economic briefing 4 august 2007

Economic BriefingEconomic Briefing4 August 2007 4 August 2007

Presentation OutlinePresentation Outline Presentation OutlinePresentation Outline

• Indicators of selected countries

• Malaysia’s key economic

indicators

• MIER 2Q07 Surveys

• Near-term outlook

• Indicators of selected countries

• Malaysia’s key economic

indicators

• MIER 2Q07 Surveys

• Near-term outlook

GDP Growth (%)GDP Growth (%)

-15

-10

-5

0

5

10

15

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Indonesia Malaysia Thailand Korea Singapore

Domestic Investment (% of GDP)Domestic Investment (% of GDP)

0

5

10

15

20

25

30

35

40

45

50

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


Export Growth (%)Export Growth (%)

-20-15

-10-50

510

152025

3035

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


CAB as % of GDPCAB as % of GDP

-10

-5

0

5

10

15

20

25

30

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


FDI InflowsFDI Inflows

-10

-5

0

5

10

15

20

25

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Malaysia Thailand Indonesia Korea Singapore

US$ billion

Fiscal Balance (% of GDP)Fiscal Balance (% of GDP)

-8-6

-4-20

24

68

10

1214

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


Foreign Reserves (US$ billion)

Foreign Reserves (US$ billion)

0

50

100

150

200

250

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


Inflation Rate (%)Inflation Rate (%)

-5

0

5

10

15

20

1998 1999 2000 2001 2002 2003 2004 2005 2006


58.5% 20.5%

Interest Rate (6m FD,%)Interest Rate (6m FD,%)

0

5

10

15

20

25

30

35

40

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


Non-Performing Loans (3-months arrears)

Non-Performing Loans (3-months arrears)

0

5

10

15

20

25

30

35

40

2001 2002 2003 2004 2005 2006


Unemployment Rate (%)Unemployment Rate (%)

0

2

4

6

8

10

12

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006


Real Effective Exchange Rate (2000=100)

Real Effective Exchange Rate (2000=100)

80

90

100

110

120

130

140

150

Jan-00Jul-00Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04Jan-05Jul-05Jan-06Jul-06Jan-07

Indonesia Malaysia Korea Thailand Singapore

80

90

100

110

120

130

140

150

Jan-00Jul-00Jan-01Jul-01Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04Jan-05Jul-05Jan-06Jul-06Jan-07

Indonesia Malaysia Korea Thailand Singapore

% Change in Stock Indices as at 11th July’07, since

Jan’07

% Change in Stock Indices as at 11th July’07, since

Jan’07

12.68

21.25

24.28

25.0

25.1

26.27

32

0 10 20 30 40

Positive Return

Korea KOSPIThai SETMal KLCIPhilip PCOMPIndon JCISing STIHong Kong HIS 12.68

21.25

24.28

25.0

25.1

26.27

32

0 10 20 30 40

Positive Return

Korea KOSPIThai SETMal KLCIPhilip PCOMPIndon JCISing STIHong Kong HIS

Debt Service Ratio (% of exports)

Debt Service Ratio (% of exports)

0

5

10

15

20

25

30

35

40

45

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Indonesia Malaysia Thailand Korea

Relative ProductivityRelative ProductivityRelative ProductivityRelative Productivitycountry Productivit

y growth (%)

Productivity in constant US$

China 9.7 2,885

Indonesia 6.4 2,128

India 6.0 1,276

Malaysia 3.7 11,716

Korea 3.7 28,956

Thailand 3.5 4,454

USA 1.5 77,989

Singapore 1.2 48,782

MALAYSIA’s KEY ECONOMIC INDICATORSMALAYSIA’s KEY ECONOMIC INDICATORSMALAYSIA’s KEY ECONOMIC INDICATORSMALAYSIA’s KEY ECONOMIC INDICATORS

• Leading index• External trade• Exports to major partners• Import sources• Industrial Production Index (IPI)• Foreign direct investments (BOP)• Monetary indicators• Inflation• Exchange rates• External reserves• Unemployment• Productivity performance• MIER survey trends

• Leading index• External trade• Exports to major partners• Import sources• Industrial Production Index (IPI)• Foreign direct investments (BOP)• Monetary indicators• Inflation• Exchange rates• External reserves• Unemployment• Productivity performance• MIER survey trends

Composite Indices & GDP GrowthComposite Indices & GDP Growth

-15

-10

-5

0

5

10

15

20

1Q961Q971Q981Q991Q001Q011Q021Q031Q041Q051Q061Q07

RGDP(%yoy) Leading Index

Coincident Index

%change yoy

Malaysia: Exports, Imports Malaysia: Exports, Imports and Trade Balanceand Trade Balance

Malaysia: Exports, Imports Malaysia: Exports, Imports and Trade Balanceand Trade Balance

0

2

4

6

8

10

12

14

Jan-05Mar-05May-05Jul-05Sep-05Nov-05Jan-06Mar-06May-06

Jul-06Sep-06Nov-06Jan-07Mar-07May-07

RM bill

-10

-5

0

5

10

15

20

25% y-o-y

Trade Balance Export(%y-o-y) Import(%y-o-y)

Imports by CategoryImports by CategoryImports by CategoryImports by Category

-30

-20

-10

0

10

20

30

40

Jan-05Feb-05Mar-05Apr-05May-05Jun-05Jul-05Aug-05Sep-05Oct-05Nov-05Dec-05Jan-06Feb-06Mar-06Apr-06May-06Jun-06Jul-06

Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07

% y-o-y

Capital goods Intermediate Consumption

External TradeExternal TradeExternal TradeExternal Trade• exports dominated mainly by manufactures, especially

E&E• export structure remain unchanged but value-added have

increased

• exports dominated mainly by manufactures, especially E&E

• export structure remain unchanged but value-added have increased

0

10

20

30

40

50

60

70

80

90

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

% share

0

10

20

30

40

50

60

70

80

90

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

% share Manufactured goods

E&E

Palm oil

Oil+LNG

Source: DOSM

Exports to Major PartnersExports to Major Partners• traditional markets for Malaysia: US, Singapore, EU and Japan • Singapore, EU and Japan show declining market share• China account for an increasing share of Malaysia’s exports

• traditional markets for Malaysia: US, Singapore, EU and Japan • Singapore, EU and Japan show declining market share• China account for an increasing share of Malaysia’s exports

0

5

10

15

20

25

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

% share

0

5

10

15

20

25

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

% share

USA

SingaporeEU

Japan

China

Source: DOSM

Foreign Direct InvestmentsForeign Direct Investments Foreign Direct InvestmentsForeign Direct Investments • FDI (from BOP), although increasing, still far from pre-crisis levels

• Malaysian investment abroad rising• portfolio flows remain volatile

• FDI (from BOP), although increasing, still far from pre-crisis levels

• Malaysian investment abroad rising• portfolio flows remain volatile

-5

-3

-1

1

3

5

7

9

1999 2000 2001 2002 2003 2004 2005 2006 1Q07

FDI as % of GDP Portfolio as % of GDP

Invest Aboad as % of GDP

% of GDP

-5

-3

-1

1

3

5

7

9

1999 2000 2001 2002 2003 2004 2005 2006 1Q07

FDI as % of GDP Portfolio as % of GDP

Invest Aboad as % of GDP

% of GDP

Source: DOS

Foreign Approvals in ManufacturingForeign Approvals in ManufacturingForeign Approvals in ManufacturingForeign Approvals in Manufacturing• total of 571 projects approved in 2006, level of

FDI approved highest to date• foreign investments amount >RM20 billion (43.9%

of total)• Japan largest source of investments

• total of 571 projects approved in 2006, level of FDI approved highest to date

• foreign investments amount >RM20 billion (43.9% of total)

• Japan largest source of investments

0

5000

10000

15000

20000

25000

2001 2002 2003 2004 2005 2006

0

1000

2000

3000

4000

5000

6000

0

5000

10000

15000

20000

25000

2001 2002 2003 2004 2005 2006

0

1000

2000

3000

4000

5000

6000

USA (RHS)

SingaporeChina

Japan

Total Approvals (LHS)

UK

Source: MIDA

Foreign Approvals by Foreign Approvals by Country, Jan-May’07Country, Jan-May’07

Foreign Approvals by Foreign Approvals by Country, Jan-May’07Country, Jan-May’07

Source: MIDA

Iran19%

Japan11%

Singapore8%

USA7%

Cayman Islands

6%

Korea,Rep.5%

Australia2%

Others28%

Nether-lands14%

Iran19%

Japan11%

Singapore8%

USA7%

Cayman Islands

6%

Korea,Rep.5%

Australia2%

Others28%

Nether-lands14%

Foreign Approvals by Foreign Approvals by Industry, Jan-May’07Industry, Jan-May’07Foreign Approvals by Foreign Approvals by Industry, Jan-May’07Industry, Jan-May’07

Source: MIDA

Petroleum Products

23%

E&E56%

Others4%

Food Manuf2%

Machinery & Equip3%

Paper,Printing0%

Non-Metallic Mineral

7%

Chemical Products

4%Basic Metal

1%

Petroleum Products

23%

E&E56%

Others4%

Food Manuf2%

Machinery & Equip3%

Paper,Printing0%

Non-Metallic Mineral

7%

Chemical Products

4%Basic Metal

1%

Malaysia: Industrial Malaysia: Industrial Production Index Production Index (IPI)(IPI)Malaysia: Industrial Malaysia: Industrial Production Index Production Index (IPI)(IPI)

-10

-5

0

5

10

15



% y-o-y

IPI Mining Manuf Electricity

Inflation RateInflation RateInflation RateInflation Rate

0

1

2

3

4

5

6

Jan-05

Mar May Jul Sep Nov

Jan-06

Mar May Jul Sep Nov

Jan-07Mar-07May-07

CPI Food Index Core Inflation

0

1

2

3

4

5

6

Jan-05

Mar May Jul Sep Nov

Jan-06

Mar May Jul Sep Nov

Jan-07Mar-07May-07

CPI Food Index Core Inflation

• inflation soften following peak of 4.8% in March’06 due to higher price of fuel

• core inflation also trending generally lower

• inflation soften following peak of 4.8% in March’06 due to higher price of fuel

• core inflation also trending generally lower

Source: BNM

Monetary IndicatorsMonetary IndicatorsMonetary IndicatorsMonetary Indicators

0

5

10

15

20

25

30

35

Jan-05

Mar May Jul Sep Nov

Jan-06

Mar May Jul Sep Nov

Jan-07Mar-07May-07

M1 M2 M3

0

5

10

15

20

25

30

35

Jan-05

Mar May Jul Sep Nov

Jan-06

Mar May Jul Sep Nov

Jan-07Mar-07May-07

M1 M2 M3

• Moderate growth in M1, M2 and M3• Moderate growth in M1, M2 and M3

Source: BNM

RM vs. Major CurrenciesRM vs. Major CurrenciesRM vs. Major CurrenciesRM vs. Major Currencies0.92

0.94

0.96

0.98

1.00

1.02

1.04

29/12/0610/1/0718/1/0726/1/07

6/2/0714/2/0726/2/07

6/3/0714/3/0722/3/0730/3/07

9/4/0717/4/07 25/4/07

8/5/0716/5/07 24/5/07

1/6/0711/6/0719/6/07 27/6/07 5/7/07

US$ GBP EUR JPY100

RM appreciates

0.92

0.94

0.96

0.98

1.00

1.02

1.04

29/12/0610/1/0718/1/0726/1/07

6/2/0714/2/0726/2/07

6/3/0714/3/0722/3/0730/3/07

9/4/0717/4/07 25/4/07

8/5/0716/5/07 24/5/07

1/6/0711/6/0719/6/07 27/6/07 5/7/07

US$ GBP EUR JPY100

RM appreciates

Source: BNM

RM vs. Regional CurrenciesRM vs. Regional CurrenciesRM vs. Regional CurrenciesRM vs. Regional Currencies0.94

0.96

0.98

1.00

1.02

1.04

1.06

29/12/0610/1/0718/1/0726/1/07

6/2/0714/2/0726/2/07

6/3/0714/3/0722/3/0730/3/07

9/4/0717/4/07 25/4/07

8/5/0716/5/07 24/5/07

1/6/0711/6/0719/6/07 27/6/07 5/7/07

SGD THB100 PHP100

KRW100 IDR100

RM appreciates

0.94

0.96

0.98

1.00

1.02

1.04

1.06

29/12/0610/1/0718/1/0726/1/07

6/2/0714/2/0726/2/07

6/3/0714/3/0722/3/0730/3/07

9/4/0717/4/07 25/4/07

8/5/0716/5/07 24/5/07

1/6/0711/6/0719/6/07 27/6/07 5/7/07

SGD THB100 PHP100

KRW100 IDR100

RM appreciates

Source: BNM

Current Account BalanceCurrent Account BalanceCurrent Account BalanceCurrent Account Balance

% of GNP

-15

-10

-5

0

5

10

15

20

25

30

35

95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07f

CAB Servs & Inv. inc. Merchandise

% of GNP

-15

-10

-5

0

5

10

15

20

25

30

35

95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07f

CAB Servs & Inv. inc. Merchandise

current account surplus still sizeable, at 17.8% of GNP in 2006

Foreign ReservesForeign ReservesForeign ReservesForeign Reserves• international reserves at a sizable US$98.4 billion in June 2007• equivalent to nearly 8.9 months of retained imports & 8.7 times

the short-term external debt

• international reserves at a sizable US$98.4 billion in June 2007• equivalent to nearly 8.9 months of retained imports & 8.7 times

the short-term external debt

0

1

2

3

4

5

6

7

8

9

10

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Jun'070

20

40

60

80

100

120Billions

Months of Retained Imports

Reserves (USD)

0

1

2

3

4

5

6

7

8

9

10

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Jun'070

20

40

60

80

100

120Billions

Months of Retained Imports

Reserves (USD)

Source: BNM

Unemployment RateUnemployment RateUnemployment RateUnemployment Rate• employment rose an average of 3.3%pa with 1.6

million jobs created between 2001-2005• employment rose an average of 3.3%pa with 1.6

million jobs created between 2001-2005

0

2000

4000

6000

8000

10000

96 97 98 99 '00 '01 '02 '03 '04 '05 '06e1

1.5

2

2.5

3

3.5

4Total labour force ('000) Unemployment

0

2000

4000

6000

8000

10000

96 97 98 99 '00 '01 '02 '03 '04 '05 '06e1

1.5

2

2.5

3

3.5

4Total labour force ('000) Unemployment

Source: DOSM

Productivity PerformanceProductivity PerformanceProductivity PerformanceProductivity Performance• favourable productivity growth thanks to continuous efforts

to enhance productivity and high capacity utilisation in both domestic and export-oriented industries

• favourable productivity growth thanks to continuous efforts to enhance productivity and high capacity utilisation in both domestic and export-oriented industries

-15

-10

-5

0

5

10

15

20

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

%

Productivity Growth GDP

-15

-10

-5

0

5

10

15

20

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

%

Productivity Growth GDP

Source: NPC

Malaysia: Total Loan and Malaysia: Total Loan and Deposit GrowthDeposit Growth

Malaysia: Total Loan and Malaysia: Total Loan and Deposit GrowthDeposit Growth

4

6

8

10

12

14

16

18

20



% y-o-y

Total Deposit Loans (outstanding)

Malaysia: Loans Approved & Malaysia: Loans Approved & DisbursedDisbursed

Malaysia: Loans Approved & Malaysia: Loans Approved & DisbursedDisbursed

-30-20-10

0102030405060708090



% y-o-y

Loans disbursed Loans approved

Household Loans to GDP (Household Loans to GDP (%%))Household Loans to GDP (Household Loans to GDP (%%))

62

0

10

20

30

40

50

60

70

2001 2002 2003 2004 2005 2006

per cent

Household loans to GDP(%) Credit card to GDP(%)

Mortgages to GDP(%) Car loan to GDP(%)

Real Interest Rate Real Interest Rate (%)(%)Real Interest Rate Real Interest Rate (%)(%)

-3

-2

-1

0

1

2

3

4

5

6



Real Interest Rate Inflation 3m Fixed Dep

Inflation

3mFD

NPLs/Total Loans RatioNPLs/Total Loans Ratio& Capital Adequacy Ratio& Capital Adequacy RatioNPLs/Total Loans RatioNPLs/Total Loans Ratio

& Capital Adequacy Ratio& Capital Adequacy Ratio

0

2

4

6

8

10

12

14

16



%

RWCR 3-month arrears 6-month arrears

Malaysia: External DebtMalaysia: External DebtMalaysia: External DebtMalaysia: External Debt

0

50

100

150

200

250

1Q003Q001Q013Q011Q023Q021Q033Q031Q043Q041Q053Q051Q063Q061Q07

Medium & Long-term External Debt

Short-term Debt

RM billion

MIER 2Q07 INDICESMIER 2Q07 INDICES

The The Business Conditions IndexBusiness Conditions Index

(BCI)(BCI)

The The Business Conditions IndexBusiness Conditions Index

(BCI)(BCI)

Business Conditions SurveyBusiness Conditions Surveyon firmer footing

• BCI chalked an impressive 16.6 points to 122.1

• uptick in sales

• pickup in output activities

• higher local orders

• turnaround in export orders70

80

90

100

110

120

130

'00 '01 '02 '03 '04 '05 '06 '07

points

BCI and Quarterly GDP GrowthBCI and Quarterly GDP Growth

-12

-7

-2

3

8

13

'00 '01 '02 '03 '04 '05 '0650

60

70

80

90

100

110

120

130

140%%GDP growth

BCI

Quarter BCI GDP GDP y-o-y q-q

2Q07 122.1

1Q07 105.5 5.3

-1.9

4Q06 107.2 5.7 0.5

3Q06 107.8 6.0 3.9

2Q06 102.4 6.1 2.7

1Q06 102.5 6.0 -

2.8

4Q05 100.5 5.2 1.8

3Q05 102.7 5.3 3.8

2Q05 106.0 4.1 2.4

1Q05 104.1 6.1 -

2.9

ProductionProduction shifting to higher gear

• 44% increased production, higher than 26% in 1Q07

• output of wood and wood-based products continue to accelerate (75% reported increase)

• increases also observed in food and beverage, textiles and apparel, paper and paper products, chemicals and chemical products, non-metallic products, basic metal and metallic products

0

10

20

30

40

50

60

'00 '01 '02 '03 '04 '05 '06 '070

10

20

30

40

50

60

'00 '01 '02 '03 '04 '05 '06 '07

% responded % responded ‘better’‘better’

Capacity UtilisationCapacity Utilisation up a notch

• capacity utilisation averaged 80.4 from the previous reading of 79.6

• industries like paper and paper products, non-metallic products maintained capacity between 81-100%

• chemicals and chemical products, rubber and rubber-based products also shifted to near-full capacity

72

74

76

78

80

82

84

86

'00 '01 '02 '03 '04 '05 '06 '07

0

5

10

15

20

25

30

35

40

C U Rate Investment

72

74

76

78

80

82

84

86

'00 '01 '02 '03 '04 '05 '06 '07

0

5

10

15

20

25

30

35

40

C U Rate Investment

% responding positively

Capital InvestmentCapital Investmentgoing strong

• 28% reveal higher investments, edging up from 22% in 1Q07

• firms from food and beverage, textiles and apparel committed more funds for capital investment

0

10

20

30

40

50

60

'00 '01 '02 '03 '04 '05 '06 '07

Production

Investment

0

10

20

30

40

50

60

'00 '01 '02 '03 '04 '05 '06 '07

Production

Investment

% responding positively

InventoriesInventoriessmooth flow

• 19% reported fatter stockpiles, lower than 27% in previous quarter

• stocks running lower for textiles and apparel and plastics and plastic products

0

5

10

15

20

25

30

35

40

'00 '01 '02 '03 '04 '05 '06 '070

5

10

15

20

25

30

35

40

'00 '01 '02 '03 '04 '05 '06 '07

% responded ‘higher’ % responded ‘higher’ stocksstocks% responded ‘higher’ % responded ‘higher’ stocksstocks

The The Consumer Sentiments IndexConsumer Sentiments Index

(CSI)

The The Consumer Sentiments IndexConsumer Sentiments Index

(CSI)

Consumer Sentiments Index Consumer Sentiments Index (CSI)(CSI)

no let-up in confidenceno let-up in confidence

• CSI rises to 115.9 points in 2Q07, from 104.2 points in 2Q06 and 124.1 in 1Q07

• jobs and incomes lift sentiments

CSCSII

70

80

90

100

110

120

130

140

96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '0770

80

90

100

110

120

130

140

96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07

COMPONENTS OF COMPONENTS OF CONSUMER SENTIMENTSCONSUMER SENTIMENTS

COMPONENTS OF COMPONENTS OF CONSUMER SENTIMENTSCONSUMER SENTIMENTS

incomes stable in second quarter and expected to pick up in the third quarter

good momentum of employment prospects in coming months

0

5

10

15

20

25

30

35

40

452Q06 1Q07 2Q07

Current income Expected income

ExpectedEmployment

0

5

10

15

20

25

30

35

40

452Q06 1Q07 2Q07

Current income Expected income

ExpectedEmployment

% responded ‘better’

Spending plans high on consumers’ agendaSpending plans

high on consumers’ agenda

personal computers most sought-after, followed by cars and furniture

houses still holding up; plans strongest in the eastern region

public sector wage hike and mega sale carnival boost spending plans

0 2 4 6 8 10 12

House

Car

Furniture

TV

W/Machine

Fridge

PC

Cooker/Oven

2Q06 1Q07 2Q07

0 2 4 6 8 10 12

House

Car

Furniture

TV

W/Machine

Fridge

PC

Cooker/Oven

2Q06 1Q07 2Q07

Inflationary Expectationsa big worry

Inflationary Expectationsa big worry

82% of respondents

frown over higher

prices in the next 6

months, up from 76%

in 1Q07, down from

85% in 2006

anxieties rise in

middle-income group

and eastern region

60

65

70

75

80

85

90

96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '0760

65

70

75

80

85

90

96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07

BCI, CSI, TEC & GDP GrowthBCI, CSI, TEC & GDP GrowthBCI, CSI, TEC & GDP GrowthBCI, CSI, TEC & GDP Growth

60

70

80

90

100

110

120

130

140

96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07

-15

-10

-5

0

5

10

15

BCI CSI TEC-MIER GDP

BCI/CSI GDP%

60

70

80

90

100

110

120

130

140

96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07

-15

-10

-5

0

5

10

15

BCI CSI TEC-MIER GDP

BCI/CSI GDP%

MIER’s MIER’s Sectoral IndicesSectoral IndicesMIER’s MIER’s Sectoral IndicesSectoral Indices

60

70

80

90

100

110

120

130

140

150

2Q01 1Q02 4Q02 3Q03 2Q04 1Q05 4Q05 3Q06 2Q0760

70

80

90

100

110

120

130

140

150

Auto Industry Index Residential Property Index

Retail Trade Index Tourism Market Index

60

70

80

90

100

110

120

130

140

150

2Q01 1Q02 4Q02 3Q03 2Q04 1Q05 4Q05 3Q06 2Q0760

70

80

90

100

110

120

130

140

150

Auto Industry Index Residential Property Index

Retail Trade Index Tourism Market Index

NEAR-TERM OUTLOOKNEAR-TERM OUTLOOKNEAR-TERM OUTLOOKNEAR-TERM OUTLOOK

• World economy• Real GDP growth • exports of goods and services• imports of goods and services• private investment• public investment• growth by sector• inflation • unemployment

• World economy• Real GDP growth • exports of goods and services• imports of goods and services• private investment• public investment• growth by sector• inflation • unemployment

World EconomyWorld EconomyWorld EconomyWorld Economy

3.64.1 4.2

2.8

3.7

4.6

2.53.0

4.0

5.1 4.9 5.1 4.9 4.9

-2

-1

0

1

2

3

4

5

6

95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08

% growth

World GDP USGDP% EU-GDP% JapGDP%

Real GDP GrowthReal GDP GrowthReal GDP GrowthReal GDP Growth• Malaysian economy expected to ease somewhat given the uncertainty in the global outlook for 2007

• GDP projected to grow by 5.7% in 2007 (06: 5.9%)

• Malaysian economy expected to ease somewhat given the uncertainty in the global outlook for 2007

• GDP projected to grow by 5.7% in 2007 (06: 5.9%)

-7.4

6.1

8.9

0.5

5.4 5.86.8

5 5.9 5.7 5.8

-8

-6

-4

-2

0

2

4

6

8

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07f '08fSource: DOSM, MIER

Exports and ImportsExports and ImportsExports and ImportsExports and Imports• export growth in 2007 expected to decelerate (‘07:5.0%) as

growth in developed countries softens• imports to moderate (‘07:6.8%), in line with softer export

growth

• export growth in 2007 expected to decelerate (‘07:5.0%) as growth in developed countries softens

• imports to moderate (‘07:6.8%), in line with softer export growth

-20

-15

-10

-5

0

5

10

15

20

25

30

%

'98 '99 '00 '01 '02 '03 '04 '05 '06e '07f

Exports Imports

Source: DOSM, MIER

Private and Public Private and Public ConsumptionConsumption

Private and Public Private and Public ConsumptionConsumption

• private consumption to stay resilient (‘07:6.6%) though moderating

• consumer sentiments affected by higher living expenses

• private consumption to stay resilient (‘07:6.6%) though moderating

• consumer sentiments affected by higher living expenses

-15

-10

-5

0

5

10

15

20

'98 '99 '00 '01 '02 '03 '04 '05 '06e '07f

% change

Private Public

Source: DOSM, MIER

Private and Public Private and Public InvestmentInvestment

Private and Public Private and Public InvestmentInvestment

• private investment to remain key driver (‘07:10.3%)• expansion in public investment (‘07:11.5%) driven by the 9MP

• private investment to remain key driver (‘07:10.3%)• expansion in public investment (‘07:11.5%) driven by the 9MP

-70

-50

-30

-10

10

30

50

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07f

% change

Private Public

Source: DOSM, MIER

Federal Government Fiscal BalanceFederal Government Fiscal Balance (% of GDP)(% of GDP)

Federal Government Fiscal BalanceFederal Government Fiscal Balance (% of GDP)(% of GDP)

-6.9

-15.6-16.7

-9.9

-6.0-5.7

-10.5

-7.6

-3.6-3.2-2.9-2.0

-0.8

0.2

2.30.8 0.7

2.4

-1.8-3.2

-5.8-5.5-5.6-5.3-4.3-3.8-3.5-3.4

-20

-15

-10

-5

0

5

10

15

198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006e2007f

Fiscal Balance (% of GDP) GDP Growth (%)

%

Growth by SectorGrowth by SectorGrowth by SectorGrowth by Sector• slower growth for manufacturing as export demand eases• new infrastructure projects to help rebound in construction • mining to grow modestly thanks to sustained demand for petroleum

and natural gas

• slower growth for manufacturing as export demand eases• new infrastructure projects to help rebound in construction • mining to grow modestly thanks to sustained demand for petroleum

and natural gas

-2

-1

0

1

2

3

4

5

6

7

8

Agriculture Mining Manufacturing Construction Services

% growth '06 '07f '08f

Source: DOSM, MIER

Inflation and UnemploymentInflation and Unemployment

• inflation pressures to moderate (‘07:2.4%) • unemployment to remain low (‘07:3.5%)• inflation pressures to moderate (‘07:2.4%) • unemployment to remain low (‘07:3.5%)

0

1

2

3

4

5

6

'98 '99 '00 '01 '02 '03 '04 '05 '06e '07f

%

Inflation Unemployment

Source: DOSM, MIER

Europe’s & Japan’s growth falter

DOWNSIDE RISKSDOWNSIDE RISKS

DownsidDownsidee

RisksRisks

Global imbalance worsening

US economy slower than 2.1% in ‘07

Oil price overshooting

Terrorist threatsrising

ISSUES & CONCERNSISSUES & CONCERNSISSUES & CONCERNSISSUES & CONCERNS• Economy underperforming

• Jobless growth

• Domestic sector not investing enough

• Declining private consumption expenditure

• Growing income disparity

• Inadequate EPF savings for old age

• Brain drain

• Credit-card bankruptcies on the rise

• Too much dependence on immigrant workers

• Vulnerability to crisis

• Economy underperforming

• Jobless growth

• Domestic sector not investing enough

• Declining private consumption expenditure

• Growing income disparity

• Inadequate EPF savings for old age

• Brain drain

• Credit-card bankruptcies on the rise

• Too much dependence on immigrant workers

• Vulnerability to crisis

economic briefing 4 august 2007

Documents

gdpexport growth

billioninflation rate

major currenciessource

disbursedhousehold loans

constant us

sizable us

midaforeign approvals

gdpforeign reserves