Posted Date : 21 Mar 2013
MARC today released its report on the 2012 BNM Annual Report, commenting on the central bank’s outlook for the economy and the status and health of the financial sector in Malaysia.
Bank Negara is projecting GDP growth for 2013 at around 5.0% to 6.0%, which is in line with MARC’s expectations for the year ahead. Modest improvement will be seen in trade performance but domestic demand will remain the key pillar, upholding the economy in 2013. The financial sector remains healthy with excellent asset quality and substantial capital buffers, with Basel III compliance now being implemented.
The household debt level is a perennial issue, with the ratio to GDP increasing further to 80.5% in 2012. While the risk to the financial system is contained, aggressive lending by non-bank financial institutions (NBFIs) have contributed to higherpersonal financing credit to households. MARC feels that further macro prudential measures should be put in place to rein in lending to households, particularly in the low income segment as leverage ratios for these households are already high and liquid financial assets negligible.
Rising property prices and declining home affordability are also a continuing concern. While MARC notes that fundamental changes in the economy such as demographics have contributed to higher property prices, a further clamp down is probably needed, particularly with reference to schemes designed to circumvent prudential limits on lending such as Developer Interest Bearing Schemes (DIBS).
MARCexpects little change to BNM’s monetary policy stance for 2013 as inflationary pressures are contained and global economic recovery uncertain. We however remain concerned with the level of foreign involvement in the domestic sovereign bond market, as previous sell-downs have weighed on the Ringgit exchange rate. Overall, we concur with BNM’s outlook for the economy and foresee 2013 GDP growing at a 5.3% pace.
For a copy of MARC’s 2012 Bank Negara Malaysia Annual Report, please click here.
