Economic Balance in Malaysia After Recession

With Bank Negara Malaysia (herein referred to as "BNM") declaring in the month of September that its Monetary & Financial Developments August 2009, the Malaysian economy faces stable interest rates, demand for financing in the housing industry is sustained and the capital market moderated, it seems positive that Malaysia may be looking at a very positive economic outlook coming 2010.

There were previous speculations about the domino effect this Great Recession has on Malaysia will last about 2-3 years; albeit its heavy political activities and shrewd financial stability mentality that was placed on Malaysians by various mass and alternative media.

Mass Mutual

Locally speaking, Malaysia is seen to be performing quite well in this recession - BNM's net non-performing loans ratio remains at 2.1% as of August 2009, as many other banks stood at an approximate figure of 3.65%. Deutsche Bank however, was forecasted to a high of 15% non-performing loan ratios (herein referred to as "NPL") for the next 12 months starting October 2009.

The Average Base Lending Rates (BLR) in Malaysia stands at 5.53% on July, decreasing to a low of 5.51% at the end of August.

For more almost a decade now, citizens of the world mainly financiers and political leaders have always craved for economic stability, sustainability and predictability: Even depicted in the G20 summit. But what is the shape of the economy after this recent economic turmoil, and how would we reshape it?

Economy Focus: Malaysia The GDP chart above (by Dept. of Statistics Malaysia) shows a very sharp decline at the expected bottom-out -6.2% in Quarter 1 of 2009. Over the period of time, output for exports have declined, oil price was down to a low of US/barrel and the producer price index showed decline compared from January - August 2008 and 2009.

Some of the other exciting figures are also unemployment rates, commodity prices, global stock market prices, foreign currency exchange value and manufacturing output of vital Malaysian exports. Interestingly, the balance of payments figures are depicted as below.

Balance of Payments - Malaysia for 2007 - Q1 2009

According to the Malaysian Department of Statistics,

The current account recorded a surplus of RM28.8 billion (equivalent to 17.8% of GDP) in the second quarter of 2009, down from RM31.4 billion from the preceding quarter (-RM2.7 billion or -8.5%). The decrease was as a result of lower surplus on goods of RM33.1 billion from RM37.0 billion in the earlier quarter (-RM3.8 billion or -10.4%), and services of RM1.0 billion (Q1 2009: RM2.5 billion). Meanwhile, other components in current account showed an improved performance as follows:

a lower net payments on income account of RM1.5 billion (Q1 2009: -RM3.9 billion); and a lower leakage on current transfers of RM3.9 billion (Q1 2009: -RM4.2 billion)

Malaysia vs. Other economies Household debts are still worryingly high in United States, and healthcare is often a concern. It has been said 'worryingly' for many times that Americans are spending too much, wanting a lot of amenities but are not paying enough for it. Consumer spending has dropped, but cost of capital and consumer prices index has increased. This negatively effects the economy as prices will be higher and consumers do not spend as much - Leaving local monetary circulation volatility at a much lower rate.

In Malaysia, banks were having strong capitalization and stable NPL, sustained fund raising volatility in the capital market, gross financing to the private sector was moderated and M3 (broad money) grew at a faster annual rate at 7.6%.

Economic Balance in Malaysia After Recession