malaysia’s response to the global economic crisis and · pdf filemalaysia...

ECONOMICS AND INTERNATIONAL DIVISIONMINISTRY OF FINANCEMALAYSIA

Malaysia’s Response to the Global Economic Crisis and the

Way Forward

Malaysia’s Response to the Global Economic Crisis and the

Way Forward

12 February 2009 (Thursday)12 February 2009 (Thursday)


2

(%)

-10

-5

0

5

10

15

'71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09

5.0-5.5

11.5

-7.4

-1.3

0.5

New Economic PolicyOPP 1

National Development Policy OPP 2 ( 7. 0 %)

National Vision PolicyOPP 3

3.5

9/11

Iraq war /SARS

Oil hike /

Sub prime crisis

Asian financial crisis

GROSS DOMESTIC PRODUCT GROWTH (1971 – 2009)

Commodity crash

Oil crisis


3.11

5.4

10.5

2.7

8.2

6.1

7.5

4.0

91.41

7.43.3

15.9

38.4

26,1888,184

17,218

5.0 – 5.5

2008

-3.60.55.5Exp. goods / services (real) (%)

26,6527,508

15,590

12,0803,0796,914

12,3104,37610,920

Income per capita: RMUSD

Purchasing Power Parity (USD)

0.1-8.95.7Public Consumption

26.5-8.48.4Public Investment

2.5

2.8

4.3

9.4

6.6

15.73.43.4

-6.3

37.0

7.3

1997

3.5-7.4GDP (real) (%)

Unemployment (%)

Inflation (%)

Private Consumption

Private Investment

Domestic Demand (real) (%)

Net International Reserves: USD Mil.Months of retained importsTimes of short-term debts

Current Acc. BOP (% share GNP)

National Savings (% share GDP)

ECONOMIC DATA

4.0 – 4.53.2

1.0 – 2.0 5.2

5.1-10.2

0.6-55.2

6.4-25.2

91.52

7.33.3

26.25.65.6

4.814.0

37.139.9

2009(Nov 2008)

1998

KEY ECONOMIC INDICATORS: 1997/1998 & 2008/2009

1 As at 31 Dec 2008 2 As at 15 Jan 2009


3.55.0 – 5.5-7.47.3GDP (real) (%)

5,5961

-4.6

696,1521

2.0

1,0002

-8.1

17.31

12.1

12.01

6.71

-0.91

1.71

1.7

3.9

3.6

6.9

4.3

2008

2,6722.7

723,0003.0

1,2211.2

16.7-1.8

-

-

-

-

2.3

2.9

3.1

5.6

0.8

2009(Nov 2008)

886-7.1

953-12.0

Rubber (‘000/tonne)Annual growth (%)

725,0361.6

713,929-0.5

Crude oil (barrel/day)Annual growth (%)

8.3-8.3

9.18.1

Crude palm oil (million/tonne)Annual growth (%)

Primary Production:

17.04.0Sales of manu. goods (overall %)

3,89715.7

3,36820.4

Natural gas (mmscf)Annual growth (%)

-14.415.4Domestic-oriented industries

-6.49.7Export-oriented industries

-7.210.6Industrial Prod. Index (overall %)

0.41.9Mining

-2.80.7Agriculture

10.6

9.9

10.1

1997

Construction

Services

Manufacturing

ECONOMIC DATA

-24.0

-0.4

-13.4

1998

KEY ECONOMIC INDICATORS: 1997/1998 & 2008/2009

1 Jan – Dec 2008 2 Jan – Nov 2008


2.554.013.5Statutory Reserve Requirement (%)

74.796.797.9Loans-Deposit ratio (%) 2

135.5228.9215.8Loans-GDP ratio (%)

12.611.810.5Risk-Weighted Capital Ratio (RWCR – %)

8.311.9

-14.62.7

4.618.5

Money supply (% growth) M1M3

4.13

424.526.6

433.621.3

8.701

7.7810.33

1997

Net Non Performing Loans ratio (%) – 3 months

Loans (RM billion)Annual growth (%)

Deposits (RM billion)Annual growth (%)

Interest Rates (%)Overnight Policy Rate3-month interbank (average at end-period)Base lending rate (average at end-period)

MONETARY AND FINANCIAL (end-period)

2.213.6

726.612.8

417.1-1.7

972.411.9

431.4-0.5

3.25 (2.5)5

3.616.66

7.001

9.438.04

20081998KEY ECONOMIC INDICATORS: 1997/1998 AND 2008

1 BNM Intervention Rate. The Overnight Policy Rate was introduced in 20042 As at end November 20083 Including Cagamas4 Total net non-performing loans ratio5 As at 21 Jan 2009


6

WORLD ECONOMIC SCENARIO(Growth % for 2007 – 2009)

-2.8-1.30.83.0United Kingdom

-2.02.04.15.0South Korea-4.02.23.85.7Taiwan

2007 2008 2009 2009

World Trade 7.2 4.6 2.1 -2.8

World GDP 5.0 3.7 2.2 0.5

United States 2.0 1.4 -0.7 -1.6Euro area 2.6 1.2 -0.5 -2.0

Japan 2.1 0.5 -0.2 -2.6

China 11.9 9.7 8.5 6.7India 9.3 7.8 6.3 5.1

Malaysia 6.3 5.0-5.5 3.5 1.4

Singapore 7.7 2.7 2.0 -4.9Thailand 4.8 4.5 4.0 1.5Indonesia 6.3 6.0 4.5 3.5Philippines 7.2 4.4 3.5 1.9

Source: World Economic Outlook, IMF

Nov. Revised 2008 (%) Jan. Revised (%)


Selected Economic IndicatorsSelected Economic Indicators


8

INDUSTRIAL PRODUCTION INDEX2007-2008

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

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

%

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0%IPI MPI Export oriented Domestic oriented Electricity


9

BUSINESS CONFIDENCE INDEX

≥

Source: MIER.

Business Confidence Index fell by 45.8 points to 53.8 points in Q4 2008


10

CONSUMER SENTIMENTS INDEX

Source: MIER.

Consumer Sentiments Index fell by 17.5 points to 71.4 points in Q4 2008


11

USD per barrel

-50

-25

0

25

50

75

100

125

150

J F M A M J J O S O N D J F M A M J J O S O N D J F

-50

-25

0

25

50

75

100

125

150

CRUDE OIL PRICES and GLOBAL FOOD PRICES INDEX(Monthly/Yearly Growth Rate)

50

75

100

125

150

175

200

225

250

275

300

2000 2001 2002 2003 2004 2005 2006 2007 2008a 2008b50

75

100

125

150

175

200

225

250

275

300

West Taxes Intermediate,USA

Cooking oilDairyGrain

SugarPoultry

2007 2008 2009

FAO Global Food Prices IndexIndex Index

Crude Oil Prices

Source: Bloomberg.

Tapis Malaysia

USD per barrel

Total Food Prices 2008

Increased 38.2% (a)Declined -2.8% (b)

a Forecast in Aug 2008 b Forecast in November 2008

96.74Jan ’08

92.98Jan ’08

153.1215 Jul ’0838.1429 Dec ’0847.33 Feb ’09

TapisTapis::

153.123 Jul ’08

USD per barrel

WTI:WTI:

22 Dec ’08 31.413 Feb ‘09 40.78


12

0100200300400500600700800900

1,0001,1001,2001,3001,4001,500

J F M A M J J A S O N D J F M A M J J O S O N D J F0102030405060708090100110120130140150

2007 2008

PRICES OF MAJOR COMMMODITIES(January 2007 - January 2009)

Source: DOS Malaysia

0600

1,2001,8002,4003,0003,6004,2004,8005,4006,0006,6007,2007,8008,4009,0009,600

10,20010,80011,40012,000

J F M A M J J A S O N D J F M A M J J O S O N D J F02004006008001,0001,2001,4001,6001,8002,0002,2002,4002,6002,8003,0003,2003,4003,6003,8004,000

RubberTapis Crude Oil (Right)

Soy Bean (Right)Palm Oil (Right)

Cocoa

2009

Sen per kg USD per barrel

RM per tonne metricRM per tonne

Tapis Oil:3 Feb ‘09: USD47.3 per barrel

Rubber:3 Feb ‘09: RM4.95 per kg

Palm Oil:2 Feb ‘09: RM1,740 per tonne

Soy Bean:30 Jan ‘09: RM1,233.64 per tonne

Cocoa:3 Feb ‘09: RM8,200 per tonne


13

%

-5.0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

22.5

25.0

J F M A M J J A S O N D J F M A M J J O S O N

-15.0

-7.5

0.0

7.5

15.0

22.5

30.0

37.5

45.0

52.5

60.0

67.5

75.0

Transportation

Food

Utilities

2007 2008

%Petrol (Right scale)

Diesel (Right scale)

Restaurant/hotel

CONSUMER PRICE INDEX: SELECTED COMPONENTS

(2007 – 2008)

Source: DOS Malaysia

Total CPI

11.05.7Nov

2008

8.85.42008

12.17.6Oct12.38.2Sept

10.44.4Dec

11.78.5Aug

2.0

8.57.73.8

2.3

CPI(%)

8.2May

Food(%)

Jan 3.9

Jun 10.0Jul 11.2

2007 3.0


14Source: DOS Malaysia.

-10-505

10152025303540455055606570

J'07

F M A M J J A S O N D J'08

F M A M J J A S O N-5-303581013151820232528303335

External Trade Surplus(Right scale)

-2

-1

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

J'07

F M A M J J A S O N D J'08

F M A M J J A S O N D-20

-10

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

Net International Reserves(Right scale)

MALAYSIA’S EXTERNAL SECTOR PERFORMANCE

External Trade International Reserves

Imports

Exports Short-term external debt (times)

Retained imports(months)

Times / Months USD BillionRM Billion RM Billion

116.3

47.1(-2.8%)

Feb. 2008

109.7

62.3(15.0%)

Sep. ’08Jul. ’08 Dec. ’08

Exports RM bil. 63.3(25.4%)

51.8 (Nov)(-4.9%)

International Reserves (USD bil.)

125.1 91.4


Impact on Malaysia’s EconomyImpact on Malaysia’s Economy


16

• Shrinking exports – Lower earningsSept 2008: 15.1% y-o-yOct 2008: - 2.6% y-o-yNov 2008: - 4.9% y-o-yDec 2008: -14.9% y-o-y

• Declining crude oil prices – Less revenue

• Volatility in stock market – Sentiment affectedKLCI: 1163 points on 31 Jul. 2008

879.67 points on 3 Feb. 2009

USD per barrelUSD per barrel

15 Jul. 20083 Feb. 2009

153.1247.3

3 Jul. 20083 Feb. 2009

145.2940.78

Tapis

WTI

IMPACT ON MALAYSIA’S ECONOMY


17

IMPACT ON MALAYSIA’S ECONOMY

• Declining commodity prices:

• Shrinking demand in the manufacturing sector – output of export-oriented industries declined

• Rising unemployment – 23,274 total retrenched workers (2008)

• Domestic demand – affected by low business and consumer confidence

Average Jul 2008

Average Nov 2008

Palm Oil(RM per tonne) RM3,363.76 RM1,528.40

(2 Feb ‘09: RM1,740)

Rubber(RM per kg) RM10.23

RM5.95 (3 Feb ‘09: RM4.95)


18

1.43.8IMF

0.53.1CITIGROUP(14 Jan 2009)

1.5n.aFITCH

1.12.7OSK (22 Jan 2009)

0.5n.a Standard Chartered

0.83.0CIMB (Feb 2009)

4.0n.aASLI(22 Jan 2009)

2.83.5AFFIN (5 Jan 2009)

1.5n.a.RHB

0.0 3.0UBS(22 Jan 2009)

2.53.5MARC(5 Jan 2009)

1.33.4MIER(15 Jan 2009)

3.55.4MOF(Nov 2008)

Current (%)Previous (%)

GDP FORECAST BY SELECTED ANALYSTS/INSTITUTIONS


19Source: MOF.

IMPACT ON MALAYSIA’S ECONOMY: GROWTH DOMESTIC PRODUCT (GDP) DEMAND AND SUPPLY

(Growth Rate For Year 2008 – 2009)

2008 2009

Real GDP 5.0-5.5 3.5

Public Sector 4.7 9.6Consumption 5.7 6.3Investment 3.6 13.4

Private Sector 6.6 4.3Consumption 6.8 4.9Investment 6.2 1.9

Export 4.7 -1.5Import 5.7 0.3

Agriculture 3.6 2.9

Mining 2.8 2.3

Construction 4.0 3.1

Manufacturing 4.7 0.8

Services 7.1 5.6

Demand

(%) Revised Forecast (%)

Supply

GDP*GDP* 2008

Q1 7.4

Q2

Q3

6.7

4.7

J-Sep 6.2

Key drivers for growth:- Services sector- Domestic economy- Private sector activities supported by Fiscal and Monetary measures

* Nov. 2008


20

FEDERAL GOVERNMENT FISCAL POSITION: (RM Billion)

1 ER 2008 2 Forecast

20081

(ER)

20092

29 Aug ’08(ER)

4 Nov ’08(Rev.)

Revenue 161,558 176,220 168,732

Operating ExpenditureFuel Subsidies

150,95318,100

154,17021,000

154,17013,922

Current Balance 10,605 22,050 14,562

Gross Development Expenditure 46,258 51,729 51,729Minus: Loan Recovery 1,191 1,229 1,229

Net Development Expenditure 45,067 50,500 50,500

Overall Balance% of GDP

-34,462-4.8

-28,450-3.6

-35,938-4.8


Malaysia’s Policy ResponseMalaysia’s Policy Response


22

STRENGTHENING ECONOMIC RESILIENCE

Policy Response:• Immediate action to strengthen domestic economy and implement

fiscal stimulus package: RM7 billion (4 Nov. 2008)

• Other countries which have introduced fiscal stimulus packages:United States: USD700 billion (Obama USD819)Germany: USD42.5 billionSouth Korea: USD25.5 billionChina: USD585 billionFrance: USD36.2 billionSingapore: SGD20.5 billion

• To ensure continuous credit flow to all sectors of the economy

• To enhance domestic investment and consumer confidence

• To ensure purchasing power of the rakyat remains strong

• To mitigate the impact of unemployment through training programmes


23

FISCAL MEASURES• Reprioritise Government projects to focus on those with high

multiplier effects and low import content;

• Upgrading, repair and maintenance:

- Public amenities including schools, hospitals, and roads(RM500 million)

- Rural roads, jalan kampung, jalan pertanian including in Sabah and Sarawak (RM500 million)

- Police stations and camps as well as quarters for armed forces and police personnel (RM500 million)

• Upgrading and maintenance of public transportation (RM500 million) and expedite implementation of public transport projects such as extension of existing 2 LRT lines and building 1 new line;


24

FISCAL MEASURES• Build additional low and medium cost houses and enhance

housing programmes (RM1.2 billion) including Sabah and Sarawak;

- SPNB (Rumah Mesra Rakyat) – 6,500 units- PPRT, KKLW – 15,000 units

• Abandoned housing projects – SPNB (RM200 million);

• Encourage development of Government assets (to unlock the value of assets) through joint ventures and PFI initiatives to ensure steady income stream for Government – more than RM5 billion (selected prime land in KL); and

• Other small maintenance projects (PIA and PIAS) - RM600 million


25

PRIVATE CONSUMPTION• Complete registration of welfare recipients based on the

revised eligibility criteria by end December 2008;• Voluntary reduction of EPF employees’ contribution by 3

percentage points from 11% to 8% for a 2-year period effective 1 January 2009;

• Raise ceiling of car loans for civil servants; • Government loans for properties in the secondary market

without strata title will be allowed;

• Repayment period for existing Government housing loans to be extended up to 30 years;

• Additional business premises for small and medium entrepreneurs – RM100 million; and

• Extend business hours for shopping malls and hypermarkets.


26

PRIVATE INVESTMENT

• Establish investment fund to attract private investment (RM1.5 billion);

• Facilitate development of health and education tourism particularly in the areas of human capital and immigration as well as simplifying procedures;

• Abolish the current 10% import duty for cement;

• Liberalise imports of long iron and steel products both APs and import duties for the construction sector;

• Allow purchase of commercial properties above RM500,000 by foreigners for own use without FIC approval;

• Micro financing – BNM to provide additional soft loan amounting to RM200 million to commercial banks;


27

PRIVATE INVESTMENT

• Work permits will also be issued directly to knowledge workers in critical fields as compared to present practice of issuing work permits to their company; and

• To accelerate the implementation of High Speed Broadband (HSBB) project as a catalyst to spearhead private investmentand reduce cost of doing business. Additional RM400 million will be provided.


28

TRAINING AND EDUCATION • Enhance training and employment opportunities by providing initial

training. A fund of RM300 million to be provided to Growth Corridors;

• Encourage employment of professionals and skilled Malaysians affected by global financial turmoil (bankers, investment advisors and fund managers) - BNM and SC to coordinate initially;

• Expedite recruitment of critical service staff in the public sector by way of contract for service. Currently, total critical vacancies in the public sector stand at 18,000 posts;

• Buying places to train youth in private training institutions – RM200 million;

• Enhance preschool education (PERMATA, KEMAS, Tadika) – RM200 million; and

• Financial assistance to Sekolah Agama Bantuan Kerajaan, missionary schools, SJK Cina and SJK Tamil (RM200 million).


29

MOVING FORWARD

• Monitor closely global economic developments and the impact on domestic economy

• Swift implementation of RMK-9 projects and the stimulus package initiatives

• Project Management Unit established in Ministry of Finance to expedite projects in stimulus package which are to be realised in 2009

• Working on additional measures to support the economy

• Addressing emerging concerns as a result of the global slowdown


Thank YouThank You

malaysia’s response to the global economic crisis and · pdf filemalaysia...

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