2 Estimate. 3 Forecast. 4 As at 15 October 2018. Sources: IMF World Economic Outlook (October 2018), World Trade Organisation Trade Statistics and various sources.
106 Economic Outlook 2019
4 BI 2.1 - 2.2.indd 106 10/25/18 4:21 PM STATISTICAL TABLES
3.1. GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY at constant 2010 prices, Malaysia RM million
Kind of Economic Activity 2015 2016 20172 20183 20194
Agriculture 94,396 89,509 95,968 95,748 98,721 (1.4) (-5.2) (7.2) (-0.2) (3.1)
Mining and quarrying 95,508 97,468 98,436 97,828 98,464 (5.3) (2.1) (1.0) (-0.6) (0.7)
Manufacturing 243,703 254,472 269,804 283,132 296,353 (4.8) (4.4) (6.0) (4.9) (4.7)
Construction 46,719 50,197 53,574 55,977 58,581 (8.4) (7.4) (6.7) (4.5) (4.7)
Services 569,865 602,261 639,568 679,870 719,837 (5.3) (5.7) (6.2) (6.3) (5.9)
Utilities 27,161 28,618 29,437 30,811 32,240 (3.7) (5.4) (2.9) (4.7) (4.6)
Wholesale and retail trade 155,875 165,692 177,438 189,946 201,895 (7.0) (6.3) (7.1) (7.0) (6.3)
Food & beverages and accommodation 29,385 31,475 33,820 36,571 39,084 (6.4) (7.1) (7.4) (8.1) (6.9)
Transportation and storage 37,396 39,542 41,998 44,415 46,880 (5.8) (5.7) (6.2) (5.8) (5.5)
Information and communication 60,666 65,578 71,109 76,863 83,050 (9.5) (8.1) (8.4) (8.1) (8.0)
Finance and insurance 73,619 75,539 79,009 83,359 87,736 (-0.5) (2.6) (4.6) (5.5) (5.3)
Real estate and business services 45,779 48,931 52,556 56,412 60,152 (6.5) (6.9) (7.4) (7.3) (6.6)
Other services1 46,776 49,068 51,578 54,306 57,062 (4.8) (4.9) (5.1) (5.3) (5.1)
Government services 93,208 97,818 102,623 107,188 111,739 (4.2) (4.9) (4.9) (4.4) (4.2)
(+) Import duties 13,808 15,030 16,980 17,783 18,777 (18.6) (8.8) (13.0) (4.7) (5.6)
GDP at purchasers’ prices 1,063,998 1,108,935 1,174,329 1,230,336 1,290,734 (5.1) (4.2) (5.9) (4.8) (4.9)
1 Community, social and personal services, private non-profit services to households and domestic services of households. 2 Preliminary. 3 Estimate. 4 Forecast. Note: Figures in parentheses are annual percentage changes. Source: Department of Statistics and Ministry of Finance, Malaysia.
Economic Outlook 2019 107
5 BI 3.1 - 3.6.indd 107 10/25/18 4:20 PM STATISTICAL TABLES
3.2. INDEX OF SERVICES 2010 = 100, Malaysia
Weights 2014 2015 2016 2017 20181 (%)
Annual Change (%)
Services 100.0 6.5 5.2 5.6 6.7 6.9
Wholesale & retail trade, 44.6 7.0 6.9 food & beverages and accommodation 7.4 6.3 6.1
Wholesale & retail trade 37.2 7.9 6.5 6.0 7.0 6.8
Food & beverages 5.6 5.2 5.1 6.4 7.2 8.4
Accommodation 1.9 4.7 5.4 5.8 5.9 6.4
Finance, real estate and professional 28.4 3.7 1.4 3.7 5.8 6.4
Finance & insurance 21.5 2.3 -0.5 2.4 4.9 5.6
Real estate 4.0 5.4 4.5 5.1 5.4 5.5
Professional 2.9 10.8 9.4 9.8 10.9 11.2
Information & communication and 21.2 8.4 7.8 6.9 7.4 7.4 transportation & storage
Information & communication 11.6 11.5 9.9 8.1 8.5 8.5
Transportation & storage 9.6 4.2 4.7 4.9 5.8 5.5
Other services 5.8 6.1 6.1 5.8 6.4 6.4
Private health 2.1 5.9 5.7 5.3 5.6 6.3
Private education 2.0 6.7 7.0 6.4 6.2 5.4
Arts, entertainment & recreation 1.7 5.6 5.6 5.7 7.7 7.8
1 January to June 2018. Source: Department of Statistics, Malaysia.
108 Economic Outlook 2019
5 BI 3.1 - 3.6.indd 108 10/25/18 4:20 PM STATISTICAL TABLES
3.3. INDUSTRIAL PRODUCTION INDEX 2015 = 100, Malaysia
1 Weights 2016 2017 2018 Sub-sector (%) Annual Change (%)
Total Industrial Production 100.00 4.1 4.3 3.1 Mining 25.14 2.4 -0.1 -2.4 Electricity 6.61 8.5 2.6 3.9 Manufacturing 68.25 4.3 6.1 4.9 Export-oriented industries Petroleum, chemical, rubber and plastic products 20.60 4.1 4.0 4.1 Refined petroleum products 9.36 3.1 3.5 3.0 Chemicals and chemical products 6.37 6.0 4.3 5.8 Basic pharmaceutical products and pharmaceutical 0.38 4.4 4.8 6.1 preparations Rubber and plastic products 4.49 3.6 4.6 3.9 Electrical and electronics products 18.23 7.5 7.3 5.8 Computer, electronics and optical products 13.89 8.1 7.5 6.6 Electrical equipment 2.20 5.8 6.3 2.7 Machinery and equipment n.e.c. 2.14 5.5 6.6 4.5 Wood products, funiture, paper products and printing 4.56 5.5 4.9 4.4 Wood and wood products 1.44 3.3 3.4 5.2 Paper and paper products 1.15 4.5 5.6 5.4 Printing and reproduction of recorded media 0.93 5.3 4.7 3.6 Furniture 1.04 10.0 6.1 3.1 Textiles, wearing apparel, leather products and footwear 1.33 6.8 8.0 4.8 Textiles 0.58 4.8 4.4 3.3 Wearing apparel 0.60 8.3 11.6 6.2 Leather and related products 0.15 8.5 6.5 4.4 Domestic-oriented industries Non-metallic mineral products, basic metal and fabricated 9.11 4.1 4.9 5.2 metal products Other non-metallic mineral and other related products 2.97 4.4 4.5 6.0 Basic metals 2.35 2.1 5.4 4.3 Fabricated metal products, except machinery and 3.79 5.0 4.9 5.1 equipment Food, beverages and tobacco 8.55 2.1 10.9 4.1 Food products 7.39 1.4 11.5 4.4 Beverages 0.65 9.9 9.1 3.8 Tobacco products 0.52 3.2 2.1 1.2 Transport equipment and other manufactures 5.87 -2.7 5.5 5.6 Motor vehicles, trailers and semi-trailers 3.17 -4.7 4.8 6.1 Other transport equipment 1.19 -2.8 3.6 3.9 Other manufacturing 0.74 -2.8 5.2 4.7 Repair and installation of machinery and equipment 0.76 5.9 11.2 6.7
1 January to August 2018. Source: Department of Statistics, Malaysia. Economic Outlook 2019 109
5 BI 3.1 - 3.6.indd 109 10/25/18 4:20 PM STATISTICAL TABLES
3.4. GROSS NATIONAL INCOME BY DEMAND AGGREGATES Malaysia RM million
Type of Expenditure 2015 2016 20173 20184 20195
Current Prices
A. Final consumption expenditure
Public 152,338 154,905 164,671 167,372 171,728
Private 626,372 674,964 748,857 816,213 896,704
B. Gross fixed capital formation
Public1 104,060 105,535 107,395 106,696 101,941
Private 198,648 211,297 234,824 247,110 263,885
C. Changes in inventories and valuables2 -11,497 1,191 3,683 -4,638 952
D. Exports of goods and services 817,370 834,491 966,174 998,101 1,028,202
E. Imports of goods and services 728,778 751,363 872,223 899,461 933,098
Gross Domestic Product at purchasers’ F. 1,158,513 1,231,020 1,353,380 1,431,392 1,530,315 prices (A+B+C+D-E)
G. Balance of primary income -32,112 -34,592 -36,354 -40,885 -41,144
H. Gross National Income (F+G) 1,126,401 1,196,428 1,317,027 1,390,507 1,489,171
Constant 2010 Prices
A. Final consumption expenditure
Public 143,577 144,877 152,769 154,282 157,002
Private 556,632 589,774 630,988 676,196 722,491
B. Gross fixed capital formation
Public1 94,649 94,154 94,203 92,815 87,832
Private 179,140 186,914 204,268 213,362 224,135
C. Changes in inventories and valuables2 -1,211 459 1,141 -4,255 647
D. Exports of goods and services 771,739 781,939 855,196 872,636 886,978
E. Imports of goods and services 680,527 689,182 764,238 774,700 788,353
F. Gross Domestic Product at purchasers’ 1,063,998 1,108,935 1,174,329 1,230,336 1,290,734 prices (A+B+C+D-E)
G. Balance of primary income -24,362 -23,285 -23,041 -25,669 -25,348
H. Gross National Income (F+G) 1,039,636 1,085,650 1,151,288 1,204,667 1,265,386
1 Includes investment of public corporations. 2 Includes statistical discrepancy arising from balancing. 3 Preliminary. 4 Estimate. 5 Forecast. Source: Department of Statistics and Ministry of Finance, Malaysia.
110 Economic Outlook 2019
5 BI 3.1 - 3.6.indd 110 10/25/18 4:20 PM STATISTICAL TABLES
3.5. PRIVATE CONSUMPTION INDICATORS Malaysia
Indicator 2014 2015 2016 2017 2018
Imports of consumption goods1 (RM million) 50,309 62,430 66,977 71,036 48,0202
Bursa Malaysia
FBM–KLCI 1,761.25 1,692.51 1,641.73 1,796.81 1,793.153
Market capitalisation (RM billion) 1,651.17 1,695.17 1,667.37 1,906.84 1,835.433
Sales number (units)
Passenger cars 588,348 591,275 514,594 514,679 405,0484
Motorcycles 442,749 380,802 396,343 434,850 301,9982
Sales of food (RM million) 30,554 31,124 34,514 38,133 26,8032
Production of televisions (‘000 units) 12,498 8,622 7,745 11,446 8,2152
Outstanding balance of credit card 35,605 36,044 36,947 38,060 38,0035 (RM million, end-period)
Domestic loans (RM million, end-period)
Banking system’s consumption credit 256,515 263,786 265,523 267,650 272,6885
1 Refers to imports by broad economic categories published by the Department of Statistics, Malaysia. 2 January to August 2018. 3 End-September 2018. 4 January to September 2018. 5 End-August 2018. Source: Bank Negara Malaysia, Bursa Malaysia, Malaysian Automotive Association, Motorcycle & Scooter Assemblers and Distributors Association of Malaysia and Department of Statistics, Malaysia.
Economic Outlook 2019 111
5 BI 3.1 - 3.6.indd 111 10/25/18 4:20 PM STATISTICAL TABLES
3.6. PRIVATE INVESTMENT INDICATORS Malaysia
Indicator 2014 2015 2016 2017 2018
Imports (RM million)
Capital goods1 95,882 95,551 100,245 115,567 75,4103
Intermediate goods1 408,181 399,526 399,033 478,932 305,4783
Loan disbursements by banking system (RM million)
Manufacturing 213,329 209,988 202,550 213,738 152,8703
Construction 65,403 65,172 67,349 77,674 59,8053
Housing loans (RM million, end-period)
Government2 43,898 42,237 48,518 55,882 60,9384
Banking system 390,380 437,007 477,256 519,582 545,6374
Production of construction materials
Cement roofing tiles ('000 units) 97,544 54,147 38,241 36,073 22,8093
Ready-mixed concrete ('000 cu. metres) 16,068 12,477 28,589 30,323 21,9753
Iron and steel bars and rods ('000 tonnes) 2,778 2,230 2,064 1,698 1,3593
Sales of commercial vehicles (units) 78,139 75,402 65,491 61,956 49,9235
1 Refers to imports by broad economic categories published by the Department of Statistics, Malaysia. 2 Based on principal amount. 3 January to August 2018. 4 End-August 2018. 5 January to September 2018. Source: Bank Negara Malaysia, Malaysian Automotive Association, Public Sector Home Financing Board and Department of Statistics, Malaysia.
112 Economic Outlook 2019
5 BI 3.1 - 3.6.indd 112 10/25/18 4:20 PM STATISTICAL TABLES
3.7. MALAYSIA’S TRADE WITH MAJOR TRADING PARTNERS RM million
2014 2015 2016 2017 20181 share share RM RM RM RM RM (%) (%) Total Trade 1,448,354 1,463,134 1,485,783 1,771,349 100.0 1,230,673 100.0 Exports 765,417 777,355 786,964 934,927 52.8 650,562 52.9 Total Imports 682,937 685,778 698,819 836,422 47.2 580,111 47.1 Net 82,480 91,577 88,145 98,505 5.6 70,450 5.7 Total Trade 207,800 230,817 240,965 290,402 100.0 206,190 100.0 Exports 92,286 101,537 98,578 125,957 43.4 89,308 43.3 China Imports 115,513 129,280 142,387 164,445 56.6 116,881 56.7 Net -23,227 -27,744 -43,809 -38,488 -13.3 -27,573 -13.4 Total Trade 194,615 190,584 186,840 228,357 100.0 155,362 100.0 Exports 108,728 108,388 114,442 135,628 59.4 88,628 57.0 Singapore Imports 85,887 82,195 72,398 92,729 40.6 66,734 43.0 Net 22,841 26,193 42,045 42,899 18.8 21,894 14.1 Total Trade 116,779 129,013 135,891 153,955 100.0 101,500 100.0 Exports 64,405 73,669 80,233 88,680 57.6 59,181 58.3 United States Imports 52,375 55,344 55,658 65,275 42.4 42,319 41.7 Net 12,030 18,325 24,575 23,406 15.2 16,862 16.6 Total Trade 137,329 126,267 120,725 139,208 100.0 87,243 100.0 Exports 82,617 72,683 63,743 75,597 54.3 45,192 51.8 Japan Imports 54,712 53,584 56,982 63,611 45.7 42,051 48.2 Net 27,905 19,099 6,761 11,986 8.6 3,140 3.6 Total Trade 79,817 86,047 86,421 98,649 100.0 69,808 100.0 Exports 40,205 44,387 44,092 50,508 51.2 37,532 53.8 Thailand Imports 39,612 41,660 42,328 48,141 48.8 32,275 46.2 Net 593 2,727 1,764 2,367 2.4 5,257 7.5 Total Trade 58,971 59,714 63,057 78,716 100.0 61,552 100.0 Exports 24,609 23,015 21,243 23,962 30.4 20,144 32.7 Chinese Taipei Imports 34,362 36,699 41,814 54,755 69.6 41,408 67.3 Net -9,754 -13,683 -20,571 -30,793 -39.1 -21,264 -34.5 Total Trade 47,792 48,384 50,311 61,724 100.0 58,156 100.0 Exports 37,023 36,852 37,641 47,713 77.3 48,033 82.6 Hong Kong Imports 10,768 11,532 12,669 14,011 22.7 10,123 17.4 Net 26,255 25,320 24,972 33,703 54.6 37,910 65.2 Total Trade 59,486 60,104 57,432 71,510 100.0 47,502 100.0 Exports 31,758 29,104 27,945 33,631 47.0 21,156 44.5 Indonesia Imports 27,728 31,000 29,486 37,879 53.0 26,345 55.5 Net 4,029 -1,896 -1,541 -4,249 -5.9 -5,189 -10.9 Total Trade 59,641 55,913 59,580 67,705 100.0 46,990 100.0 Exports 27,941 24,668 22,905 28,586 42.2 21,527 45.8 Republic of Korea Imports 31,700 31,245 36,675 39,119 57.8 25,463 54.2 Net -3,759 -6,577 -13,769 -10,532 -15.6 -3,936 -8.4 Total Trade 45,234 46,800 48,701 61,384 100.0 41,202 100.0 Exports 31,893 31,660 31,999 34,531 56.3 24,671 59.9 India Imports 13,340 15,139 16,702 26,853 43.7 16,531 40.1 Net 18,553 16,521 15,297 7,678 12.5 8,140 19.8
1 January to August 2018. Source: Department of Statistics, Malaysia.
Economic Outlook 2019 113
6 BI 3.7 - 3.12.indd 113 10/25/18 9:01 PM STATISTICAL TABLES
3.7. MALAYSIA’S TRADE WITH MAJOR TRADING PARTNERS (cont’d) RM million
2014 2015 2016 2017 20181 share share RM RM RM RM (%) RM (%) Total Trade 41,022 43,013 46,080 52,951 100.0 37,206 100.0 Exports 17,859 19,639 22,296 26,673 50.4 19,544 52.5 Germany Imports 23,162 23,375 23,784 26,278 49.6 17,662 47.5 Net -5,303 -3,736 -1,488 396 0.7 1,882 5.1 Total Trade 29,606 36,246 42,592 50,222 100.0 35,308 100.0 Exports 14,344 17,396 23,773 27,597 54.9 22,343 63.3 Viet Nam Imports 15,262 18,850 18,819 22,626 45.1 12,965 36.7 Net -918 -1,453 4,954 4,971 9.9 9,377 26.6 Total Trade 53,199 45,677 42,429 52,468 100.0 34,557 100.0 Exports 32,967 28,082 26,819 32,377 61.7 20,674 59.8 Australia Imports 20,233 17,595 15,610 20,092 38.3 13,883 40.2 Net 12,734 10,486 11,209 12,285 23.4 6,791 19.7 Total Trade 31,651 32,503 28,961 34,752 100.0 21,997 100.0 Exports 23,438 23,395 21,931 26,900 77.4 17,394 79.1 Netherlands Imports 8,213 9,108 7,030 7,852 22.6 4,603 20.9 Net 15,225 14,287 14,901 19,048 54.8 12,790 58.1 Total Trade 17,205 19,705 20,235 25,497 100.0 16,958 100.0 Exports 12,046 13,175 13,638 16,521 64.8 10,894 64.2 Philippines Imports 5,160 6,530 6,596 8,976 35.2 6,064 35.8 Net 6,886 6,645 7,042 7,545 29.6 4,830 28.5 Total Trade 17,634 14,333 15,232 18,558 100.0 15,903 100.0 Exports 5,170 5,738 5,746 5,830 31.4 4,150 26.1 France Imports 12,464 8,594 9,486 12,728 68.6 11,753 73.9 Net -7,295 -2,856 -3,741 -6,898 -37.2 -7,602 -47.8 Total Trade 27,293 23,988 22,357 25,181 100.0 14,996 100.0 United Arab Exports 11,743 11,837 12,575 12,019 47.7 7,321 48.8 Emirates Imports 15,550 12,151 9,781 13,161 52.3 7,676 51.2 Net -3,807 -314 2,794 -1,142 -4.5 -355 -2.4 Total Trade 13,088 10,947 14,024 14,925 100.0 13,856 100.0 Exports 3,837 3,421 3,373 4,235 28.4 2,469 17.8 Saudi Arabia Imports 9,251 7,525 10,651 10,689 71.6 11,387 82.2 Net -5,414 -4,104 -7,278 -6,454 -43.2 -8,918 -64.4 Total Trade 8,326 9,784 9,930 17,074 100.0 10,664 100.0 Exports 928 1,545 2,802 5,221 30.6 2,664 25.0 Switzerland Imports 7,399 8,239 7,128 11,853 69.4 8,000 75.0 Net -6,471 -6,694 -4,326 -6,631 -38.8 -5,336 -50.0 Total Trade 15,035 16,450 15,291 16,382 100.0 10,422 100.0 Exports 7,922 9,318 8,739 9,655 58.9 5,748 55.2 United Kingdom Imports 7,113 7,132 6,552 6,727 41.1 4,674 44.8 Net 808 2,186 2,188 2,928 17.9 1,074 10.3 Total Trade 186,830 176,845 178,728 211,729 100.0 143,302 100.0 Exports 93,698 97,844 102,448 123,105 58.1 81,990 57.2 Rest of the world Imports 93,132 79,002 76,280 88,624 41.9 61,312 42.8 Net 566 18,842 26,168 34,481 16.3 20,678 14.4
1 January to August 2018. Source: Department of Statistics, Malaysia.
114 Economic Outlook 2019
6 BI 3.7 - 3.12.indd 114 10/25/18 9:01 PM STATISTICAL TABLES
3.8. PRODUCTION, EXPORTS VOLUME AND VALUE OF MAJOR PRIMARY COMMODITIES Malaysia
Major Commodities 2014 2015 2016 2017 20182
Palm oil
Production (‘000 tonnes) 19,667 19,962 17,320 19,920 12,0453
Volume (‘000 tonnes) 16,573 16,866 15,310 15,188 8,798
Value (RM million) 42,809 40,118 41,443 46,086 23,073
Rubber
Production (‘000 tonnes) 669 722 674 740 3343
Volume (‘000 tonnes) 722 707 642 616 374
Value (RM million) 4,574 4,025 3,614 4,726 2,239
Sawlogs
Production (‘000 cubic metres) 14,911 14,335 13,934 11,046 5,1993
Volume (‘000 cubic metres) 3,217 3,021 2,837 2,592 1,136
Value (RM million) 2,072 2,020 1,611 1,411 621
Crude petroleum
Volume (‘000 tonnes) 12,562 15,678 15,907 15,736 9,780
Value (RM million) 32,723 26,075 22,319 28,255 20,736
Liquefied natural gas (LNG)
Production (mmscfpd)1 6,331 6,136 6,536 6,904 5,5403
Volume (‘000 tonnes) 25,087 24,801 24,868 26,794 13,814
Value (RM million) 63,750 44,603 32,709 41,417 24,243
Tin
Production (‘000 tonnes) 3,757 4,159 4,123 4,819 1,2583
Volume (‘000 tonnes) 35,221 38,319 27,470 25,920 14,046
Value (RM million) 2,524 2,352 1,953 2,219 1,151
1 mmscfpd = million standard cubic feet per day. 2 January to July 2018. 3 January to August 2018. Source: Bank Negara Malaysia, Malaysian Palm Oil Board, and Department of Statistics, Malaysia.
Economic Outlook 2019 115
6 BI 3.7 - 3.12.indd 115 10/25/18 9:01 PM STATISTICAL TABLES
3.9. DIRECTION OF MAJOR EXPORTS Malaysia
2014 2015 2016 2017 20184 Exports ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%)
Manufactured goods1 Total 498,925 100.0 551,006 100.0 567,404 100.0 665,786 100.0 476,895 100.0 Singapore 68,890 13.8 78,400 14.2 84,683 14.9 102,059 15.3 66,184 13.9 China 66,565 13.3 69,371 12.6 69,539 12.3 84,387 12.7 64,843 13.6 European Union 61,920 12.4 68,073 12.4 69,124 12.2 83,329 12.5 58,689 12.3 United States 59,271 11.9 69,308 12.6 76,004 13.4 83,938 12.6 56,367 11.8 Hong Kong 35,560 7.1 35,363 6.4 35,804 6.3 45,592 6.8 45,920 9.6 Palm oil2 Total 16,573 42,809 100.0 16,866 40,118 100.0 15,310 41,443 100.0 15,254 46,295 100.0 9,910 25,851 100.0 India 3,093 7,500 17.5 3,684 8,035 20.0 2,822 7,162 17.3 1,942 5,649 12.2 1,495 3,655 14.1 European Union 2,193 5,646 13.2 2,358 5,638 14.1 1,900 5,193 12.5 1,770 5,436 11.7 1,253 3,318 12.8 China 2,877 7,123 16.6 2,429 5,368 13.4 1,867 4,835 11.7 1,613 4,582 9.9 982 2,409 9.3 Pakistan 761 1,979 4.6 618 1,534 3.8 810 2,221 5.4 779 2,362 5.1 664 1,721 6.7 Turkey 77 208 0.5 391 920 2.3 641 1,756 4.2 703 2,019 4.4 432 1,133 4.4 Sawlogs3 Total 3,217 2,072 100.0 3,021 2,020 100.0 2,837 1,611 100.0 2,592 1,411 100.0 1,206 681 100.0 India 1,817 1,273 61.4 1,582 1,266 62.7 1,243 968 60.1 918 829 58.7 447 405 59.4 Indonesia 171 38 1.8 534 106 5.2 900 178 11.0 1,154 214 15.2 515 99 14.6 Chinese Taipei 332 232 11.2 208 174 8.6 199 155 9.6 113 97 6.9 67 55 8.1 China 343 211 10.2 174 121 6.0 74 47 2.9 72 53 3.8 46 45 6.7 Japan 236 161 7.8 201 160 7.9 165 114 7.1 120 88 6.3 55 38 5.6 Sawn timber3 Total 1,965 2,651 100.0 1,986 3,168 100.0 2,025 3,390 100.0 2,169 3,894 100.0 1,278 2,393 100.0 Thailand 385 404 15.2 405 494 15.6 399 505 14.9 403 551 14.1 224 305 12.8 China 261 363 13.7 238 375 11.8 225 358 10.6 310 533 13.7 180 304 12.7 India 34 47 1.8 77 131 4.1 111 182 5.4 167 344 8.8 137 262 11.0 European Union 161 412 15.5 146 412 13.0 140 378 11.1 132 401 10.3 81 258 10.8 Philippines 180 79 3.0 215 244 7.7 231 326 9.6 266 380 9.8 147 251 10.5 Crude petroleum Total 12,562 32,723 100.0 15,678 26,075 100.0 15,907 22,319 100.0 17,086 30,773 100.0 11,205 24,030 100.0 Australia 4,553 12,062 36.9 3,419 5,763 22.1 4,422 6,294 28.2 4,545 8,266 26.9 3,245 7,068 29.4 India 2,988 7,682 23.5 3,112 5,093 19.5 3,734 5,264 23.6 3,220 5,656 18.4 2,508 5,342 22.2 Thailand 1,696 4,228 12.9 4,052 6,558 25.2 3,249 4,634 20.8 3,651 6,565 21.3 1,921 4,142 17.2 Singapore 712 1,857 5.7 1,690 2,866 11.0 1,273 1,797 8.1 1,365 2,489 8.1 1,299 2,727 11.4 New Zealand 976 2,653 8.1 902 1,578 6.1 466 613 2.7 835 1,469 4.8 592 1,243 5.2
1 Includes SITC 1+5+6+7+8. 2 Includes crude and processed palm oil and palm stearin. 3 Figures in quantity are in thousand cubic metres. 4 January to August 2018. Source: Department of Statistics, Malaysia.
116 Economic Outlook 2019
6 BI 3.7 - 3.12.indd 116 10/25/18 9:01 PM STATISTICAL TABLES
2014 2015 2016 2017 20184 Exports ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%) ‘000 tonnes RM million share (%)
Manufactured goods1 Total 498,925 100.0 551,006 100.0 567,404 100.0 665,786 100.0 476,895 100.0 Singapore 68,890 13.8 78,400 14.2 84,683 14.9 102,059 15.3 66,184 13.9 China 66,565 13.3 69,371 12.6 69,539 12.3 84,387 12.7 64,843 13.6 European Union 61,920 12.4 68,073 12.4 69,124 12.2 83,329 12.5 58,689 12.3 United States 59,271 11.9 69,308 12.6 76,004 13.4 83,938 12.6 56,367 11.8 Hong Kong 35,560 7.1 35,363 6.4 35,804 6.3 45,592 6.8 45,920 9.6 Palm oil2 Total 16,573 42,809 100.0 16,866 40,118 100.0 15,310 41,443 100.0 15,254 46,295 100.0 9,910 25,851 100.0 India 3,093 7,500 17.5 3,684 8,035 20.0 2,822 7,162 17.3 1,942 5,649 12.2 1,495 3,655 14.1 European Union 2,193 5,646 13.2 2,358 5,638 14.1 1,900 5,193 12.5 1,770 5,436 11.7 1,253 3,318 12.8 China 2,877 7,123 16.6 2,429 5,368 13.4 1,867 4,835 11.7 1,613 4,582 9.9 982 2,409 9.3 Pakistan 761 1,979 4.6 618 1,534 3.8 810 2,221 5.4 779 2,362 5.1 664 1,721 6.7 Turkey 77 208 0.5 391 920 2.3 641 1,756 4.2 703 2,019 4.4 432 1,133 4.4 Sawlogs3 Total 3,217 2,072 100.0 3,021 2,020 100.0 2,837 1,611 100.0 2,592 1,411 100.0 1,206 681 100.0 India 1,817 1,273 61.4 1,582 1,266 62.7 1,243 968 60.1 918 829 58.7 447 405 59.4 Indonesia 171 38 1.8 534 106 5.2 900 178 11.0 1,154 214 15.2 515 99 14.6 Chinese Taipei 332 232 11.2 208 174 8.6 199 155 9.6 113 97 6.9 67 55 8.1 China 343 211 10.2 174 121 6.0 74 47 2.9 72 53 3.8 46 45 6.7 Japan 236 161 7.8 201 160 7.9 165 114 7.1 120 88 6.3 55 38 5.6 Sawn timber3 Total 1,965 2,651 100.0 1,986 3,168 100.0 2,025 3,390 100.0 2,169 3,894 100.0 1,278 2,393 100.0 Thailand 385 404 15.2 405 494 15.6 399 505 14.9 403 551 14.1 224 305 12.8 China 261 363 13.7 238 375 11.8 225 358 10.6 310 533 13.7 180 304 12.7 India 34 47 1.8 77 131 4.1 111 182 5.4 167 344 8.8 137 262 11.0 European Union 161 412 15.5 146 412 13.0 140 378 11.1 132 401 10.3 81 258 10.8 Philippines 180 79 3.0 215 244 7.7 231 326 9.6 266 380 9.8 147 251 10.5 Crude petroleum Total 12,562 32,723 100.0 15,678 26,075 100.0 15,907 22,319 100.0 17,086 30,773 100.0 11,205 24,030 100.0 Australia 4,553 12,062 36.9 3,419 5,763 22.1 4,422 6,294 28.2 4,545 8,266 26.9 3,245 7,068 29.4 India 2,988 7,682 23.5 3,112 5,093 19.5 3,734 5,264 23.6 3,220 5,656 18.4 2,508 5,342 22.2 Thailand 1,696 4,228 12.9 4,052 6,558 25.2 3,249 4,634 20.8 3,651 6,565 21.3 1,921 4,142 17.2 Singapore 712 1,857 5.7 1,690 2,866 11.0 1,273 1,797 8.1 1,365 2,489 8.1 1,299 2,727 11.4 New Zealand 976 2,653 8.1 902 1,578 6.1 466 613 2.7 835 1,469 4.8 592 1,243 5.2
1 Includes SITC 1+5+6+7+8. 2 Includes crude and processed palm oil and palm stearin. 3 Figures in quantity are in thousand cubic metres. 4 January to August 2018. Source: Department of Statistics, Malaysia.
Economic Outlook 2019 117
6 BI 3.7 - 3.12.indd 117 10/25/18 9:01 PM STATISTICAL TABLES
3.10. EXPORTS OF MANUFACTURED GOODS Malaysia RM million
2014 2015 2016 2017 20182
share (%)
Electrical and electronics products 256,145 277,922 287,810 343,070 245,576 45.1
Petroleum products 70,356 54,528 54,662 71,813 49,459 9.1
Chemicals and chemical products 35,846 39,434 41,396 47,138 36,769 6.8
Machinery, equipment and parts 29,998 36,159 37,498 40,133 27,533 5.1
Manufactures of metal 26,444 34,904 33,352 37,937 30,335 5.6
Optical and scientific equipment 23,661 26,085 28,747 32,395 23,366 4.3
Rubber products 18,003 20,184 20,253 26,308 17,409 3.2
Palm oil-based manufactured products 17,739 17,482 19,552 23,785 15,254 2.8
Processed food 15,712 17,111 18,958 19,713 12,516 2.3
Wood products 14,716 15,441 15,680 16,369 10,377 1.9
Textiles, apparels and footwear 12,115 13,213 13,884 15,329 9,912 1.8
Manufactures of plastics 11,915 12,921 13,066 14,504 9,527 1.8
Transport equipment 10,592 12,014 13,476 15,605 12,240 2.2
Iron and steel products 9,568 8,644 6,935 12,562 9,802 1.8
Jewellery 6,829 7,767 7,185 6,714 4,141 0.8
Non-metallic mineral products 5,757 6,048 5,562 5,996 4,696 0.9
Beverages and tobacco 4,068 4,486 4,650 4,213 2,156 0.4
Paper and pulp products 3,659 4,165 4,263 4,691 3,153 0.6
Other manufactures’1 14,230 16,918 18,838 27,584 19,986 3.7
Total 587,178 625,428 645,768 765,858 544,207 100.0 (7.1) (6.5) (3.3) (18.6) (8.9)
1 Includes animal feed, printed matter, miscellaneous manufactured articles, etc. 2 January to August 2018. Note: Figures in parentheses are annual percentage changes. Total may not add up due to rounding. Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation.
118 Economic Outlook 2019
6 BI 3.7 - 3.12.indd 118 10/25/18 9:01 PM STATISTICAL TABLES
3.11. SOURCE OF MAJOR IMPORTS Malaysia RM million
Imports 2014 2015 2016 2017 20181
share share share share share (%) (%) (%) (%) (%) Telecommunication equipment and parts Total 20,427 100.0 22,965 100.0 22,501 100.0 26,490 100.0 16,743 100.0 China 9,211 45.1 9,510 41.4 11,675 51.9 13,683 51.7 8,557 51.1 Hong Kong 1,549 7.6 1,917 8.3 2,102 9.3 3,429 12.9 2,156 12.9 Viet Nam 2,178 10.7 2,117 9.2 1,799 8.0 2,997 11.3 2,044 12.2 Automatic data processing machines Total 8,603 100.0 9,896 100.0 10,646 100.0 12,236 100.0 8,484 100.0 China 4,113 47.8 4,941 49.9 5,027 47.2 4,987 40.8 4,349 51.3 Thailand 584 6.8 813 8.2 2,080 19.5 3,319 27.1 1,637 19.3 Singapore 1,209 14.1 1,379 13.9 1,087 10.2 1,134 9.3 506 6.0 Thermionic valves and tubes Total 109,455 100.0 111,509 100.0 118,033 100.0 149,363 100.0 103,078 100.0 Chinese Taipei 14,656 13.4 16,672 15.0 22,199 18.8 33,765 22.6 26,412 25.6 Singapore 11,497 10.5 14,666 13.2 14,779 12.5 24,310 16.3 16,769 16.3 United States 16,993 15.5 18,278 16.4 19,065 16.2 24,373 16.3 15,175 14.7 Parts for office machine Total 10,527 100.0 10,591 100.0 9,766 100.0 9,041 100.0 6,432 100.0 China 3,025 28.7 3,596 34.0 3,166 32.4 3,543 39.2 2,324 36.1 Thailand 2,097 19.9 2,230 21.1 2,418 24.8 2,212 24.5 1,528 23.8 United States 724 6.9 659 6.2 667 6.8 618 6.8 662 10.3 Medicaments Total 4,231 100.0 4,535 100.0 4,615 100.0 4,689 100.0 3,306 100.0 European Union 2,145 50.7 2,473 54.5 2,440 52.9 2,481 52.9 1,795 54.3 United States 355 8.4 390 8.6 437 9.5 417 8.9 336 10.2 Switzerland 406 9.6 385 8.5 356 7.7 286 6.1 210 6.4 Lubricating oils & preparation not stated elsewhere Total 74,553 100.0 57,668 100.0 49,398 100.0 71,566 100.0 50,815 100.0 Singapore 37,331 50.1 26,041 45.2 20,676 41.9 27,537 38.5 23,009 45.3 China 2,241 3.0 2,091 3.6 4,887 9.9 7,876 11.0 6,051 11.9 India 3,266 4.4 2,728 4.7 3,675 7.4 9,903 13.8 6,008 11.8
1 January to August 2018. Source: Department of Statistics, Malaysia.
Economic Outlook 2019 119
6 BI 3.7 - 3.12.indd 119 10/25/18 9:01 PM STATISTICAL TABLES
3.12. BALANCE OF PAYMENTS Malaysia RM million
2014 2015 2016 2017 20181
Components Credits Debits Net Credits Debits Net Credits Debits Net Credits Debits Net Credits Debits Net (+) (-) (+) (-) (+) (-) (+) (-) (+) (-)
Balance on goods and services 816,483 713,863 102,620 817,370 728,778 88,592 834,491 751,363 83,128 966,174 872,223 93,951 481,873 432,164 49,709
Goods 678,865 565,538 113,327 681,275 572,051 109,224 686,896 584,850 102,046 807,012 690,246 116,766 404,524 342,788 61,736
Services 137,618 148,325 -10,706 136,095 156,727 -20,632 147,596 166,513 -18,917 159,162 181,977 -22,815 77,349 89,376 -12,027
Transport 15,617 41,666 -26,050 16,365 40,930 -24,565 17,251 40,710 -23,459 19,336 48,896 -29,561 9,924 23,395 -13,471
Travel 73,951 40,718 33,233 68,675 41,734 26,941 74,980 43,465 31,515 78,797 45,915 32,882 36,608 23,196 13,412
Other services 48,051 65,941 -17,890 51,056 74,063 -23,007 55,365 82,339 -26,974 61,029 87,166 -26,137 30,817 42,785 -11,968
Primary income 52,395 89,019 -36,624 48,674 80,786 -32,112 47,452 82,045 -34,592 53,455 89,809 -36,354 26,302 47,724 -21,422
Compensation of employees 5,170 10,071 -4,902 6,405 12,000 -5,595 6,648 12,254 -5,606 7,077 11,850 -4,773 3,407 6,808 -3,400
Investment income 47,225 78,948 -31,722 42,270 68,786 -26,517 40,805 69,791 -28,986 46,378 77,959 -31,581 22,895 40,917 -18,021
Secondary income 10,496 27,939 -17,443 11,925 33,251 -21,325 15,988 34,617 -18,629 16,696 34,018 -17,322 7,304 16,706 -9,401
Balance on current account 879,374 830,821 48,554 877,970 842,815 35,155 897,932 868,024 29,907 1,036,325 996,050 40,275 515,480 496,594 18,886
% of Gross National Income 4.5 3.1 2.5 3.1 2.8
Capital account 344 -1,136 102 -27 -61
Financial account -79,954 -55,350 -249 3,800 24,387
Direct investment -17,974 -1,810 13,792 16,134 9,989
Assets -52,623 -39,698 -42,246 -24,867 -6,329
Liabilities 34,649 37,888 56,038 41,000 16,319
Portfolio investment -39,354 -26,122 -14,203 -12,316 -40,911
Financial derivatives -975 -663 -802 -109 540
Other investment -21,652 -26,755 964 92 54,769 Balance on capital and financial -79,610 -56,486 -148 3,773 24,325 accounts Net errors and omissions -13,023 -32,222 -23,899 -27,639 -25,909
Overall balance -44,080 -53,553 5,860 16,409 17,303
1 January to June 2018. Note: Total may not add up due to rounding. Source: Department of Statistics, Malaysia.
120 Economic Outlook 2019
6 BI 3.7 - 3.12.indd 120 10/25/18 9:01 PM STATISTICAL TABLES
2014 2015 2016 2017 20181
Components Credits Debits Net Credits Debits Net Credits Debits Net Credits Debits Net Credits Debits Net (+) (-) (+) (-) (+) (-) (+) (-) (+) (-)
Balance on goods and services 816,483 713,863 102,620 817,370 728,778 88,592 834,491 751,363 83,128 966,174 872,223 93,951 481,873 432,164 49,709
Goods 678,865 565,538 113,327 681,275 572,051 109,224 686,896 584,850 102,046 807,012 690,246 116,766 404,524 342,788 61,736
Services 137,618 148,325 -10,706 136,095 156,727 -20,632 147,596 166,513 -18,917 159,162 181,977 -22,815 77,349 89,376 -12,027
Transport 15,617 41,666 -26,050 16,365 40,930 -24,565 17,251 40,710 -23,459 19,336 48,896 -29,561 9,924 23,395 -13,471
Travel 73,951 40,718 33,233 68,675 41,734 26,941 74,980 43,465 31,515 78,797 45,915 32,882 36,608 23,196 13,412
Other services 48,051 65,941 -17,890 51,056 74,063 -23,007 55,365 82,339 -26,974 61,029 87,166 -26,137 30,817 42,785 -11,968
Primary income 52,395 89,019 -36,624 48,674 80,786 -32,112 47,452 82,045 -34,592 53,455 89,809 -36,354 26,302 47,724 -21,422
Compensation of employees 5,170 10,071 -4,902 6,405 12,000 -5,595 6,648 12,254 -5,606 7,077 11,850 -4,773 3,407 6,808 -3,400
Investment income 47,225 78,948 -31,722 42,270 68,786 -26,517 40,805 69,791 -28,986 46,378 77,959 -31,581 22,895 40,917 -18,021
Secondary income 10,496 27,939 -17,443 11,925 33,251 -21,325 15,988 34,617 -18,629 16,696 34,018 -17,322 7,304 16,706 -9,401
Balance on current account 879,374 830,821 48,554 877,970 842,815 35,155 897,932 868,024 29,907 1,036,325 996,050 40,275 515,480 496,594 18,886
% of Gross National Income 4.5 3.1 2.5 3.1 2.8
Capital account 344 -1,136 102 -27 -61
Financial account -79,954 -55,350 -249 3,800 24,387
Direct investment -17,974 -1,810 13,792 16,134 9,989
Assets -52,623 -39,698 -42,246 -24,867 -6,329
Liabilities 34,649 37,888 56,038 41,000 16,319
Portfolio investment -39,354 -26,122 -14,203 -12,316 -40,911
Financial derivatives -975 -663 -802 -109 540
Other investment -21,652 -26,755 964 92 54,769 Balance on capital and financial -79,610 -56,486 -148 3,773 24,325 accounts Net errors and omissions -13,023 -32,222 -23,899 -27,639 -25,909
Overall balance -44,080 -53,553 5,860 16,409 17,303
1 January to June 2018. Note: Total may not add up due to rounding. Source: Department of Statistics, Malaysia.
Economic Outlook 2019 121
6 BI 3.7 - 3.12.indd 121 10/25/18 4:20 PM STATISTICAL TABLES
3.13. CONSUMER PRICE INDEX BY REGION 2010 = 100, Malaysia
Weights1 2014 2015 2016 2017 20182 Groups (%) Annual Change (%)
Malaysia
Total 100.0 3.2 2.1 2.1 3.7 1.3
Food and non-alcoholic beverages 29.5 3.3 3.9 3.9 4.0 2.0
Alcoholic beverages and tobacco 2.4 11.6 17.2 17.2 0.2 -0.2
Clothing and footwear 3.2 -0.2 -0.4 -0.4 -0.3 -1.5
Housing, water, electricity, gas and other fuels 23.8 3.4 2.4 2.4 2.2 2.0 Furnishings, household equipment and routine 4.1 1.0 2.4 2.4 2.1 0.7 household maintenance Health 1.9 2.9 2.7 2.7 2.5 1.3
Transport 14.6 4.9 -4.6 -4.6 13.2 2.7
Communication 4.8 -0.7 -1.5 -1.5 -0.4 -1.8
Recreation services and culture 4.8 1.5 2.5 2.5 1.9 -0.6
Education 1.3 2.4 2.1 2.1 1.7 1.1
Restaurants and hotels 2.9 4.7 2.8 2.8 2.5 1.6
Miscellaneous goods and services 6.7 0.7 2.9 2.9 1.2 -0.8
Peninsular Malaysia
Total 100.0 3.3 2.3 2.2 4.0 1.3
Food and non-alcoholic beverages 29.0 3.5 3.8 4.1 4.1 2.0
Alcoholic beverages and tobacco 2.4 11.8 13.7 17.3 0.2 -0.1
Clothing and footwear 3.3 0.0 0.5 -0.4 -0.2 -1.5
Housing, water, electricity, gas and other fuels 23.6 3.6 3.1 2.6 2.4 2.1 Furnishings, household equipment and routine 4.2 1.1 2.9 2.5 2.2 0.8 household maintenance Health 1.9 2.5 4.5 2.8 2.6 1.3
Transport 14.7 4.8 -4.8 -4.4 13.2 2.7
Communication 4.9 -0.8 1.9 -1.5 -0.3 -1.9
Recreation services and culture 4.9 1.5 1.7 2.5 2.0 -0.6
Education 1.4 2.5 2.5 2.2 1.6 1.2
Restaurants and hotels 3.0 4.8 4.2 2.7 2.6 1.6
Miscellaneous goods and services 6.7 0.6 4.1 3.0 1.2 -0.7
1 Weights based on Household Expenditure Survey 2016. 2 January to August 2018. Source: Department of Statistics, Malaysia.
122 Economic Outlook 2019
7 BI 3.13 - 3.18.indd 122 10/25/18 4:20 PM STATISTICAL TABLES
3.13. CONSUMER PRICE INDEX BY REGION (cont’d) 2010 = 100, Malaysia
Weights1 2014 2015 2016 2017 20182 Groups (%) Annual Change (%)
Sarawak
Total 100.0 2.8 1.4 1.5 3.0 1.0
Food and non-alcoholic beverages 33.5 3.5 3.4 3.1 2.6 2.0
Alcoholic beverages and tobacco 2.7 8.6 10.9 13.7 -0.1 -1.5
Clothing and footwear 2.8 -0.8 0.4 -1.1 -1.2 -1.5
Housing, water, electricity, gas and other fuels 21.9 2.2 -1.7 2.5 0.8 0.8 Furnishings, household equipment and routine household maintenance 3.8 0.5 2.0 1.4 2.2 -0.7 Health 1.5 5.4 4.5 2.4 2.3 2.5
Transport 14.0 5.5 -2.5 -5.8 15.2 3.1
Communication 4.6 -0.7 2.0 -2.6 -0.6 -1.9
Recreation services and culture 4.8 1.4 1.3 1.5 0.6 -0.6
Education 0.9 0.8 1.3 1.9 1.1 1.0
Restaurants and hotels 2.4 2.7 2.8 2.4 2.0 1.7
Miscellaneous goods and services 7.1 1.1 4.3 3.0 1.6 -1.1
Sabah & Federal Territory of Labuan
Total 100.0 2.0 0.8 0.7 3.0 1.0
Food and non-alcoholic beverages 31.3 1.5 2.0 1.6 3.6 2.0
Alcoholic beverages and tobacco 2.1 12.2 14.0 17.8 0.2 -1.5
Clothing and footwear 2.9 -1.0 0.4 -0.1 -0.9 -1.5
Housing, water, electricity, gas and other fuels 28.1 2.3 -0.6 1.2 1.0 0.8 Furnishings, household equipment and routine household maintenance 3.6 0.2 1.7 0.6 1.1 -0.7 Health 1.1 2.5 4.8 2.4 1.7 2.5
Transport 13.7 3.3 -4.0 -5.3 11.7 3.1
Communication 4.6 -0.4 2.9 -2.0 -0.2 -1.9
Recreation services and culture 3.7 2.8 1.5 2.7 2.0 -0.6
Education 0.8 1.7 1.4 0.9 1.2 1.0
Restaurants and hotels 2.0 4.6 5.6 2.7 1.3 1.7
Miscellaneous goods and services 6.1 0.6 4.1 1.6 0.6 -1.1
1 Weights based on Household Expenditure Survey 2016. 2 January to August 2018. Source: Department of Statistics, Malaysia.
Economic Outlook 2019 123
7 BI 3.13 - 3.18.indd 123 10/25/18 4:20 PM STATISTICAL TABLES
3.14. CONSUMER PRICE INDEX BY STRATUM 2010 = 100, Malaysia
Weights1 2014 2015 2016 2017 20182 Groups (%) Annual Change (%)
Rural
Total 100.0 2.8 1.7 1.7 3.7 1.1
Food and non-alcoholic beverages 35.6 2.8 2.6 2.9 3.6 1.5
Alcoholic beverages and tobacco 3.0 12.8 14.3 18.6 0.1 -0.3
Clothing and footwear 3.6 -0.2 0.5 0.0 -0.1 -0.6 Housing, water, electricity, gas and other fuels 19.9 2.3 2.2 2.6 1.8 1.3 Furnishings, household equipment and routine household maintenance 3.7 0.7 2.1 1.4 1.8 0.5 Health 2.0 2.4 3.5 2.4 1.7 1.0
Transport 14.6 4.9 -4.4 -5.5 13.8 2.7
Communication 4.4 -0.5 2.5 -2.5 -0.1 -0.9
Recreation services and culture 3.6 2.0 1.1 1.7 1.7 -0.5
Education 0.9 2.0 1.8 2.1 1.2 0.6
Restaurants and hotels 2.4 3.3 3.1 1.7 1.5 1.2
Miscellaneous goods and services 6.3 0.5 4.3 2.6 1.1 -0.8
Urban
Total 100.0 3.3 2.2 0.7 3.8 1.3
Food and non-alcoholic beverages 28.4 3.6 4.0 1.6 4.0 2.2
Alcoholic beverages and tobacco 2.3 11.2 13.2 17.8 0.2 -0.1
Clothing and footwear 3.2 -0.2 0.5 -0.1 -0.4 -1.8 Housing, water, electricity, gas and other fuels 24.5 3.7 2.5 1.2 2.4 2.1 Furnishings, household equipment and routine household maintenance 4.2 1.1 2.9 0.6 2.3 0.7 Health 1.8 3.0 4.6 2.4 2.8 1.4
Transport 14.6 4.8 -4.6 -5.3 13.0 2.7
Communication 4.9 -0.8 1.8 -2.0 -0.3 -2.0
Recreation services and culture 5.0 1.6 1.8 2.7 1.9 -0.6
Education 1.4 2.4 2.5 0.9 1.7 1.2
Restaurants and hotels 3.0 5.0 4.4 2.7 2.7 1.7
Miscellaneous goods and services 6.7 0.7 4.1 1.6 1.2 -0.8
1 Weights based on Household Expenditure Survey 2016. 2 January to August 2018. Source: Department of Statistics, Malaysia.
124 Economic Outlook 2019
7 BI 3.13 - 3.18.indd 124 10/25/18 4:20 PM STATISTICAL TABLES
3.15. CONSUMER PRICE INDEX BY STATE 2010 = 100, Malaysia
2014 2015 2016 2017 20181 States Annual Change (%)
Total
Malaysia 3.2 2.1 2.1 3.7 1.3
Kedah and Perlis 2.9 1.7 1.7 3.9 0.7
Pulau Pinang 3.2 2.4 2.5 4.0 1.1
Perak 2.7 1.6 1.4 3.3 1.0
Selangor and Federal Territory of Putrajaya 3.4 2.4 2.2 3.9 1.6
Federal Territory of Kuala Lumpur 3.3 2.8 2.8 3.7 1.6
Melaka 3.2 2.0 2.0 4.1 1.3
Negeri Sembilan 2.9 2.5 2.0 4.2 1.4
Johor 3.5 2.8 2.8 4.2 1.4
Pahang 3.0 1.6 1.8 3.1 0.9
Kelantan 3.2 1.8 1.6 3.5 1.0
Terengganu 2.6 1.5 1.5 3.1 0.9
Sabah and Federal Territory of Labuan 3.0 0.8 0.7 3.0 1.1
Sarawak 2.8 1.4 1.6 3.0 1.0
Food and Non-Alcoholic Beverages
Malaysia 3.3 3.6 3.9 4.0 2.0
Kedah and Perlis 3.3 2.6 3.5 4.3 0.8
Pulau Pinang 3.9 4.1 4.9 4.4 2.0
Perak 2.3 3.2 3.1 3.3 1.6
Selangor and Federal Territory of Putrajaya 4.3 4.2 4.3 4.2 2.0
Federal Territory of Kuala Lumpur 3.0 4.3 4.2 4.5 4.0
Melaka 3.4 3.5 4.7 4.1 1.8
Negeri Sembilan 2.5 4.6 4.4 4.2 1.8
Johor 3.5 4.6 5.0 4.6 2.2
Pahang 3.8 3.4 3.7 2.5 1.4
Kelantan 3.7 3.1 3.0 3.4 1.4
Terengganu 2.6 2.5 3.2 2.8 1.6
Sabah and Federal Territory of Labuan 1.5 2.0 1.6 3.6 2.3
Sarawak 3.5 3.4 3.1 2.6 2.0
1 January to August 2018. Source: Department of Statistics, Malaysia.
Economic Outlook 2019 125
7 BI 3.13 - 3.18.indd 125 10/25/18 4:20 PM STATISTICAL TABLES
3.16. CORE INDEX 2010 = 100, Malaysia
Weights1 2014 2015 2016 2017 20182 Groups (%) Annual Change (%)
Total 100.0 2.3 3.1 2.4 2.4 1.0
Food and non-alcoholic beverages 26.5 3.2 3.5 3.2 3.6 2.2
Alcoholic beverages and tobacco ------
Clothing and footwear 4.5 -0.2 0.5 -0.4 -0.3 -1.5
Housing, water, electricity, gas and other 26.5 3.1 3.8 2.6 2.7 2.4 fuels
Furnishings, household equipment and 5.5 1.0 2.7 2.3 2.1 0.7 routine household maintenance
Health 2.6 2.9 4.5 2.7 2.5 1.3
Transport 6.5 1.0 2.1 3.9 2.7 -0.3
Communication 6.5 -0.7 1.9 -1.6 -0.4 -1.8
Recreation services and culture 6.6 1.5 1.7 2.5 1.9 -0.6
Education 1.8 2.4 2.4 2.1 1.7 1.0
Restaurants and hotels 3.9 4.7 4.1 2.8 2.5 1.6
Miscellaneous goods and services 9.1 0.7 4.1 2.9 1.2 -0.8
1 Weights based on Household Expenditure Survey 2016. 2 January to August 2018. Source: Department of Statistics, Malaysia.
126 Economic Outlook 2019
7 BI 3.13 - 3.18.indd 126 10/25/18 4:20 PM STATISTICAL TABLES
3.17. PRODUCER PRICE INDEX - LOCAL PRODUCTION 2010 = 100, Malaysia
Weights1 2014 2015 2016 2017 20182 Sectors and Stage of Processing (%) Annual Change (%)
Sector (MSIC 2008)
Total 100.0 1.5 -7.4 -1.1 6.7 -0.9
Agriculture, forestry and fishing 6.7 1.8 -3.9 16.3 7.0 -11.6
Mining 7.9 -4.1 -36.1 -15.3 24.7 19.0
Manufacturing 81.6 2.2 -3.6 -1.2 5.3 -1.9
Electricity and gas supply 3.4 10.3 -4.6 -0.9 1.9 1.0
Water supply 0.3 0.9 2.5 3.5 -0.1 0.4
Stage of processing
Total 100.0 1.5 -7.4 -1.1 6.7 -0.9
Crude materials for further processing 16.4 -2.1 -20.5 3.4 14.8 4.3
Intermediate materials, supplies and 56.1 3.4 -6.2 -3.2 6.7 -2.1 components
Finished goods 27.5 0.8 1.2 0.4 0.9 -2.5
1 Weights based on Economic Census 2016. 2 January to August 2018. Source: Department of Statistics, Malaysia.
Economic Outlook 2019 127
7 BI 3.13 - 3.18.indd 127 10/25/18 4:20 PM STATISTICAL TABLES
3.18. EXTERNAL TRADE INDICES 2010 = 100, Malaysia
Weights1 2014 2015 2016 2017 20182 Commodity Section (%) Annual Change (%)
Export Unit Value Indices
Total 100.0 1.2 -4.2 -2.0 7.2 0.9
Food 3.0 2.7 4.9 5.6 6.9 3.5
Beverages and tobacco 0.5 1.6 4.8 6.5 7.6 6.1
Crude materials, inedible 2.6 -10.6 -3.1 -2.6 14.2 -8.7
Mineral fuels, lubricants, etc. 22.7 1.5 -29.7 -24.7 27.8 14.9
Animal and vegetable oils and fats 6.9 5.8 -8.2 7.7 13.3 -13.2
Chemicals 7.2 5.9 8.9 5.5 11.5 4.2
Manufactured goods 9.3 0.7 3.5 -0.5 4.8 2.3
Machinery & transport equipment 37.9 0.0 3.2 0.6 1.2 -1.8
Miscellaneous manufactured articles 9.3 1.8 4.3 3.3 3.2 1.2
Miscellaneous transactions and commodities 0.6 1.9 -2.7 16.7 12.3 2.2
Import Unit Value Indices
Total 100.0 1.0 -0.8 1.4 6.1 1.3
Food 6.3 3.7 3.3 0.9 8.9 2.6
Beverages and tobacco 0.7 0.9 0.2 1.9 3.6 2.4
Crude materials, inedible 3.8 -0.9 1.5 -3.3 16.8 -7.5
Mineral fuels, lubricants, etc. 17.3 -1.4 -26.4 -19.6 32.5 21.8
Animal and vegetable oils and fats 0.7 16.6 -5.9 18.9 25.8 -10.8
Chemicals 9.6 0.3 1.9 0.2 4.1 2.4
Manufactured goods 13.7 -0.1 0.4 -1.4 5.0 2.0
Machinery & transport equipment 40.1 1.7 3.5 5.0 2.0 -1.9
Miscellaneous manufactured articles 6.0 1.1 1.3 4.0 2.2 -1.3
Miscellaneous transactions and commodities 2.0 -7.6 12.4 17.0 4.7 -6.1
1 Weights based on values of Malaysia imports and exports of merchandise during 2013. 2 January to August 2018. Source: Department of Statistics, Malaysia.
128 Economic Outlook 2019
7 BI 3.13 - 3.18.indd 128 10/25/18 4:20 PM STATISTICAL TABLES
3.19. LABOUR FORCE Malaysia
2014 2015 2016 2017 20184
Labour force (‘000) 14,263.6 14,518.0 14,667.8 14,952.6 15,136.6
Employment (‘000) 13,852.6 14,067.7 14,163.7 14,450.0 14,628.9
Unemployment Rate (%) 2.9 3.1 3.4 3.4 3.4
Labour force participation rate1 (%)
Total 67.6 67.9 67.7 68.0 67.9
Male 80.6 80.6 80.2 80.1 80.3
Female 53.7 54.1 54.3 54.7 54.6
Number of collective agreements signed in the 270 267 308 226 15 current year2
Number of workers covered (thousands) 145.0 124.4 133.7 60.6 4.4
Labour productivity3 3.7 3.5 3.5 3.8 2.05
Agriculture 1.5 4.2 -4.9 1.4 1.35
Mining and quarrying 3.4 -15.1 15.1 6.8 5.25
Manufacturing 4.5 5.4 3.6 4.3 1.55
Construction 13.7 2.9 10.0 2.4 4.05
Services 3.0 2.9 4.2 5.0 2.55
Foreign workers (‘000) 2,073.4 2,135.0 1,866.4 1,797.4 1,750.46
1 The ratio of the labour force to the working age population (15-64 years), expressed as percentage. 2 Based on the information in the collective agreement and the feedback from the employer for which has been given cognisance by the Industrial Court for the year. 3 Annual change (%). 4 January to June 2018. 5 As at second quater of 2018. 6 As at end-August 2018. Source: Department of Statistics, Ministry of Human Resources and Ministry of Home Affairs, Malaysia.
Economic Outlook 2019 129
8 BI 3.19 - 3.22.indd 129 10/25/18 4:20 PM STATISTICAL TABLES
3.20. EMPLOYMENT BY INDUSTRY ‘000 persons, Malaysia
Industry1 2014 2015 2016 2017 20184
share (%) Total employment2 13,852.6 14,067.7 14,163.7 14,450.0 100.0 14,628.9
Agriculture, forestry and fishing 1,694.2 1,753.9 1,609.9 1,631.6 11.3 1,608.3
Mining and quarrying 84.7 104.4 96.3 97.0 0.7 95.2
Manufacturing 2,372.5 2,322.7 2,390.6 2,509.1 17.4 2,535.6
Construction 1,277.7 1,309.9 1,251.7 1,256.0 8.7 1,290.0
Services 8,422.1 8,575.1 8,814.3 8,956.3 62.0 9,099.9
Electricity, gas, steam and air conditioning 65.6 61.7 77.9 62.1 0.4 70.0 supply
Water supply; sewerage, waste management 81.2 72.1 76.4 80.9 0.6 81.6 and remediation activities
Wholesale and retail trade; repair of motor 2,324.4 2,361.4 2,428.5 2,481.1 17.2 2,476.6 vehicles and motorcycles
Transportation and storage 598.2 615.0 630.4 657.4 4.5 681.2
Accommodation and food and beverage service 1,149.3 1,150.8 1,260.7 1,320.2 9.1 1,392.1 activities
Information and communication 213.2 214.2 208.7 220.0 1.5 206.6
Financial and insurance/takaful activities 329.1 354.4 346.9 368.5 2.6 321.6
Real estate activities 79.7 71.2 82.4 84.4 0.6 98.4
Professional, scientific and technical activities 328.8 359.3 361.8 347.6 2.4 374.4
Administrative and support service activities 654.3 634.8 657.0 675.9 4.7 709.3
Public administration and defence; compulsory 741.7 751.0 748.2 740.7 5.1 749.9 social security
Education 871.4 899.0 928.7 878.9 6.1 956.3
Human health and social work activities 532.9 573.1 570.3 586.9 4.1 545.6
Arts, entertainment and recreation 94.1 81.7 80.9 84.2 0.6 85.5
Others service activities 199.1 233.1 230.8 259.7 1.8 251.4
Activities of households as employers3 159.1 142.3 124.7 106.2 0.7 97.1
1 Industry is classified according to the MSIC 2008 Ver. 1.0. 2 Total includes ‘Activities of extraterritorial organisations and bodies’. 3 Labour Force Survey does not classify the subsistence goods-and services-producing activities of households as persons who are economically active. Therefore, the classification of industry by MSIC 2008 for ‘Activities of households as employers; undifferentiated goods-and services- producing activities of households for own use’ only accounted for ‘Activities of households as employers’. 4 For the first half of 2018. Source: Department of Statistics, Malaysia.
130 Economic Outlook 2019
8 BI 3.19 - 3.22.indd 130 10/25/18 4:20 PM STATISTICAL TABLES
3.21. ACTIVE REGISTRANTS Malaysia
2014 2015 2016 2017 20182
share (%)
Total Active Registrants (end-period) 367,826 276,851 306,037 262,756 100.0 241,046
Age
Below 20 43,101 35,329 33,386 27,829 10.6 25,370
20 – 24 234,488 183,916 204,116 177,111 67.4 160,438
25 – 29 56,552 42,866 52,909 46,460 17.7 42,761
30 and above 33,685 14,740 15,626 11,356 4.3 12,477
Gender
Male 140,219 104,522 110,577 91,528 34.8 84,307
Female 227,607 172,329 195,460 171,228 65.2 156,739
Educational Level
Less than PT3/PMR/SRP/LCE 6,867 1,392 691 766 0.3 371
PT3/PMR/SRP/LCE 8,665 5,359 4,110 2,870 1.1 3,462
SPM/MCE 97,365 68,754 67,373 51,245 19.5 46,292
Skills Certificate1 14,831 10,603 9,981 7,787 3.0 6,827
MHSC/STPM, Matric, Diploma and 240,098 190,743 223,882 200,088 76.1 184,094 Degree
Employment Status
Unemployed 199,637 150,355 154,548 129,581 49.3 115,363
1 Malaysian Skills Certificate (SKM), other skills certificate and non-technical skills certificate. 2 January to June 2018. Note: Covers job seekers registered with Labour Department through JobsMalaysia and within valid registration period. Source: Ministry of Human Resources, Malaysia.
Economic Outlook 2019 131
8 BI 3.19 - 3.22.indd 131 10/25/18 4:20 PM STATISTICAL TABLES
3.22. VACANCIES AND PLACEMENTS Malaysia
2014 2015 2016 2017 20183
share (%) Number of Vacancies by Occupational 1,074,018 1,088,756 854,044 1,473,376 100.0 550,449 Category1
Managers 6,515 26,424 26,320 11,164 0.8 2,342
Professionals 30,233 37,264 36,204 41,171 2.8 13,257
Technician and associate professionals 21,844 16,821 14,026 16,904 1.1 7,339
Clerical support workers 15,767 25,073 14,654 14,083 1.0 5,035
Service and sales workers 97,827 107,278 41,301 63,335 4.3 22,615
Skilled agricultural, forestry and fishery 12,355 11,103 9,649 12,212 0.8 4,509 workers
Craft and related trade workers 25,343 31,761 22,228 35,244 2.4 8,569
Plant and machine operators and 121,260 97,556 118,178 151,779 10.3 60,015 assemblers
Elementary occupation 742,874 735,476 571,484 1,127,484 76.5 426,768
Number of Vacancies by Sector 1,074,018 1,088,756 854,044 1,473,376 100.0 550,449
Agriculture, forestry and fishing 240,552 269,469 174,751 264,216 17.9 100,970
Mining and quarrying 2,605 9,929 1,857 2,730 0.2 546
Manufacturing 352,784 313,396 376,349 617,308 41.9 225,341
Construction 202,878 208,912 127,985 255,851 17.4 90,565
Services 275,199 287,050 173,102 333,271 22.6 133,027
Number of Placements by Sector2 40,753 41,097 22,643 20,369 100.0 14,138
Agriculture, forestry and fishing 3,908 2,870 1,639 1,382 6.8 1,326
Mining and quarrying 304 150 0 7 0.0 16
Manufacturing 19,615 20,693 11,342 12,325 60.5 8,557
Construction 1,980 4,855 2,396 652 3.2 538
Services 14,946 12,529 7,266 6,003 29.5 3,701
1 Classification of occupational groups is based on the Malaysia Standard Classification of Occupations (MASCO) 2013. 2 Data for 2016 covers period from January to November 2016. 3 January to June 2018. Note: Definition of vacancies refers to job vacancy listings by employers in public (selected only) and private sector on JobsMalaysia. The job listing includes non-substantive vacancies such as sales person, promoter, insurance agent and part-time workers as well as foreign workers. Source: Ministry of Human Resources, Malaysia.
132 Economic Outlook 2019
8 BI 3.19 - 3.22.indd 132 10/25/18 4:20 PM STATISTICAL TABLES
4.1. INTEREST RATES Malaysia
Average rates in the year Average rates of the month in 2018 (% per annum) (%) 2014 2015 2016 2017 Jan. Feb. Mar. Apr. May Jun. Jul. Aug.
Overnight interbank 3.10 3.21 3.06 2.98 2.99 3.19 3.20 3.19 3.21 3.19 3.22 3.22
1-week interbank 3.13 3.25 3.12 3.03 3.06 3.28 3.28 3.28 3.28 3.28 3.28 3.28
3-month interbank 3.51 3.74 3.48 3.38 3.52 3.68 3.67 3.69 3.68 3.67 3.68 3.66
Commercial banks
Fixed deposits
3-month 3.05 3.13 3.03 2.92 3.01 3.16 3.16 3.17 3.15 3.15 3.16 3.16
12-month 3.23 3.31 3.18 3.09 3.16 3.33 3.33 3.33 3.33 3.33 3.33 3.33
Savings deposits 1.03 1.06 1.00 0.96 0.99 1.03 1.04 1.03 1.03 1.04 1.05 1.05
Weighted Base Rate1 (BR) - 3.78 3.71 3.62 3.76 3.89 3.89 3.89 3.89 3.89 3.90 3.90
Base lending rate (BLR) 6.66 6.79 6.73 6.67 6.72 6.89 6.89 6.89 6.90 6.90 6.91 6.91
1 Effective from 2 January 2015, the BR replaced the BLR as the main reference rate for new retail floating rate loans and financing facilities. Source: Bank Negara Malaysia.
Economic Outlook 2019 133
9 BI 4.1 - 4.7.indd 133 10/29/18 12:54 PM STATISTICAL TABLES
4.2. BROAD MONEY (M3) Malaysia RM million
End-period
2014 2015 2016 2017 20184
Broad money (M3)1 1,557,612 1,596,612 1,645,688 1,722,630 1,794,147
Currency in circulation2 68,029 76,643 85,460 92,347 94,106
Demand deposits 277,885 282,943 294,373 329,164 315,058
Broad quasi-money 1,211,698 1,237,026 1,265,855 1,301,118 1,384,982
Savings deposits 134,931 135,591 145,129 150,505 155,824
Fixed deposits 722,997 747,073 773,221 823,165 874,416
Negotiable instruments of deposits (NIDs) 18,177 9,255 8,327 8,154 5,318
Repurchase agreements (Repos) 0 0 0 0 0
Foreign currency deposits 95,513 137,547 128,079 119,496 119,338
Other deposits 240,079 207,561 211,100 199,797 230,085
Factors Affecting M3
Net claims on Government 104,331 96,686 113,199 129,829 151,147
Claims on Government 155,350 154,997 166,431 186,677 224,185
Less: Government deposits 51,020 58,312 53,232 56,848 73,038
Claims on private sector 1,439,346 1,558,321 1,648,791 1,745,190 1,827,702
Loans 1,290,296 1,396,418 1,480,417 1,537,100 1,592,992
Securities 149,050 161,903 168,375 208,090 234,711
Net foreign assets3 505,039 526,448 520,433 518,192 520,543
Bank Negara Malaysia 400,060 401,087 415,756 406,832 414,788
Banking system 104,980 125,362 104,677 111,360 105,755
Other influences -491,103 -584,843 -636,735 -670,582 -705,246
1 Exclude interplacements among banking institutions. 2 Exclude holdings by the banking system. 3 Includes exchange rate revaluation losses/gains. 4 End-August 2018. Note: Data based on BNM Monthly Statistical Bulletin (August 2018). Total may not add up due to rounding. Source: Bank Negara Malaysia.
134 Economic Outlook 2019
9 BI 4.1 - 4.7.indd 134 10/29/18 12:54 PM STATISTICAL TABLES
4.3. KEY EXCHANGE RATES Malaysia
Annual change Change RM to one unit of foreign currency1 (%) (%) 2014 2015 2016 2017 2018 End-December 2017 2016 2017 – End-December End-August End-August 2018
Special Drawing Rights 5.0853 5.9912 6.0394 5.7892 5.7793 -0.8 4.3 0.2
US dollar 3.4950 4.2920 4.4860 4.0620 4.1075 -4.3 10.4 -1.1
Singapore dollar 2.6449 3.0356 3.1016 3.0392 3.0079 -2.1 2.1 1.0
100 Japanese yen 2.9255 3.5645 3.8442 3.6020 3.6801 -7.3 6.7 -2.1
Pound sterling 5.4396 6.3607 5.5108 5.4660 5.3535 15.4 0.8 2.1
Euro 4.2513 4.6918 4.7238 4.8510 4.8054 -0.7 -2.6 1.0
100 Thai baht 10.6270 11.9222 12.5167 12.4334 12.5535 -4.7 0.7 -1.0
100 Indonesian rupiah 0.0281 0.0311 0.0334 0.0300 0.0280 -6.9 11.4 6.9
100 Korean won 0.3201 0.3651 0.3720 0.3801 0.3703 -1.9 -2.1 2.6
100 Philippine peso 7.8066 9.1494 9.0516 8.1232 7.6862 1.1 11.4 5.7
Chinese renminbi 0.5637 0.6610 0.6455 0.6230 0.6013 2.4 3.6 3.6
1 US dollar (USD) rates are the average of buying and selling rates at noon in the Kuala Lumpur Interbank Foreign Exchange Market. Rates for foreign currencies other than USD are cross rates derived from rates of these currencies against the USD and the RM/USD rate. Source: Bank Negara Malaysia.
Economic Outlook 2019 135
9 BI 4.1 - 4.7.indd 135 10/29/18 12:54 PM STATISTICAL TABLES
4.4. COMMERCIAL BANKS: LOANS OUTSTANDING BY PURPOSE AND SECTOR Malaysia
2016 2017 2018 December August December August RM share RM share RM share RM share million (%) million (%) million (%) million (%)
Purpose
Purchase of securities 41,377 3.8 38,925 3.6 37,505 3.4 35,514 3.2
Purchase of transport vehicles 98,146 9.1 96,188 8.8 94,922 8.6 94,833 8.5
Purchase of passenger cars 91,093 8.4 89,437 8.2 88,244 8.0 88,220 7.9
Purchase of residential property 364,328 33.7 378,571 34.7 386,397 35.2 397,831 35.6
Purchase of non-residential property 170,227 15.8 171,260 15.7 172,212 15.7 172,701 15.4 Purchase of fixed assets other than land 7,560 0.7 7,299 0.7 6,612 0.6 7,421 0.7 and building Personal use 33,065 3.1 33,310 3.1 34,047 3.1 35,406 3.2
Credit card 34,199 3.2 33,421 3.1 35,024 3.2 34,872 3.1
Purchase of consumer durables 111 0.0 99 0.0 98 0.0 90 0.0
Construction 36,307 3.4 36,014 3.3 36,600 3.3 37,819 3.4
Working capital 254,889 23.6 253,762 23.3 253,445 23.1 258,338 23.1
Other purpose 40,050 3.7 40,867 3.8 41,439 3.8 43,127 3.9
Total Loans1 1,080,260 100.0 1,089,717 100.0 1,098,300 100.0 1,117,952 100.0
Sector2
Primary agriculture 23,641 2.2 23,355 2.1 21,674 2.0 21,230 1.9
Mining and quarrying 7,899 0.7 5,406 0.5 5,667 0.5 5,639 0.5
Manufacturing (including agro-based) 81,482 7.5 80,601 7.4 80,749 7.4 85,031 7.6
Electricity, gas and water supply 8,155 0.8 9,052 0.8 9,804 0.9 11,074 1.0 Wholesale and retail, restaurants and 92,960 8.6 94,173 8.6 93,527 8.5 96,649 8.6 hotels Construction 47,354 4.4 49,831 4.6 50,636 4.6 52,544 4.7
Real estate 87,109 8.1 86,904 8.0 89,311 8.1 90,469 8.1
Transport, storage and communication 21,566 2.0 22,565 2.1 21,328 1.9 21,535 1.9 Financing, insurance and business 72,522 6.7 73,214 6.7 70,828 6.4 76,309 6.8 services Education, health & others 20,679 1.9 20,154 1.8 19,759 1.8 17,079 1.5
Household sector 606,547 56.1 613,772 56.3 622,332 56.7 631,060 56.4
Other sector3 10,347 1.0 10,692 1.0 12,685 1.2 9,333 0.8
1 Includes loans sold to Cagamas. 2 Definitions of economic sectors/industries are based on MSIC 2000. 3 Includes loans to individual businesses. Note: Data based on BNM Monthly Statistical Bulletin (August 2018). Total may not add up due to rounding. Source: Bank Negara Malaysia.
136 Economic Outlook 2019
9 BI 4.1 - 4.7.indd 136 10/29/18 12:54 PM STATISTICAL TABLES
4.5. GOVERNMENT AND CORPORATE BOND YIELDS Malaysia
2018 2014 2015 2016 2017 Jan. Feb. Mar. Apr. May Jun. Jul. Aug.
Malaysian Government Securities market indicative yield (%)
1-year 3.48 2.59 3.26 2.89 3.21 3.21 3.19 3.39 3.41 3.41 3.39 3.37
3-year 3.64 3.27 3.50 3.34 3.39 3.41 3.44 3.68 3.72 3.63 3.56 3.48
5-year 3.84 3.47 3.70 3.56 3.61 3.63 3.55 3.79 3.85 3.85 3.76 3.70
10-year 4.15 4.19 4.23 3.91 3.96 4.04 3.95 4.14 4.20 4.20 4.08 4.04
5-year corporate bond yields (%)
AAA 4.27 4.37 4.40 4.33 4.34 4.39 4.39 4.47 4.48 4.49 4.45 4.43
AA 4.60 4.73 4.78 4.64 4.65 4.69 4.68 4.76 4.77 4.77 4.75 4.75
A 6.87 6.97 6.66 6.36 6.27 6.25 6.26 6.59 6.33 6.35 6.26 6.46
BBB 11.17 11.13 10.12 9.62 9.23 9.14 9.12 10.28 9.39 9.47 9.69 9.85
Source: Bank Negara Malaysia.
Economic Outlook 2019 137
9 BI 4.1 - 4.7.indd 137 10/29/18 12:54 PM STATISTICAL TABLES
4.6. BURSA MALAYSIA: SELECTED INDICATORS
2014 2015 2016 2017 20183
Indices1
Composite 1,761.25 1,692.51 1,641.73 1,796.81 1,819.66
FBM EMAS 12,066.28 11,793.65 11,466.54 12,942.57 12,719.42
FBM-ACE 5,653.39 6,389.24 4,780.71 6,603.55 5,283.71
Trading volume2 (million units) 530,655.4 501,431.2 433,678.5 641,315.6 468,760.0
Main Market 397,089.8 299,067.6 289,799.5 430,833.7 301,513.3
ACE Market 115,563.5 139,198.7 77,807.5 156,155.6 79,039.8
Average Daily 2,157.1 2,038.3 1,762.9 2,639.2 2,875.8
Trading value2 (RM million) 531,792.3 512,220.8 484,106.5 614,822.8 454,233.2
Main Market 501,205.6 464,597.2 457,858.7 578,620.9 420,623.5
ACE Market 27,119.9 32,161.0 14,050.5 29,040.4 14,856.6
Average Daily 2,161.8 2,082.2 1,967.9 2,530.1 2,786.7
Number of listed companies 906 903 904 905 910
Main Market 799 794 791 788 781
ACE Market 107 109 113 115 121
LEAP Market - - - 2 8
Market capitalisation1 (RM billion) 1,651.2 1,694.8 1,667.4 1,906.8 1,865.8
Main Market 1,633.3 1,673.1 1,649.4 1,881.9 1,841.7
ACE Market 9.7 11.9 10.0 15.6 15.2
LEAP Market - - - 0.21 0.55
Market capitalisation/GDP (%) 149.2 146.4 135.5 140.9 -
1 End-period. 2 Based on market transactions and direct business transactions. 3 End-August 2018. Source: Bursa Malaysia.
138 Economic Outlook 2019
9 BI 4.1 - 4.7.indd 138 10/29/18 12:54 PM STATISTICAL TABLES
4.7. ISLAMIC BANKS: LOANS OUTSTANDING BY PURPOSE AND SECTOR Malaysia
2016 2017 2018 December August December August RM share RM share RM share RM share million (%) million (%) million (%) million (%)
Purpose
Purchase of securities 28,492 6.6 30,855 6.7 32,443 6.8 39,614 7.7
Purchase of transport vehicles 72,368 16.7 74,001 16.1 74,266 15.5 75,743 14.7
Purchase of passenger cars 70,698 16.3 71,698 15.6 71,852 15.0 73,466 14.2
Purchase of residential property 112,686 25.9 125,377 27.2 132,956 27.8 147,588 28.6
Purchase of non-residential property 38,551 8.9 40,214 8.7 40,946 8.5 44,144 8.6 Purchase of fixed assets other than land 2,502 0.6 2,333 0.5 2,231 0.5 2,045 0.4 and building Personal use 33,562 7.7 34,319 7.4 35,309 7.4 37,464 7.3
Credit card 2,747 0.6 2,820 0.6 3,036 0.6 3,131 0.6
Purchase of consumer durables 21 0.0 40 0.0 19 0.0 18 0.0
Construction 9,230 2.1 9,951 2.2 11,068 2.3 12,874 2.5
Working capital 112,957 26.0 117,314 25.5 117,960 24.6 123,724 24.0
Other purpose 21,293 4.9 23,438 5.1 28,825 6.0 29,884 5.8
Total Financing1 434,410 100.0 460,662 100.0 479,059 100.0 516,230 100.0
Sector2
Primary agriculture 12,285 2.8 14,029 3.0 14,218 3.0 14,641 2.8
Mining and quarrying 5,745 1.3 5,515 1.2 5,254 1.1 4,803 0.9
Manufacturing (including agro-based) 20,870 4.8 21,944 4.8 21,553 4.5 22,483 4.4
Electricity, gas and water supply 2,261 0.5 2,249 0.5 2,282 0.5 2,658 0.5 Wholesale and retail, restaurants and 19,127 4.4 20,240 4.4 21,467 4.5 23,550 4.6 hotels Construction 17,502 4.0 20,382 4.4 21,910 4.6 28,029 5.4
Real estate 22,458 5.2 23,341 5.1 24,858 5.2 26,755 5.2
Transport, storage and communication 16,611 3.8 17,795 3.9 15,726 3.3 15,962 3.1 Financing, insurance and business 35,102 8.1 34,339 7.5 33,904 7.1 34,133 6.6 services Education, health and others 22,089 5.1 21,208 4.6 21,672 4.5 20,571 4.0
Household sector 254,385 58.6 270,721 58.8 282,474 59.0 307,851 59.6
Other sectors3 5,972 1.4 8,900 1.9 13,742 2.9 14,793 2.9
1 Includes loans sold to Cagamas. 2 Definitions of economic sectors/industries are based on MSIC 2000. 3 Includes loans to individual businesses. Note: Data based on BNM Monthly Statistical Bulletin (August 2018). Total may not add up due to rounding. Source: Bank Negara Malaysia.
Economic Outlook 2019 139
9 BI 4.1 - 4.7.indd 139 10/29/18 12:54 PM 9 BI 4.1 - 4.7.indd 140 10/25/18 4:19 PM ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA AUTH ORITY ah BinAbdullah Director General LABUAN FINANCIAL SERVICES NIT En. Danial M U NE RSHIP MALAYSIA Di rector General F IC PRIVATE PART Datuk SeriAhmad Husni Bin Hussain cuti ve Officer PUBL Exe f ’ to ’ Sri Sabin Bin Samitah EVE NUE BOARD O Chie Da AN D R INL UN RAZAK SECRETARY Har ith BinTengku Aziz YAYASAN T rty Services Tengku hamm adAlias IDEN T FUND aharom D utiv e Officer NCE MALAYSIA YEE S PROV zakr i Bin Raja Mu Chief E xec Haji Nordin Bin r N M ALAYSIA EMPLO S TunkuAli N AN D PROPERTY SERVICES DEPARTMENT Ch airman Director General of Valuation and Prope ES COMMISSIO VALUATIO Bin Ham zah Datuk Syed Zaid Bin Jaafar Albar Offi cer SECURITI
OF MALAYSIA za man BinWan Ahmad Y Ami ruddin
REM ENT FUND Executive TM ENT f NC ORPORATED) am aru (I RETI uan Lim Guan Eng Chie TREASUR Secretary General of Treasury DatukAhmad Badri Bin Mohd Zahir YBT to’ Ir H aji MINISTER OF FINA NCE PANTONE 284 CVC Dato’Wan K RD MALAYSIA DE PUTY MINISTER OF FINANCE rom aniama/l Tholasy YB Da AN CUSTOMS DEPAR Executive Officer ’ f Dat o Abdul Rauf Bin Sani Chie to ’ Sri Sub Director General of Customs MALAYSI Da L TOTALISATOR BOA A BE RHAD ROYA ON OF THE MINISTRY OF FINA AGENCIES UN DER THE MINISTRY OF FINANCE Executive Officer MALAYSI f DEPARTMENTS UNDER THE MINISTRY OF FINANCE A Chie Datuk SeriTajuddin BinAtan BURS NC ING BOARD ME FINA l Executive Officer f to’ Kamal Bin MohdAli Chie Da ta nt Genera ORGANISATI IC SECTOR HO tu k Saat Bin Esa Da Accoun PUBL EN ERAL’S DEPARTMENT OF MALAYSIA Chief E xecutive DatukYunos Bin Abd Ghani BANK SIMPANAN NASIONAL ACCOUNTANT G Governor NEGARA MALAYSIA NK Nor Shamsiah Binti MohdYunus BA Datuk
Economic Outlook 2019 141
ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA.indd 141 29/10/2018 11:34 AM ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA - - Integrity Unit Legal Division En. Suhaili Bin Ahmad Suhaili Bin En. National Strategy Unit Dato’ Faiza Binti Zulkifli Dato’ Faiza Pn Mastura Binti Marsam Customs Appeal Tribunal En. Saharuddin Bin Mahamud En. Pn Normazli Binti Abdul Rahim Pn Normazli Binti Treasury Internal Audit Division Treasury Corporate Strategy and Communication Division Office of the Special Commissioners Income Tax Dato’ Dr Yusof Bin Ismail Yusof Dato’ Dr En. Ahmad Suhaimi Bin Endut En. OF TREASURY (INVESTMENT ) OF TREASURY DEPUTY SECRETARY GENERAL DEPUTY SECRETARY Datin Rashidah Binti Mohd Sies Strategic Investment Division Dato’ Shahrol Anuwar Bin Sarman Dato’ Shahrol Dato’ Asri Bin Hamidin @ Hamidon Dato’ Public Asset Management Division Government Investment Companies Division Statutory Body Strategic Management Division
YB Tuan Lim Guan Eng Tuan YB MINISTER OF FINANCE Datuk Ahmad Badri Bin Mohd Zahir Datuk DEPUTY MINISTER OF FINANCE SECRETARY GENERAL OF TREASURY SECRETARY YB Dato’ Ir Haji Amiruddin Bin Hamzah YB Dato’ Ir Haji TREASURY OF MALAYSIA TREASURY - - Dato’ Othman Bin Semail Federal Treasury Sabah Treasury Federal Federal Treasury Sarawak Treasury Federal Dato’ Siti Fatimah Binti Daud Dato’ Siti Fatimah DEPUTY SECRETARY GENERAL DEPUTY SECRETARY OF TREASURY (MANAGEMENT) OF TREASURY Information Technology Division Information Technology Government Procurement Division En. Mohd Saiful Sungkih Bin Abdullah Mohd Saiful Sungkih Bin En. En. Mohd Yunus Bin Charlie Charington Yunus Mohd En. Remuneration Policy and Management Division Remuneration Policy Tax Division Tax Pn Suhara Binti Husni International Division National Budget Office OF TREASURY (POLICY) OF TREASURY Cik Azah Hanim Binti Ahmad En. Johan Mahmood Merican En. Dato’ Khodijah Binti Abdullah Dato’ Khodijah Binti DEPUTY SECRETARY GENERAL DEPUTY SECRETARY Dr Sivabalasingam Veerasingam Fiscal and Economics Division Datuk Siti Zauyah Binti Md Desa Registrar Office of Credit Reporting Agencies
142 Economic Outlook 2019
ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA.indd 142 29/10/2018 11:34 AM
ISSN 2637-0239
9 772637 023004
COVER ECONOMIC OUTLOOK.indd All Pages 27/10/2018 12:50 AM