Inflation is 3.4% in June. Exports grew 27%. More updates from BNM

Please note that inflation is just a measurement. It is not necessary bad unless it’s too high and kept moving up too fast. When it’s very low, it also does not mean that it’s good because when it’s low, it may also be a signal that demand for goods and services are weak and this will definitely be a drag on the economy. So, what’s happening to the Malaysian economy since inflation is now back to our typical 3%?

Happy referring to BNM’s latest announcements below. The full report can also be obtained here.

Monetary and Financial Developments in June 2021

Headline inflation declined to 3.4% in June

1. Headline inflation declined to 3.4% in June (May: 4.4%), due mainly to lower inflation in the transport and food and non-alcoholic beverages categories.
2. The lower transport inflation (June y-o-y: 16.6%; May: 26%) reflected the dissipating base effect, which is expected to further subside in the near term.
3. Underlying inflation, as measured by core inflation, declined slightly to 0.7% (May: 0.8%).

Robust export growth in June

1. Export growth moderated but remained robust at 27.2% (May: 47.0%), reflecting broad-based strength across products and markets.
2. Moving forward, exports performance will continue to be underpinned by the rebound in external demand and continued upcycle in global technology. 
3. In addition, strong demand for non-E&E manufactured products and higher commodity prices will provide further impetus to export growth. Nonetheless, the trade outlook remains contingent on the path of the COVID-19 pandemic. 

Net financing growth moderated in June

1. Net financing growth moderated to 4.3% in June (May: 4.8%), reflecting the decline in both outstanding loan growth (June: 3.4%, May: 3.9%) and outstanding corporate bond growth (June: 6.9%, May: 7.2%).
2. Outstanding household loan growth moderated to 5.2% (May: 6.1%) as loan disbursements declined, mainly for the purchase of passenger cars, residential property and credit cards.
3. However, outstanding business loan growth increased to 0.9% (May: 0.4%) reflecting stronger working capital loan growth (June: 1.6%,     May: 0.4%). 

Domestic financial markets were affected by domestic and external factors in June

1. In June, domestic financial markets were affected by both domestic and external factors. Investor sentiments were affected by uncertainties surrounding the course of the pandemic in the region. The extension of stricter containment measures amid rising COVID-19 cases domestically led to further concerns over the economic outlook and increased risk aversion towards domestic financial assets.
2. Consequently, the FBM KLCI declined by 3.2% and the ringgit depreciated by 0.4% against the US dollar. Increased expectations of monetary policy tightening in the US also led to a broad strengthening of the US dollar.
3. The 10-year MGS yield increased by 4.7 basis points partly due to expectations of higher bond issuances following the announcement of additional fiscal support as domestic COVID-19 cases rose in the second quarter of 2021.

Banking system liquidity position remained strong to support financial intermediation

1. The banking system continued to record a healthy liquidity coverage ratio (LCR) level.
2. Banks’ funding profile also remained stable amid sustained growth in deposits.

Sound risk management practices by banks will support asset quality in the period ahead 

1. Overall gross and net impaired loans ratios remain broadly unchanged at 1.6% and 1.0%, respectively, amid a marginal monthly increase in impairments.
2. The impaired loans ratio is expected to remain broadly stable in the immediate term as banks continue to facilitate repayment assistance for viable borrowers facing temporary financial difficulties.
3. Despite this, banks continue to set aside additional provisions against potential credit losses, which currently stand at 1.8% of total banking system loans.

— end of report —

Still okay, Malaysia

Generally, Malaysia is doing fine. There’s still demand within and there’s now a much more robust demand from overseas market. As you may have noted, many countries with lots of vaccines have indeed reopened their economy and thus, they needed to order more goods and this meant Malaysia needed to export more to fulfill their needs. By the way, Malaysia’s economy is much more diversified than some commodity exporting nation yeah.

Need faster, Malaysia

What we must do in order to do better than fine is to speed up the vaccinations without fail. Plus to end the drama in Parliament currently. Whichever side wins, please just ensure one has a much larger majority so that no changes can suddenly happen, again and again. Both sides are really ‘killing’ the country with all these uncertainties. Just go google for news ‘Malaysia’ and you would get my idea. Happy reading.

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