1QFIRST QUARTER 2022 - VOL. 37 NO. 1 - BANK NEGARA MALAYSIA
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Vol. 37 No. 1
1Q
First Quarter 2022The BNM Quarterly Bulletin presents a quarterly review of Malaysia’s economic, monetary and financial developments. It includes the Bank’s latest assessments on the direction of the economy going forward. The Bulletin also provides insights on current economic and financial issues, including highlights of policy initiatives undertaken by Bank Negara Malaysia in pursuit of its mandates.
This page was intentionally left blank.
PG 5 Key Highlights
PG 7 International Economic Environment
Contents
PG 11 Developments in the Malaysian Economy
PG 27 Monetary and Financial Developments
PG 33 The Bank’s Policy Considerations
PG 37 Macroeconomic Outlook
PG 39 AnnexThis page was intentionally left blank.
Highlights: 1Q 2022
GDP expanded further in 1Q 2022 amid improving domestic demand
GDP grew by 5.0% as domestic activities improved while external trade remained strong
Real Gross Domestic Product Selected GDP Components (Annual change (%)
15.9 Demand
+5.5% Private
consumption
2.4
4.6
3.6
5.0 +8.0% Exports
of Goods &
Services
3.9
-2.7
Supply
-0.5 -0.8
-3.1
-3.3 -4.5 +6.5% Services
+6.6%
4Q 20 1Q 21 2Q 21 3Q 21 4Q 21 1Q 22
Manufacturing
quarter-on-quarter (%, seasonally adj.)
year-on-year (%)
Source: Department of Statistics, Malaysia
Headline inflation moderated in 1Q 2022, due mainly to the dissipating
base effects
Annual change (%), Factors affecting inflation in 1Q 2022
contribution to headline inflation (ppt)
Fuel
4.1 Smaller contribution from fuel amid
dissipating base effect from lower
domestic retail fuel prices last year
3.2
Other price-administered items
Absence of base effect from electricity
2.2 2.2
tariff rebates¹ implemented in 2020
1.7
Partly offset by
0.7 0.7 0.7 0.8
Core inflation²
Increase in core inflation (1Q 22:
0.5 1.7%; 4Q 21: 0.8%) amid the high cost
environment and improving
1Q 2021 2Q 2021 3Q 2021 4Q 2021 1Q 2022 demand, with services related
inflation the main driver³
Fuel (ppt) Core inflation (ppt)
Price-volatile items (ppt) Other price-administered
Price volatile items
items (ppt) Higher fresh vegetables inflation due
to seasonal factors and high input
Headline inflation (%) Core inflation (%)
costs
1
The tiered electricity tariff rebates were implemented under the Bantuan Prihatin Elektrik scheme from April to December 2020, and thus contributed
to higher inflation in 2021 upon their lapse. The rebates ranged from 2% to 50% depending on domestic users’ monthly electricity consumption.
2
Core inflation is computed by excluding price-volatile and price-administered items.
3
The main contributors of higher core services inflation were food away from home, and to a lesser extent, repair and maintenance for personal
transport, and expenditure in restaurants and cafes.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimatesThis page was intentionally left blank.
International
Economic Environment
Highlights
Moderation in global growth
• Global growth moderated during
the first quarter of 2022. Global growth moderated in the first quarter of
2022. Recovery of services activity was initially
• Regional exports remained affected by Omicron-led resurgences but improved
resilient. as advanced economies (AEs) and most emerging
market economies (EMEs) loosened restrictions
• Global financial market volatility
later in the quarter. However, the recovery
increased. momentum was dampened by the military conflict
in Ukraine, as well as renewed lockdowns in China.
These developments led to re-escalation in global
supply chain disruptions and increased commodity
prices, which further heightened inflationary
pressures. While the strength of manufacturing
sectors continued in AEs, manufacturing activities
in the EMEs were weighed by COVID-led disruptions
in China. Nevertheless, global trade activity
remained resilient.
C1 GDP Growth of Selected Economies
Year-on-year change (%)
7
6
5.0 5.0 5.0
4.8
5
4 3.6 3.4
3.1 3.1
3
2
1
0
US Euro area China Korea Chinese Singapore Indonesia Malaysia
Taipei
4Q 21 1Q 22
Source: National authorities
Quarterly Bulletin | 1Q 2022 7
R1 Pertumbuhan KDNK Ekonomi Terpilih
Perubahan tahun ke tahun (%)
7Growth for the US economy moderated to In China, the economy grew by 4.8% (4Q 2021:
3.6% (4Q 2021: 5.5%) during the quarter, 4.0%). Fixed investments rebounded during the
partly due to headwinds from an Omicron- quarter, particularly in infrastructure, supported
led resurgence and growing inflationary by fiscal and monetary loosening. However, the
pressures on private consumption. Inflation re-imposition of lockdowns amidst COVID-19
continued to increase amid strong demand outbreaks led to a fall in services activity and to a
conditions, together with rising price lesser extent, manufacturing activity. Export growth
pressure following the escalation of the remained resilient, as some firms continued to
military conflict in Ukraine. Wage growth operate despite the lockdowns. Business continuity
remained strong as unemployment rates was facilitated to some degree, as firms were given
edged towards the pre-pandemic level. the flexibility to operate in a bubble, with strict
standard operating procedures.
In the euro area, the economy grew by 5.0%
(4Q 2021: 4.7%), supported by sustained Regional export growth remained resilient
improvements in the labour market. However,
the military conflict weighed on growth in Despite the challenging external environment,
the region due to a high level of uncertainty exports in most regional economies grew at
and elevated inflation, driven primarily by a double-digit pace during the quarter. This
high energy prices. This dampened consumer reflected the continued external demand,
and business confidence. Disruptions to particularly for electrical and electronics (E&E)
economic activity in Ukraine, Russia, and products. Commodity exporters, such as Indonesia
China also affected supply chains and and Malaysia, continued to benefit from rising
manufacturing activity in the euro area. commodity prices.
C2 Exports Growth of Selected Economies (in USD terms)
Year-on-year change (%)
50
45
40
35.3
35
30
25 23.5
20 18.6 18.3
15.8 14.9
15
9.8 9.8
10
5 2.8
0
Indonesia Chinese Malaysia Korea China Thailand Philippines Singapore Hong Kong
Taipei SAR
4Q 21 1Q 22
Source: National authorities
R2 Pertumbuhan Eksport Ekonomi Terpilih (dalam Dolar AS)
Perubahan tahun ke tahun (%)
8 Quarterly Bulletin | 1Q 2022
50
45
40
35.3C3 CBOE Volatility Index (VIX)
Index
80
70
60
50
40
30
20
10
0
Jan 20 Apr 20 Jul 20 Sep 20 Dec 20 Mar 21 Jun 21 Sep 21 Dec 21 Mar 22
Source: Bloomberg
Global financial market volatility Uncertainties surrounding the global economic
increased outlook increased amid high commodity prices, the
military conflict, sanctions on Russia, and concerns
Global financial market conditions experienced over weaker growth in China.
increased volatility during the quarter (CBOE VIX,
1Q 2022: 25.3; 4Q 2021: 19.2). Volatility increased in Brent crude oil prices averaged higher at USD98
run-upIndeks
theR3 Volatiliti
to the January (VIX)
meeting CBOE
of the US Federal per barrel during the quarter (4Q 2021 average:
Open Market Committee (FOMC). This was mainly USD80 per barrel). Oil prices were driven mainly by
due to the increased uncertainty on the pace of
Indeks the continued improvement in global oil demand
monetary
80 policy tightening amidst an environment amid the ongoing OPEC+ production cuts. The
of a persistent rise in inflation. The second spike military conflict in Ukraine also fuelled concerns
70
in volatility was marked by the beginning of the over the tightening of global oil supply conditions,
60
military conflict in Ukraine on 24 February 2022. adding larger risk premiums on prices.
50
40
30
20
10
0
Jan 20 Apr 20 Jul 20 Sep 20 Dis 20 Mac 21 Jun 21 Sep 21 Dis 21 Mac 22
Sumber: Bloomberg
Quarterly Bulletin | 1Q 2022 9This page was intentionally left blank.
Developments in the
Malaysian Economy
Highlights
GDP continued to expand in the first
• The Malaysian economy expanded quarter of 2022
by 5.0% in the first quarter of 2022.
The Malaysian economy grew by 5.0% in the
• Headline inflation moderated to first quarter of 2022 (4Q 2021: 3.6%). Growth was
2.2% as core inflation increased to supported mainly by higher domestic demand as
1.7% during the quarter. economic activity continued to normalise with the
easing of containment measures. The improvement
• Lower current account surplus of also reflects the recovery in the labour market
RM3.0 billion, or 0.7% of GDP. and continued policy support. In addition, strong
external demand, amid the continued upcycle in
global technology, provided a further lift to growth.
In terms of economic activity, the services and
manufacturing sectors continued to drive growth.
On a quarter-on-quarter seasonally-adjusted
basis, the economy registered an increase of 3.9%
(4Q 2021: 4.6%).
C4 Real GDP Growth
Period-on-period change (%)
20
15.9
15
10
5.0
5 3.6
0
-0.5
-5
-4.5
-10 1Q 21 2Q 21 3Q 21 4Q 21 1Q 22
Quarter-on-quarter (seasonally adj.) Year-on-year
Source: Department of Statistics, Malaysia
Quarterly Bulletin | 1Q 2022 11
R4 Pertumbuhan KDNK BenarC5 Annual Growth of Economic Sectors
Annual growth (%)
15
9.1
10
6.5 6.6
5 3.2 2.8
0.2
0
-0.6 -1.1
-5
-6.2
-10
-15 -12.2
-20
-25
-30
Services Manufacturing Agriculture Mining Construction
4Q 21 1Q 22
Source: Department of Statistics, Malaysia
C6 Contributions of Economic Sectors to Real GDP Growth
R5 Pertumbuhan Tahunan KDNK Mengikut Sektor Ekonomi
Contribution to growth (ppt)
6
Pertumbuhan tahunan (%)
15
4 3.7 9.1
10
6.5 6.6
5 3.2 2.8
1.9 2.1
0.2
20 1.6
-0.6 -1.1
-5
0.2
0.01 -6.2
0
-10
-0.04 -0.1 -0.2
-0.5
-12.2
-15
-2
-20
-25
-4 Services Manufacturing Agriculture Mining Construction
-30
Perkhidmatan Perkilangan Pertanian Perlombongan Pembinaan
4Q 21 1Q 22
Source: Department of Statistics, Malaysia
S4 21 S1 22
12 Sumber: Jabatan
Quarterly Perangkaan
Bulletin | 1QMalaysia
2022
R6 Sumbangan Sektor Ekonomi kepada Pertumbuhan KDNK BenarContinued expansion in key economic expand, particularly in the motor vehicle and
sectors transport equipment segment as carmakers
ramped up production to meet the backlog of
Key economic sectors expanded in the first orders. Demand for construction materials, such
quarter of 2022. The services sector grew by as metals, fabricated metals, and non-metallic
6.5% (4Q 2021: 3.2%). Consumer-related activities minerals, also continued to grow, following the
continued to recover amid the reopening of smaller contraction in construction activity.
the economy. This was reflected in stronger
growth in the retail and leisure-related The agriculture sector grew by 0.2% (4Q 2021:
subsectors. The strong expansion was also 2.8%). Oil palm output expanded moderately as
seen in business-related activities, including harvesting activity in key producing states was
transport and storage, real estate, business temporarily disrupted by heavy rainfall in the
services and private healthcare. Growth in the early part of the year. Growth was also weighed by
information and communication subsector the decline in the other agriculture, forestry and
provided further support amid greater coverage rubber subsectors.
of 4G services as well as sustained demand for
data communications services, particularly for The construction sector contracted at a smaller
e-commerce and e-payment activities. pace of 6.2% (4Q 2021: -12.2%). Progress in
new and existing commercial and industrial
The manufacturing sector grew by 6.6% (4Q 2021: projects continued to support activity in the
9.1%). Export-oriented industries increased more non-residential subsector. Meanwhile, the
moderately as the strong growth in the E&E implementation of small-scale projects under the
cluster was partially weighed by lower growth Budget 2022 sustained growth in special trade
in the primary-related cluster. The double-digit activities. Growth in the civil engineering and
growth recorded in the E&E cluster was driven residential subsectors improved but remained
by robust demand for semiconductors amid subdued.
technological developments such as 5G, cloud
computing, and the Internet of Things. However, The mining sector remained in contraction (-1.1%;
growth in the primary-related cluster moderated 4Q 2021: -0.6%), as crude oil and natural gas
as the production of selected pandemic- production was weighed by maintenance-related
induced products such as rubber gloves began closures in several facilities. Notwithstanding, the
to normalise. Meanwhile, domestic-oriented commencement of the Pegaga gas field in Block
industries recovered further post-containment SK320 located in offshore East Malaysia in March
measures. The consumer cluster continued to 2022 provided some support to growth.
Quarterly Bulletin | 1Q 2022 13C7 Annual Growth of Real GDP by Expenditure Components
Annual growth (%)
10
6.7 5.8
5.5
5 3.7 3.8
1.6 0.8
0.2
0
-5 -3.0
-10
-15
-20
-25
-26.5
-30
Private Public GFCF Net Exports Change in Stocks
Consumption Consumption (RM billion)
4Q 21 1Q 22
Source: Department of Statistics, Malaysia
C8 Contributions of Expenditure Components to Real GDP Growth
R7 Pertumbuhan Tahunan KDNK Benar Mengikut Komponen Perbelanjaan
Contribution to growth (ppt)
4
3.4
Pertumbuhan tahunan (%)
10 2.2
2.1 6.7
5.5 1.8 5.8
52 3.7 3.8
1.6 0.8
0.2
0.8
0
0.3
0.0 0.1
-50 -3.0
-10 -0.6
-15 -1.5
-2
-20
-25
-4 Private Public GFCF Net -26.5
Exports Change in Stocks
-30 Consumption Consumption
Penggunaan Penggunaan PMTK Eksport Bersih Perubahan Stok
4Q 21 1Q 22
Swasta Awam (RM bilion)
Source: Department of Statistics, Malaysia
14 Quarterly Bulletin | 1Q 2022
S4 21 S1 22
Sumber: Jabatan Perangkaan Malaysia
R8 Sumbangan Komponen Perbelanjaan kepada Pertumbuhan KDNK BenarHigher growth in domestic demand as restaurants and hotels, recreational services
and household furnishings. The continued strength
During the quarter, domestic demand expanded in consumer expenditure was primarily driven
by 4.4% (4Q 2021: 1.9%). Growth was supported by the recovery in the labour market with higher
by higher consumption and improvement in wage and employment growth. Policy measures,
investment activities amid the normalisation of such as Bantuan Keluarga Malaysia, also provided
economic activity. On the external front, demand additional support to consumer spending.
for Malaysia’s exports, particularly for E&E
products, remained strong. Public consumption grew by 6.7% (4Q 2021: 1.6%).
The expansion was driven mainly by higher growth
Private consumption grew at a faster pace of 5.5% in supplies and services amid continued support
(4Q 2021: 3.7%), supported by higher spending on from COVID-19 related expenditure, including
necessities and selected discretionary items such vaccine procurement and logistics spending.
Quarterly Bulletin | 1Q 2022 15Improvement in investment activity supported by capital spending in the services and
manufacturing sectors. Investments in ICT-related
Gross fixed capital formation (GFCF) registered equipment and machinery for manufacturing
a marginal growth of 0.2% (4Q 2021: -3.0%) as remained robust, as firms continued to embrace
capital spending by both private and public automation and digitalisation. Structures
sectors improved. By type of asset, machinery and investment registered a smaller contraction,
equipment (M&E) investments grew by 12.0% mainly supported by the non-residential segment.
(4Q 2021: 17.4%). Meanwhile, investments in This reflects the gradual ramp-up of investment
structures and other assets declined by a smaller projects amid the reopening of the economy.
pace of 7.9% (4Q 2021: -15.6%) and 0.9% (4Q 2021:
-3.3%) respectively. Public investment declined at a smaller pace
(-0.9%; 4Q 2021: -3.4%), underpinned by the
Private investment turned around to register improvement in General Government’s fixed
a positive growth of 0.4% (4Q 2021: -2.8%), assets spending.
C9 GFCF Growth by Type of Asset
Year-on-year change (%)
30
20
10
0.2
0
-3.0
-10
-10.8
-20
-30
1Q 21 2Q 21 3Q 21 4Q 21 1Q 22
GFCF Structures
Machinery and Equipment Other Assets
Source: Department of Statistics, Malaysia
R9 Pertumbuhan PMTK Mengikut Jenis Aset
Perubahan tahun ke tahun (%)
30
20
10
0.2
0
-3.0
-10
16 Quarterly Bulletin | 1Q 2022 -10.8
-20
-30
S1 21 S2 21 S3 21 S4 21 S1 22Headline inflation moderated during normalisation after a period of subdued prices,
the quarter and continued price adjustments amid the
high-cost environment and improving demand
Headline inflation, as measured by the annual conditions. The increase was largely contributed
percentage change in the Consumer Price Index by higher core services inflation, particularly for
(CPI), moderated to 2.2% during the quarter (4Q food away from home and to a lesser extent, repair
2021: 3.2%). Lower headline inflation during the and maintenance for personal transport, and
quarter mainly reflected the smaller contribution expenditure in restaurants and cafes. Core goods
from the dissipating base effect from lower inflation also rose, with the largest driver being
domestic retail fuel prices last year (RON 95 for 1Q jewellery, rings and precious stones, followed by
2022: RM2.05/litre; 1Q 2021: RM1.96/litre) as well furniture and furnishings. The increase in price
as the absence of the base effect from electricity volatile inflation, meanwhile, was contributed
tariff rebates implemented in 2020. The moderating
1 mainly by higher fresh vegetables inflation, on
effect from these factors was partly offset by higher account of seasonal factors and cost pressures
core inflation and price volatile inflation. from supply-related disruptions.2 Correspondingly,
a relatively higher share of CPI items recorded
Core inflation increased to 1.7% during the quarter price increases during the quarter, averaging at
(4Q 2021: 0.8%), reflecting a combination of 57.3% (4Q 2021: 52%; 2011-2019 average: 45%).
1
The tiered electricity tariff rebates were implemented under 2
For instance, these included the adverse weather conditions,
the Bantuan Prihatin Elektrik scheme from April to December foreign labour shortages, elevated feed costs and fertiliser
2020, and thus contributed to higher inflation in 2021 upon costs.
their lapse. The rebates ranged from 2% to 50% depending on
domestic users’ monthly electricity consumption.
Quarterly Bulletin | 1Q 2022 17C10 Contribution to Headline Inflation by Components
Annual change (%), Contribution to headline inflation (percentage points, ppt)
6.0
4.0
2.0
0.0
-2.0
-4.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2020 2021 2022
Other price-administered Fuel (ppt) Core inflation* (ppt)
items (ppt)
Price-volatile items (ppt) Headline inflation (%) Core inflation* (%)
* Core inflation is computed by excluding price-volatile and price-administered items.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
C11
R10 Month-on-Month Price
Sumbangan kepada Changes
Inflasi of CPI Items*
Keseluruhan Mengikut Komponen
Percentage of CPI items (%)
Perubahan tahunan (%), Sumbangan kepada inflasi keseluruhan (mata peratusan, mp)
100
6.0
80
4.0
60
2.0
40
0.0
-2.0
20
-4.0
0 S1 S2 S3 S4 S1 S2 S3 S4 S1
Mar 21
Apr 21
May 21
Jun 21
Jul 21
Aug 21
Sep 21
Oct 21
Nov 21
Dec 21
Jan 22
Feb 22
Mar 22
2020 2021 2022
Price decline
Barangan Unchanged price
lain yang harganya Bahan apiPrice
(mp)increase Inflasi teras* (mp)
ditadbir (mp)
* Based on the month-on-month inflation for 125 CPI items at the 4-digit level
Barangan yang harganya Inflasi keseluruhan (%) Inflasi teras* (%)
Source: Department of Statistics, Malaysia and Bank Negara Malaysia estimates
tidak menentu (mp)
* Pengiraan inflasi teras tidak termasuk barangan yang harganya tidak menentu dan barangan yang harganya ditadbir.
Sumber: Jabatan Perangkaan Malaysia dan anggaran Bank Negara Malaysia
R11 Perubahan Bulan ke Bulan dalam Harga Barangan IHP*
Peratusan barangan IHP (%)
18 Quarterly Bulletin | 1Q 2022
100
80Labour market conditions improved Retrenchments also declined during the quarter
further (10,433 persons; 4Q 2021: 10,878 persons). The
placement rate of employees into new jobs remained
The labour market continued to recover in sustained (41 per 100 people retrenched; 4Q 2021: 45).
the first quarter of 2022 as economic activity This suggests a normalisation in the pace of hiring
resumed. The unemployment rate declined amid lower retrenchments in the economy.
further to 4.1% (4Q 2021: 4.3%). This was driven
by a robust increase in employment (+134 Private sector wages also improved in the first
thousand persons), alongside a continued quarter of 2022, growing by 4.7% on a year-on-year
strong expansion of the labour force (+111 basis (4Q 2021: 2.5%). Wages in the manufacturing
thousand persons). As a result, the labour sector increased by 4.1% (4Q 2021: 4.7%), driven by
force participation rate increased to 69.0% of robust growth in the E&E, F&B and tobacco, and
the working-age population, close to the pre- wood, furniture and paper products subsectors.
pandemic level (4Q 2021: 68.7%; 4Q 2019: 69.1%). Meanwhile, wages in the services sector registered
Meanwhile, the population outside the labour stronger growth (5.0%; 4Q 2021: 1.2%), supported by
force declined to 7.29 million persons (4Q 2021: the wholesale and retail, transportation and storage,
7.36 million persons), indicating continued re- and information and communication subsectors.
entries of workers back into the labour force. On a quarter-on-quarter basis, private sector wages
The underemployment rate declined to 1.5% of continued on their improving trend, growing by 1.7%
the labour force (4Q 2021: 1.8%). (4Q 2021: 4.5%).
Quarterly Bulletin | 1Q 2022 19C12 Employment and Wage Growth
Year-on-year change (%)
4.7
2.4 2.5
2.2
2.2 1.2
1.8
0
-2.2 -0.9
1Q 21 2Q 21 3Q 21 4Q 21 1Q 22
Employment growth Private sector wage growth
Note: Private sector wage growth refers to wage growth of workers in the manufacturing and services sectors
Source: Department of Statistics, Malaysia
C13 Jobless Claims and Placement Rate
R12 Kadar Pertumbuhan Guna Tenaga dan Upah 50
45 44
Perubahan tahun ke40
tahun (%) 41
33 34
31 4.7
2.4 2.5
2.2
20,418 2.2 1.2
1.8
0
15,753
14,311
10,878 10,433
-2.2 -0.9
4,556
S1 21 S2 21 S3 21 S4 21 2,785 3,092
S1 22
Guna tenaga Upah sektor swasta
1Q 21 2Q 21 3Q 21 4Q 21 1Q 22 Jan-22 Feb-22 Mar-22
Nota: Kadar pertumbuhan gaji sektor swasta merujuk kepada kadar pertumbuhan gaji pekerja dalam sektor pembuatan dan perkhidmatan
Sumber: Jabatan Perangkaan Malaysia
Jobless claims (persons) Placement rate (%)
Note: Jobless claims refers to the number of people who applied for the Employment Insurance System (EIS) benefits following loss of
employment. The placement rate refers to the number of people placed in new jobs under the EIS for every 100 persons retrenched.
Source: Employment Insurance System, Social Security Organisation
R13 Tuntutan Pengangguran dan Kadar Penempatan Pekerjaan
20 Quarterly Bulletin | 1Q 2022
50
45 44
40 41C14 Gross Exports by Product and Market
Annual change (%), contribution to growth (ppt) Annual change (%), contribution to growth (ppt)
50 44.0 50 44.0
40 40
29.0 29.0
30 22.2 30 22.2
18.0 15.8 18.0 15.8
20 20
10 5.1 5.2 10 5.1 5.2
0 0
-10 -0.2 -10 -0.2
-20 -14.9 -20 -14.9
-30
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2020 2021 2022 2020 2021 2022
E&E Resource-based ASEAN China
Non-resource based Commodities USA EU
Others Gross exports (% yoy) Rest of the world Gross exports (% yoy)
Source: Department of Statistics, Malaysia
Robust growth in gross export and chemical products, palm oil-based
manufactured products as well as manufactures
Gross exports grew by 22.2% (4Q 2021: 29.0%), of metal. The growth of commodity exports
reflecting a broad-based expansion across products remained robust at 54.0% (4Q 2021: 45.0%),
supported mainly by CPO, LNG and crude oil
amid Eksport
R14continued Kasar
strength Mengikut
in external Keluaran
demand and dan Pasaran
higher commodity prices. Gross imports increased exports amid higher commodity prices.
by 25.2% (4Q 2021: 29.6%), driven by the growth in
Perubahan tahunan (%), sumbangan kepada Perubahan
Intermediatetahunan (%),recorded
imports sumbangan kepada
a strong
intermediate imports. The trade surplus3 narrowed
pertumbuhan (mata peratusan) pertumbuhan (mata peratusan)
to RM65.1 billion (4Q 2021: RM76.2 billion). growth of 29.2% (4Q 2021: 36.2%) in tandem
50 44.0 50 with the expansion in manufactured
44.0 exports.
40
Manufactured exports expanded by 17.8%29.0 (4Q 2021: 40 Consumption imports registered a higher growth
29.0
30
26.6%), supported mainly by stronger15.8 22.2
E&E exports 30 of 24.5% (4Q 2021: 15.5%) amid faster private 22.2
18.0 18.0 15.8
20 20 consumption growth. Capital import growth
(27.2%, 4Q 2021: 20.6%). Non-E&E exports registered
10 5.1 5.2 10 remained strong5.1 5.2
a double-digit growth of 10.5% (4Q 2021: 31.8%), at 17.9% (4Q 2021: 22.6%),
0 0 supported by investment activity.
largely attributable to the exports of petroleum
-10 -0.2 -10 -0.2
-20 -14.9 -20 -14.9
-30
S1 S2 S3 S4 S1 S2 S3 S4 S1 S1 S2 S3 S4 S1 S2 S3 S4 S1
2020 2021 2022 2020 2021 2022
E&E Berasaskan sumber ASEAN China
Bukan berasaskan sumber Komoditi AS Kesatuan Eropah (EU)
Lain-lain Eksport kasar Negara-negara lain Eksport kasar
(% tahunan) (% tahunan)
Sumber: Jabatan Perangkaan Malaysia
3
The goods and trade surpluses differ because goods for
processing, storage and distribution (with no change in
ownership) are excluded from the goods account. This
is as per the 6th Edition of the Balance of Payments
and International Investment Position Manual by the
International Monetary Fund (IMF).
Quarterly Bulletin | 1Q 2022 21C15 Current Account Balance
RM billion % of GDP
60 8
50
7
40
30 6
20 5
10
4
0
-10 3
-20 2
-30 0.7
1
-40
-50 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 0
2019 2020 2021 2022
Secondary income Primary income Services
Goods CA balance (rhs)
Source: Department of Statistics, Malaysia
Lower current account surplus The services account registered a broadly sustained
deficit (-RM15.0 billion; 4Q 2021: -RM15.4 billion) during
R15 Imbangan Akaun Semasa
The current account of the balance of payments the quarter.
narrowed to RM3.0 billion, or 0.7% of GDP during
RM bilion The primary income account recorded a deficit ofKDNK
% daripada
the quarter (4Q 2021: RM15.3 billion or 3.6% of
GDP), driven by the lower goods surplus. RM20.1 billion (4Q 2021: -RM19.6 billion), amid continued
60 8
investment income accrued to foreign investors in
50 Malaysia. The deficit in the secondary income widened
The goods surplus narrowed to RM40.5 billion (4Q 7
40 RM51.8 billion) as import growth outpaced
2021: to RM2.5 billion (4Q 2021: -RM1.4 billion), reflecting
that
30 of exports amid stronger domestic demand. mainly lower receipts from abroad. 6
20 5
10
4
0
-10 3
-20 2
-30 0.7
1
-40
-50 S1 S2 S3 S4 S1 S2 S3 S4 S1 S2 S3 S4 S1 0
2019 2020 2021 2022
Pendapatan sekunder Pendapatan primer Perkhidmatan
Barangan Imbangan akaun semasa (skala kanan)
22 Quarterly Bulletin
Sumber: Jabatan | 1QMalaysia
Perangkaan 2022C16 Direct Investment by Sector
RM billion
30
25
20
15
10
5
0
-5 FDI DIA
RM24.4 billion RM3.6 billion
Financial services Non-financial services Manufacturing
Mining Construction Agriculture
Note: For DIA, positive values refer to net outfows, while negative values refer to net inflows.
Figures may not sum due to rounding.
Source: Department of Statistics, Malaysia and Bank Negara Malaysia
C17 Portfolio Investment
Pelaburan
R16billion
RM Langsung Mengikut Sektor
40
RM bilion
30
30
20.1
20
25
10
20 2.6
0
15
-10 -3.7
10
-20 -10.1
5
-30
0
-40
-50
-5 FDI DIA
1Q 2QRM24.4 bilion
3Q 4Q 1Q 2Q RM3.6
3Q bilion 4Q 1Q
2020 2021 2022
Perkhidmatan kewangan Perkhidmatan bukan kewangan Perkilangan
Perlombongan Pembinaan Pertanian
Resident Non-resident Net portfolio investment
Nota: Bagi
Source: DIA, angkaofpositif
Department merujuk
Statistics, aliranand
Malaysia keluar
Bankbersih
Negaramanakala
Malaysiaangka negatif merujuk aliran masuk bersih.
Angka-angka tidak semestinya terjumlah disebabkan oleh penggenapan.
Sumber: Jabatan Perangkaan Malaysia dan Bank Negara Malaysia Quarterly Bulletin | 1Q 2022 23
R17 Pelaburan PortfolioFinancial account recorded higher net The portfolio investment account recorded a net
inflows outflow of RM10.1 billion (4Q 2021: +RM2.6 billion).
This was mainly on account of higher resident
The financial account recorded a significantly higher portfolio investments abroad (-RM13.9 billion;
net inflow of RM30.4 billion (4Q 2021: +RM0.7 billion). 4Q 2021: -RM6.1 billion), which continued to
This reflects sizeable direct and other investment be driven by institutional investors’ equity
net inflows, which more than offset the portfolio investment. Net non-resident (NR) portfolio
investment net outflows. investment inflows moderated (+RM3.8 billion;
4Q 2021: +RM8.7 billion), due to outflows in debt
The direct investment account registered larger net securities (-RM4.7 billion; 4Q2021: +RM5.9 billion).
inflows of RM20.8 billion (4Q 2021: +RM10.5 billion), Nevertheless, NR’s acquisition of domestic equity
underpinned by higher foreign direct investment securities improved to RM8.5 billion (4Q 2021:
(FDI) (+RM24.4 billion; 4Q 2021: +RM18.5 billion). +RM2.8 billion).
This was driven by higher equity injections (+RM5.4
billion; 4Q 2021: +RM3.5 billion) and debt inflows The other investment account turned around to
(+RM10 billion; 4Q 2021: +RM0.8 billion). The FDI was register a net inflow of RM19.6 billion (4Q 2021:
mainly channeled into the manufacturing sector -RM10.6 billion). This was due mainly to interbank
and financial services subsector. Direct investment borrowing by the domestic banking system and
abroad (DIA) moderated (-RM3.6 billion; 4Q 2021: the deposits placement domestically by NR
-RM7.9 billion) as the investments abroad, primarily entities. Net errors and omissions amounted to
in the manufacturing sector, were partially offset by -RM20.6 billion during the quarter, or -3.3% of
loan repayments from overseas affiliates. total trade.
24 Quarterly Bulletin | 1Q 2022C18 Changes in External Debt
Net change1: +RM29.2 billion
-2.7 Bonds and notes
Loans 0.0
Positive indicates net
borrowing or issuance
Intragroup loans 1.4 of debt securities
NR holdings of domestic debt 3.1
securities
Exchange rate 3.5
valuation effects
Others² 4.3
NR deposits 4.5
Interbank borrowings 15.1
-5 0 5 10 15 20
Change from 4Q 21 (RM billion)
1 Changes in individual debt instruments exclude exchange rate valuation effects
2 Comprises trade credits, IMF allocation of SDRs and other debt liabilities
Note: Figures may not add up due to rounding
Source: Ministry of Finance Malaysia, Department of Statistics, Malaysia and Bank Negara Malaysia
External debt remained manageable and ringgit deposits (15.9% share) in resident
banking institutions. These liabilities were not
R18
Malaysia’s Perubahan dalam Hutang
external debt amounted Luar
to RM1,111.2 Negeri
affected by fluctuations in the ringgit exchange
billion, or 69.6% of GDP as at end-March 2022 (end- rate.
Perubahan bersih1: +RM29.2 bilion
December 2021: RM1,082.1 billion or 70.0% of GDP).
The increase was mainly attributable to higher Foreign currency (FCY) external debt accounted
-2.7 Bon dan nota
interbank borrowings, which was partially offset by for the remaining RM729.9 billion, or 65.7% of total
net repayment of bonds and notes. external debt (end-December 2021: RM709.1 billion
Pinjaman 0.0
and 65.5%). Long-term bonds and notes
Positif issued
menunjukkan
Malaysia’s external
Pinjaman debtsyarikat
antara remained manageable, offshore stood at RM193.7 peminjaman
billion, bersih
accounting atau
for
berkaitan
1.4 terbitan sekuriti hutang
given its favourable currency and maturity profiles. 26.5% of total FCY-denominated external debt,
Pemegangan sekuriti
Ringgit-denominated hutangdebt amounted to
external issued largely by non-financial corporates. These
domestik oleh bukan 3.1
RM381.3 billion andpemastautin
accounted for 34.3% of total are subject to BNM’s prudential and hedging
external debt (end-December requirements. Intragroup loans, which are issued
Kesan penilaian kadar2021: RM373.0 billion
3.5
pertukaran
and 34.5% respectively). This was largely in the between related foreign entities and accounted
form of NR holdings of domestic debt securities for 14.5% of FCY-denominated external debt, were
Lain-lain² 4.3
(67.7% share of ringgit-denominated external debt) generally on flexible and concessionary terms.
Deposit bukan pemastautin 4.5
Peminjaman antara bank 15.1
-5 0 5 10 15 20
Perubahan dari S4 21 (RM bilion)
1 Perubahan setiap instrumen hutang tidak termasuk kesan penilaian kadar pertukaran Quarterly Bulletin | 1Q 2022 25
2 Terdiri daripada kredit perdagangan, peruntukan SDR IMF dan liabiliti hutang lain
Nota: Angka-angka tidak semestinya terjumlah disebabkan oleh penggenapan
Sumber: Kementerian Kewangan Malaysia, Jabatan Perangkaan Malaysia dan Bank Negara MalaysiaC19 Breakdown of FCY-Denominated External Debt (RM billion, % share)
Others debt liabilities
RM20.7 billion Bonds and notes
RM193.7 billion
IMF allocation of SDRs
RM28.1 billion
2.8% 26.5%
NR deposits 3.8%
RM44.3 billion
6.1%
Loans 9.8%
RM71.2 billion
10.3% 26.2%
Trade credits
RM74.9 billion Interbank borrowings
RM191.3 billion
14.5%
Intragroup loans
RM105.6 billion
Source: Ministry of Finance Malaysia, Department of Statistics, Malaysia and Bank Negara Malaysia
Interbank borrowings and FCY deposits in the the total, and are generally more stable, thereby
domestic banking system accounted for 32.3% limiting rollover risks faced by banks. Meanwhile,
of FCY-denominated external debt. The increase foreign-currency risk of banks, as measured
Butiran
in interbank Hutang
borrowings Luar can
and deposits Negeri
be dalam Denominasi
in terms of the Mata Wang
net open Asing
position of their FCY-
R19
attributed(RM bilion,
mainly % bahagian)
to domestic banking groups’ denominated exposures4, remained low at 4.3% of
(DBGs) centralised liquidity management practices banks’ total capital (end-December 2021: 4.0%).
Liabiliti hutang
as FCY sourced abroad was subsequently placed lain
RM20.7 Bon dan nota
Peruntukan
with foreign affiliates. This Hak
increase was alsobilion From a RM193.7
maturitybilion
perspective, 61.5% of total external
Pengeluaran
partly contributed Khas (SDR)
by small locallyIMF
incorporated debt has medium- to long-term tenure (end-
RM28.1 bilion
foreign banks sourcing funds from parents2.8%
abroad December
26.5% 2021: 62.5%), thereby limiting rollover
Deposit bukan 3.8%
to manage the FCY liquidity needs of domestic risks. Short-term external debt accounted for the
pemastautin
operations whileRM44.3
some DBGs
bilion channelled
6.1% FCY remaining 38.5% of external debt (end-December
interbank funding and deposits into domestic 2021: 37.5%). Of note, 43.6% of short-term external
lending and investment activities. Additionally, debt were in the form of intragroup borrowings
Pinjaman
interbank borrowings by banks 9.8%
RM71.2 bilionin the Labuan from parent banks or related corporates located
International Business and Financial Centre (LIBFC) abroad. About another 16.8% were accounted by
also increased to fund on-lending activities, trade credits, largely backed by export earnings
although this was largely offset by10.3%
higher and are self-liquidating. As at 29 April 2022,
26.2%
Kredit
repayments perdagangan
to head offices by some banks. Overall, international reserves stood at USD112.5 billion,
RM74.9 bilion Peminjaman antara bank
intragroup borrowings from related parties located sufficient to finance 5.7 RM191.3
months bilion
of imports of
14.5%
abroad continue to dominate total banking system goods and services5 and is 1.1 times the short-term
interbank borrowing, accounting for about 80% of external debt.
Pinjaman antara syarikat
Refers to the aggregated sum of the net short or long foreign
4
berkaitan currency positions for all currencies across banks.
RM105.6 bilion 5
For more information on this indicator, please refer to the
article on “Expansion of the Measure on Reserve Coverage
of Imports
Sumber: Kementerian Kewangan Malaysia, Jabatan Perangkaan Malaysia dan Bank – from Retained Imports to Imports of Goods and
Negara Malaysia
Services” in BNM’s Quarterly Bulletin for the Fourth Quarter of
2021 publication, page 27, which can be accessed at bnm.gov.my/
documents/20124/6118085/qb2021q4_en_box_imports.pdf
26 Quarterly Bulletin | 1Q 2022Monetary and Financial
Developments
Highlights
Bond yields increased due to external
• Domestic financial market developments
conditions tightened marginally in
1Q 2022 amid higher bond yields During the quarter, global financial market
while the equity market improved. sentiments were affected by developments
surrounding the conflict in Ukraine, a faster-
• The ringgit depreciated against than-expected monetary policy normalisation
the US dollar, in line with the path by the US Federal Reserve, and the
movement of regional currencies expectations for a further slowdown in China’s
amid a broad US dollar strength. growth amid the imposition of lockdowns due
to its high COVID-19 cases. The US Federal Open
• Nominal retail rates remained Market Committee (FOMC) raised its federal
stable while interbank rates funds rate by 25 basis points (bps) for the
moderated. first time since 2018 at its March meeting, and
by another 50 bps at its May meeting. It also
• Net financing remained supportive indicated a faster-than-expected tightening
of economic activity. path for the year to curb high inflationary
pressures amid a tight labour market.
C20 Trend in MGS Yields
%
4.2 10 year:
Mar '22 29.5 bps
5 year:
3.7 27.6 bps
3 year: Dec '21
37.7 bps
3.2
Sep '21
2.7
2.2
1.7
1 2 3 4 5 6 7 8 9 10
Years to maturity
Source: Bank Negara Malaysia
Quarterly Bulletin | 1Q 2021 27
R20 Trend Kadar Hasil Sekuriti Kerajaan Malaysia
%C21 Performance of Regional Currencies Against the US Dollar
CNY 0.4
1.5
THB 0.1
1.5
SGD -0.1
0.7
IDR -0.6
0.3
MYR -0.7
0.3
-1.7
KRW
-0.4
PHP -1.8
-0.1
TWD -3.0
0.3
-4 -3 -2 -1 0 1 2
quarter-on-quarter (%)
1Q 22 4Q 21
Source: Bank Negara Malaysia and Reuters
The FOMC also announced that it would begin Ringgit depreciated amid a broad US dollar
reducing its holdings of Treasuries and agency strength
mortgage-backed securities by USD47.5 billion
per month on 1 June and by USD95 billion per In the foreign exchange market, the ringgit depreciated
month Prestasi
R21 from Mata
September Wang
onwards. Serantau Berbanding Dolarthe
by 0.7% against ASUS dollar (4Q 2021: +0.3%), in line
with the movement of regional currencies amid the
Consequently, global financial conditions broad US dollar strength and global risk-off sentiment.
CNY 0.4
tightened, with varying intensity across Higher commodity prices continued to 1.5
cushion the
regions and countries, reflecting differences downward pressure
THB 0.1 on the ringgit from external factors.
in commodity exposures and trade linkages 1.5
toSGD
countries in conflict. For Malaysia, while Domestic
-0.1 equity market improved
domestic financial conditions tightened, 0.7
IDRthe 3-year, 5-year and 10-year MGS
with -0.6
The FBM KLCI rose0.3
amid an improved outlook for
yields increasing by 37.7, 27.6, and 29.5 basis corporate earnings due to higher commodity prices,
MYR respectively, these adjustments were -0.7
points, continued recovery0.3
in domestic economic activity and
relatively smaller compared to the increase
-1.7 6 the reopening of international borders. The FBM KLCI
KRW
in regional economies7. -0.4
was driven by positive performance in the plantation
-1.8
PHP (+21.4%), financial services (+7.8%) and construction
-0.1
services (+4.8%) sectors.
TWD -3.0
0.3
-4 -3 -2 -1 0 1 2
suku tahunan ke suku tahunan (%)
S1 22 S4 21
6
Average
Sumber: increase
Bank Negara ofMalaysia
10-year bond yields in regional countries is
dan Reuters
63.4 basis points.
7
Regional economies include Singapore, Indonesia, Thailand,
Philippines, and Korea.
28 Quarterly Bulletin | 1Q 2022C22 Performance of Regional Equity Markets
Singapore 9.1
1.2
Indonesia 7.4
4.7
Thailand 2.3
3.2
1.3
Malaysia 1.9
1.1
Philippines 2.4
Korea -7.4
-3.0
China -10.6
2.0
-15 -10 -5 0 5 10 15
quarter-on-quarter (%)
1Q 22 4Q 21
Source: Bloomberg
Nominal retail rates remained stable while Nevertheless, real FD rates9 decreased in the first
interbank rates moderated quarter, reflecting higher inflation expectations as
economic activity continued to normalise amid the
Nominal interest rates in the wholesale market environment of high input costs.
R22 Prestasi Pasaran Ekuiti Serantau
were lower in the first quarter of 2022, as the tighter
interbank market conditions observed towards Banking system liquidity remained
9.1
Singapura
the end of 2021 eased in January8. In particular, the sufficient
1.2 to facilitate financial
benchmark 3-month KLIBOR decreased by 8 basis intermediation
Indonesia 7.4
points to end the quarter at 1.97% (4Q 2021: 2.05%). 4.7
Banking system liquidity remained sufficient at both
Thailand 2.3
Retail lending rates remained stable during the the institutional
3.2 and system-wide levels to facilitate
quarter, with the weighted average base rate (BR) financial
1.3intermediation activity. The outstanding
Malaysia 1.9
liquidity placed with the Bank increased in the first
and the weighted average lending rate (ALR) on
outstanding loans remaining unchanged at 2.43% quarter1.1of 2022, partly reflecting higher liquidity
Filipina 2.4
injection operations during the period. At the
and 3.87% respectively.
institutional level, almost all banks maintained
Korea -7.4
-3.0
Nominal fixed deposit (FD) rates were also steady surplus liquidity positions with the Bank as at end-
during the quarter, across
-10.6 tenures of 1 to 12 months. March 2022.
China 2.0
-15 -10 -5 0 5 10 15
suku tahunan ke suku tahunan (%)
S1 22 S4 21
8
The higher interbank rates towards year-end was amid 9
Real fixed deposit rates are computed as the difference
Sumber:
banks’Bloomberg
preference for more stable funding, as banks built between nominal fixed deposit rates and inflation
up precautionary liquidity buffers in anticipation of deposit expectations. Inflation expectations is measured as the
withdrawals amid the expiry of existing tax exemption for average expected rate of inflation over the next 12 months
non-individual investors’ income in retail money market (based on data from Consensus Economics), approximated by
funds on 1 January 2022. an average of the forecasts for the current and next calendar
year weighted by their share in the forecasting horizon of 12
months ahead. This is comparable to the use of fixed-horizon
forecasts in the literature, including Dovern et al. (2012) and
Siklos (2013).
Quarterly Bulletin | 1Q 2022 29C23 Interest Rates (at end-period)
% %
5.0 0.0
4.0
3.0 -1.0
2.0
1.0 -2.0
1Q 2Q 3Q 4Q 1Q 1Q 2Q 3Q 4Q 1Q
2021 2022 2021 2022
Weighted average lending rate (ALR) 3M real fixed deposit rate
Overnight Policy Rate (OPR) 12M real fixed deposit rate
3M KLIBOR
Source: Bank Negara Malaysia, Bloomberg and Consensus Economics
C24
Outstanding Ringgit Liquidity Placed with Bank Negara Malaysia
(at end-period)
billionKadar
R23
RM Faedah (pada akhir tempoh)
200
% %
5.0 0.0
160
4.0
120
3.0 -1.0
80
2.0
40
1.0 -2.0
0 S1 S2 S3 S4 S1 S1 S2 S3 S4 S1
4Q 20
3Q 20
2Q 20
1Q 22
4Q 21
3Q 21
2Q 21
1Q 21
2021 2022
2021 2022
Kadar pinjaman purata (ALR) berwajaran Kadar deposit tetap (FD) benar 3 bulan
Others
Kadar Dasar Semalaman (OPR) Repos BNM Kadar
debt securities
deposit tetap (FD) benar 12 bulan
KLIBOR
Money 3market
bulan borrowings Statutory Reserve Requirement (SRR)
(excluding
Sumber: repos)
Bank Negara Malaysia, Bloomberg dan Consensus Economics
Source: Bank Negara Malaysia
R24
Mudah Tunai Ringgit Terkumpul di Bank Negara Malaysia
(pada akhir tempoh)
30 Quarterly Bulletin | 1Q 2022
RM bilion
200
160Net financing remained supportive of continued drawdowns on existing credit lines
economic activity by firms to manage their cash flow. Meanwhile,
outstanding investment-related13 loans registered
As at end-1Q 2022, net financing grew by 4.5% on an slightly higher growth (1.6%; 4Q 2021: 1.4%),
annual basis (4Q 2021: 4.7%). This slight moderation reflecting growth in the SME segment.
was mainly due to the lower growth in outstanding
corporate bonds10 (4.6%; 4Q 2021: 5.4%), while For households, outstanding loan growth
outstanding loan growth was sustained at 4.4%
11 increased (4.8%; 4Q 2021: 4.2%), with higher growth
(4Q 2021: 4.4%). recorded across most loan purposes. Growth in
loan disbursements remained robust at 12.7%
Outstanding business loan growth moderated to (4Q 2021: 9.5%; 2017-19 quarterly average: 5.8%) as
4.3% (4Q 2021: 4.8%), reflecting lower growth in 12 loan demand14 among households continued to
outstanding working capital loans (6.3%;
13 be forthcoming, particularly for the purchase of
4Q 2021: 7.4%) amid continued high loan repayment residential properties and passenger cars. Loan
growth. Working capital loan disbursements repayments during the quarter also registered
continued to record strong positive growth during higher growth (3.3%; 4Q 2021: -4.6%), as some
the quarter (21.2%; 4Q 2021: 32.8%; 2017-19 quarterly borrowers resumed loan repayments amid the
average: 4.7%), amid higher loan applications and gradual lapse in repayment assistance programmes.
C25 Contribution to Net Financing Growth
Contribution to growth (ppt)
6
4
2
0
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
2020 2021 2022
Outstanding banking system and DFI loans Outstanding corporate bonds*
Net financing growth (% yoy)
*Excludes issuances by Cagamas and non-residents
Source: Bank Negara Malaysia
R25 Sumbangan kepada Pertumbuhan Pembiayaan Bersih
10
Excludes issuances
Sumbangan kepadaby Cagamas and non-residents.
pertumbuhan (mata peratusan)
13
Classification of business loans by purpose is only available
11
Loans from the banking system and development financial for the banking system.
institutions (DFIs). 14
Indicated by loan applications to the banking system.
6
12
The lower growth partly reflected the high base effects in the
first quarter of 2021.
4
Quarterly Bulletin | 1Q 2022 31
2This page was intentionally left blank.
The Bank’s
Policy Considerations
Highlights
Monetary policy remains
• At the May 2022 meeting, the accommodative
Monetary Policy Committee
(MPC) decided to begin reducing After keeping the OPR at 1.75% in its January
the degree of monetary and March 2022 MPC meetings, the MPC decided
to begin reducing the degree of monetary
accommodation. This will be
accommodation by increasing the OPR by 25
done in a measured and gradual
basis points to 2.00% at the May 2022 MPC
manner, ensuring that monetary meeting.
policy remains accommodative to
support a sustainable economic At the latest May MPC meeting, the MPC assessed
growth in an environment of price that the sustained reopening of the global
stability. economy and the improvement in labour market
conditions continue to support the recovery of
• The Overnight Policy Rate (OPR) economic activity. These have partly cushioned
was increased by 25 basis points the impact of the military conflict in Ukraine
to a new level of 2.00%. and the reimposition of strict containment
measures in China. Inflationary pressures have
increased sharply due to a rise in commodity
prices, strained supply chains and strong
demand conditions, particularly in the US.
Consequently, several central banks are expected
to adjust their monetary policy settings at a
faster pace to reduce inflationary pressures.
The global growth outlook will continue to be
affected by the developments surrounding the
conflict in Ukraine, COVID-19, global supply
chain conditions, commodity price shocks, and
financial market volatility.
For the Malaysian economy, latest indicators
available show that growth is on a firmer footing,
driven by strengthening domestic demand amid
sustained export growth. The labour market is
further lifted by a lower unemployment rate,
higher labour participation and better income
prospects. The transition to endemicity on 1
April 2022 would strengthen economic activity,
Quarterly Bulletin | 1Q 2022 33in line with further easing of restrictions and the the economy. The inflation outlook continues to be
reopening of international borders. Investment subject to global commodity price developments,
activity and prospects have also improved, arising mainly from the ongoing military conflict
underpinned by the realisation of multi-year in Ukraine and prolonged supply-related
projects and positive growth outlook. However, disruptions, as well as domestic policy measures
risks to growth remain, which include a weaker- on administered prices.
than-expected global growth, further escalation
of geopolitical conflicts, worsening supply Over the course of the COVID-19 crisis, the OPR
chain disruptions, and adverse developments was reduced by a cumulative 125 basis points to
surrounding COVID-19. a historic low of 1.75% to provide support to the
economy. The unprecedented conditions that
Headline inflation is projected to average between necessitated such actions have since abated. With
2.2% – 3.2% in 2022. Given the improvement in the domestic growth on a firmer footing, the MPC
economic activity amid lingering cost pressures, decided to begin reducing the degree of monetary
underlying inflation, as measured by core inflation, accommodation. This will be done in a measured
is expected to trend higher to average between and gradual manner, ensuring that monetary
2.0% – 3.0% in 2022. Nevertheless, upward pressure policy remains accommodative to support a
on prices would be partly contained by existing sustainable economic growth in an environment of
price controls and the continued spare capacity in price stability.
34 Quarterly Bulletin | 1Q 2022Other policy highlights in the first quarter of 2022
Policy highlight Salient details
• Issued on 25 March 2022, the PD sets out the benchmark design,
methodology and governance framework to ensure the integrity of
the MYOR-i, which replaces the Kuala Lumpur Islamic Reference Rate
(KLIRR).
• MYOR-i, the first transaction-based Islamic benchmark rate in the
world, is developed in accordance with the Principles for Financial
Benchmarks and has been confirmed by the Bank’s Shariah Advisory
Council as Shariah-compliant.
o MYOR-i is administered and calculated by the Bank. It is a volume-
Policy Document (PD) on weighted average rate of return on Shariah-compliant unsecured
Malaysia Islamic Overnight Rate overnight Ringgit interbank transactions. This includes the Bank’s
(MYOR-i) Islamic overnight monetary operations.
o MYOR-i is currently based on the Commodity Murabahah
instrument. New Shariah-compliant instruments may be included
in the future.
• By providing transparency for market players to negotiate and
standardise financial contracts, the MYOR-i will support Islamic
financial product innovation and promote efficient pricing across all
financial instruments. This in turn will help to deepen the onshore
Islamic financial market and enhance its role in financing real
economic activities in Malaysia.
• Issued on 4 January 2022, the DP articulates the proposed licensing
framework for DITOs. Entry of DITOs is expected to address critical
protection gaps in Malaysia by serving the unserved or underserved
market, through competitive product offerings and enhanced
Discussion Paper (DP) on customer experience, through digital or electronic means.
Licensing Framework for Digital • The DP outlines the proposed entry requirements such as key
Insurers and Takaful Operators assessment criteria for the licensing of DITOs (including challenge
(DITO) statements to guide DITOs in demonstrating value propositions) as
well as applicable regulatory requirements during the foundational
phase of a DITO’s operations. The DP also invites feedback on other
types of business models that may be considered in the proposed
licensing framework for DITOs.
• Issued on 11 March 2022, the DP outlines the Bank’s policy perspective
in respect of the broader application of mutual assistance (ta`awun)
by licensed takaful and professional retakaful operators (TOs) in the
provision of family and general takaful business. This will enable
TOs to harness the full potential of ta`awun, with the aim to enhance
broader socioeconomic resilience and meet the needs of unserved/
DP on Broader Application of
underserved segments.
Ta’awun in Takaful
• The DP outlines the:
o proposed scope of the broader application of ta’awun in takaful
business;
o proposed Shariah guiding principles and parameters;
o scope of proposed reviews of existing regulatory requirements; and
o potential operational challenges.
Quarterly Bulletin | 1Q 2022 35This page was intentionally left blank.
Macroeconomic
Outlook
Highlights
Slower global growth for 2022, weighed
• Global growth is expected to by ongoing geopolitical tensions
moderate in 2022.
In 2022, global growth is projected to continue
• The Malaysian economy is
its recovery path, supported by the sustained
expected to improve further in reopening of the economy and stronger labour
2022. markets. Nevertheless, the military conflict in
Ukraine is expected to weigh on the pace of
• Headline inflation to average
the global recovery. Disruptions in commodity
between 2.2% and 3.2% in 2022.
production and trade have led to higher
commodity prices and re-escalated ongoing
supply chain disruptions. This is expected
to lead to higher inflation, exacerbating cost
pressures on firms while weighing on consumer
sentiments and spending.
Furthermore, the ongoing resurgence
of COVID-19 in China, together with its
implementation of strict COVID-19 containment
measures, will constrain economic activity in
the near term. Nevertheless, this is expected
to be partially offset by policy support and a
rebound in activity once the economy reopens.
The growth outlook will also be weighed by
tighter global financial conditions, especially in
EMEs, amid monetary policy tightening in major
economies to address rising inflation. The pace
of monetary policy tightening is expected to
be faster, particularly in AEs, reflecting the
higher risks to inflation. The inflationary risks
stem from rising energy prices and concerns
over the possibility of unanchored inflation
expectations, particularly in a tight labour
market environment.
The balance of risks remains tilted to the
downside. A further escalation of geopolitical
tensions, especially between Russia and
the West, could lead to further economic
disruptions and higher prices. In addition,
Quarterly Bulletin | 1Q 2022 37COVID-19 remains a source of risks, especially if However, the risks to Malaysia’s growth prospects
there is an emergence of new variants of concern remain. These include a weaker-than-expected
that render existing vaccines ineffective. There global growth, further escalation of geopolitical
is also a risk that high inflation remains more conflicts, worsening supply chain disruptions,
persistent than expected, which could lead to adverse developments surrounding COVID-19 and
faster-than-expected monetary policy normalisation heightened financial market volatility.
in AEs. This may result in higher risk of currency
and banking crisis in vulnerable EMEs. In contrast, Headline inflation to average between
upside risks to growth could come from the faster- 2.2% and 3.2% in 2022
than-expected rollout of boosters and anti-viral
treatments, resulting in reduced severity and For 2022, in an environment of high input costs
duration of COVID-19 related lockdowns, as well as and improving demand, headline inflation is
additional policy support. projected to average between 2.2% and 3.2%.
Underlying inflation, as measured by core
The Malaysian economy is expected to inflation, is also expected to trend higher during
improve further in 2022 the year, averaging between 2.0% to 3.0%.
Several key factors are expected to partly contain
The Malaysian economy is expected to improve upward pressure on prices, namely the existing
further in 2022, underpinned by stronger domestic price control measures and the continued spare
demand, continued expansion in external demand capacity in the economy. Nonetheless, the
and improving labour market. Going forward, inflation outlook remains subject to commodity
growth would continue to benefit from the easing price developments, arising mainly from the
of restrictions and reopening of international military conflict in Ukraine and prolonged
borders. Furthermore, investment activities are also supply-related disruptions. The outlook is also
projected to improve, supported by the realisation contingent on domestic policy measures on
of multi-year projects. administered prices.
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