Net Financing Growth Supports Malaysia Economy

Malaysia’s net financing growth continued to support economic activity but moderated to 6.8% in March this year from 7.4% in February.

Bank Negara Malaysia said the growth of net outstanding issuances of corporate bonds moderated to 14.2% compared with 16.4% in February, while the banking system’s outstanding loans growth was sustained at 4.4%, Bernama reported.

“Business loan growth remained steady at 1.9% in March compared with 2% in February. In particular, the growth of loans to small and medium enterprises increased to 5.8% from 5.4% in the preceding month. Household loan growth was stable at 5.6%,” BNM said in its March 2018 monthly highlights.

The central bank said domestic financial markets were affected by volatile global conditions. In March, BNM said the domestic financial markets recorded positive performance amid easing concerns over uncertainties surrounding the US monetary policy and US-China trade tensions.

“Slower wage growth in the US and the unchanged projected path of monetary policy normalization by the Federal Reserve reduced uncertainty over the pace of interest rate increases in 2018,” it said.

On the ringgit, BNM said it appreciated by 1.6% and the five-year Malaysian Government Securities yield declined by 8.1 basis points following non-resident inflows.

“Foreign exchange swap volume increased by $17.9 billion to $120.9 billion due mainly to an increase in interbank swap activity, corresponding to quarter-end increase in dollar demand by importers and corporates.

“This led to one-month implied dollar funding cost via FX swaps increasing by 2.0 basis points to 2.31% as of end-March (end-February: 2.29%) and the average one-month US dollar/ringgit swap points correspondingly declining three points to 40 points,” it said.

The central bank also said the banking system’s asset quality remained sound where the level of impaired loans marginally increased to 0.99% of total loans net of individual impairment provisions (February: 0.94%).

Since January 2018, it said the provisioning levels of banks increased as they refined their methodologies in estimating impairment provisions with the implementation of the Malaysian Financial Reporting Standards 9. “The total provisions to total loans ratio sustained at 1.5%,” it added.

In another development, BNM said the headline inflation for March remained low at 1.3%. “The transport category registered lower inflation of -1.5% due to the decline in average domestic fuel prices during the month.

“Inflation in the food and non-alcoholic beverages category also moderated further to 2.8% in March (February: 3%), reflecting mainly the improved supply of fresh seafood,” the central bank said.