Malaysia: Economic Outlook 2023 (Budget 2023)

Transcription

1. BUDGET
3. Economic Outlook 2023 T .PAGE n PREFACE 2023.indd 1 29/09/2022 12:31 PM
4. Copyright Reserved All rights reserved . No part of this publication may be reproduced, stored in retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording and/or otherwise without prior permission of: Under Secretary, Fiscal and Economics Division, Ministry of Finance Malaysia, Level 9, Centre Block, Kompleks Kementerian Kewangan, No. 5, Persiaran Perdana, Precint 2, Federal Government Administrative Centre, 62592 Putrajaya. Fax :03-88823881 E-mail:fed@treasury.gov.my The Economic Outlook is an annual publication released on the same day as the Annual Budget. The 2023 edition is released on 7 October 2022. Sale copies are obtainable from: www.pnmb2u.com and MPH Book Store. This publication is also available for download at: www.mof.gov.my PRINTED BY PERCETAKAN NASIONAL MALAYSIA BERHAD KUALA LUMPUR, 2022 www.printnasional.com.my email: cservice@printnasional.com.my Tel.: 03-92366895 Fax: 03-92224773 T.PAGE n PREFACE 2023.indd 2 29/09/2022 12:31 PM
5. FOREWORD PRIME MINISTER MALAYSIA With inoculation rates reaching intended levels and the serious effects of COVID-19 largely contained , more economic sectors and social activities were allowed to resume in the latter half of 2021, paving the way for solid growth in 2022. However, as we enter a new and promising year, the country was hit by major floods in December 2021 and January this year. The floods had a devastating impact, claiming many lives and causing billions of ringgit in property damage. Despite the losses, the disaster had strengthened our resolve to deal with adversity while teaching us the true meaning of unity, tolerance, and caring for one another, as demonstrated by the heroic and selfless acts of #KeluargaMalaysia from all races and walks of life. As a compassionate Government, we have provided various forms of assistance to the rakyat and small businesses impacted by the floods. Moratoriums on bank loans, discounts on vehicle repairs, grants for micro and informal businesses, direct cash transfers, and vouchers for the purchase of new furniture and electrical appliances are among the benefits. Furthermore, various ministries and Government agencies have adopted the affected districts and conducted voluntary cleaning and repair work. The floods served as a stark reminder to all parties that a balance must be struck between development and the need to protect and conserve the environment. As a result, the Ministry of Finance’s establishment of the MySDG Foundation in January was timely and responded to calls for a greater emphasis on sustainable development. The Foundation’s mission includes, among other things, managing a trust fund with the United Nations (UN) and promoting sustainable development in line with the 2030 Agenda. The conflict in Eastern Europe erupted while we were concentrating our efforts on rebuilding the country. The conflict is exacerbating existing issues such as supply chain disruptions and soaring commodity prices, raising concerns about global growth prospects. As a result, the IMF and World Bank reduced their global economic forecasts for 2022 to 3.2% and 2.9%, respectively. ECONOMIC OUTLOOK T.PAGE n PREFACE 2023.indd 3 2023 iii 29/09/2022 12:31 PM
6. As an open economy , Malaysia’s growth prospects have been put at risk by the volatile external environment. Nonetheless, the country’s diverse economic structure, sound fundamentals, and timely policy interventions helped the country achieve strong growth in the first half of 2022. Furthermore, the transition towards endemicity and the reopening of our international borders on 1 April are among the factors that will keep the growth momentum going throughout the year. As a result, Malaysia’s GDP forecast for this year has been revised upwards to 6.5% – 7%. Despite various external challenges, the Government remains committed to the welfare of the rakyat. We are aware of the difficulties faced by #KeluargaMalaysia as a result of rising commodity prices, which is a global phenomenon. Nonetheless, the Government makes every effort to assist the rakyat, particularly the B40. In this regard, we increased the Bantuan Keluarga Malaysia cash assistance while continuing to implement price ceilings and provide discounts on selected essential goods and services, most notably through subsidies on certain food items, cooking gas, fuel, and electricity to offset the effects of rising living costs. Subsidy and social assistance expenses are expected to be RM78 billion this year, the highest in our country’s history. Furthermore, in June, an interministerial special task force, Pasukan Khas Jihad Tangani Inflasi, was formed to ensure that efforts to address rising prices are more holistic and sustainable. Looking ahead, we are concerned about the impact of persistent external uncertainties on our economy. As a responsible Government, we are also aware of the need for reforms to make Malaysia a better and more resilient country. We are here to serve the whole of #KeluargaMalaysia and will honour the rakyat’s hopes and dreams for a better, more prosperous future for our country. DATO’ SRI ISMAIL SABRI BIN YAAKOB Prime Minister of Malaysia 7 October 2022 iv T.PAGE n PREFACE 2023.indd 4 economic outlook 2023 29/09/2022 12:31 PM
7. PREFACE MINISTER OF FINANCE MALAYSIA Malaysia ’s economy has recovered from the COVID-19 pandemic thanks to the collaborative whole-of-nation effort by the Government, private sector, and civil society. As the country entered the recovery phase, the economy grew by 3.1% in 2021, supported by the return of domestic demand and the implementation of various assistance and economic stimulus packages. Measures in the expansionary Budget 2022, the reopening of all economic sectors, strong domestic demand, and robust export performance, bolstered the recovery momentum, resulting in an exceptional first-half GDP growth rate of 6.9% in 2022. The country’s labour market has also improved, with unemployment rate of 3.7% in July 2022, down from a peak of 5.3% in May 2020. On the supply side, as the country entered the endemic phase and international borders reopened on 1 April 2022, the services sector has continued to recover strongly, owing to a rebound in tourist arrivals and improved trade and business activities. The manufacturing sector grew steadily from strong demand, particularly for semiconductor products. On the demand side, private consumption remained the key driver of growth, supported by pent-up domestic demand, improved consumer confidence, and initiatives such as the Bantuan Keluarga Malaysia (BKM) cash assistance programme. Overall, the strong GDP performance in the first half of 2022, combined with ongoing policy support and measures, provides a solid foundation for Malaysia to achieve its GDP growth forecast of 6.5% to 7% in 2022. In line with Budget 2022’s focus areas, several key initiatives have recorded good achievements. These include the RM4.8 billion JaminKerja Keluarga Malaysia, with a target of creating 600,000 job opportunities, and the RM40 billion SemarakNiaga Keluarga Malaysia, a comprehensive financing package to support businesses’ recovery and capacity building efforts. As at end-July 2022, more than 264,000 of our fellow rakyat have found employment, while close to 60,000 businesses have been supported through SemarakNiaga measures. As for supporting the rakyat, the BKM direct cash assistance programme has benefited 8.7 million recipients, while 1.7 million youths have received RM150 e-wallet credit through the e-Pemula programme. ECONOMIC OUTLOOK T.PAGE n PREFACE 2023.indd 5 2023 v 29/09/2022 12:31 PM
8. The Ministry of Finance has crafted responsive , responsible and reformist policies that have facilitated the economic recovery, built on the momentum of growth in 2022, while also laying the foundations for a more sustainable development. Nonetheless, the Government is highly aware of current global developments that may impede the country’s economic recovery. The ongoing geopolitical tensions in Eastern Europe have resulted in economic pressures on multiple fronts, most notably an increase in global inflation as commodity prices remain high. To cushion the domestic impact of rising prices, the Government decisively imposed price controls and allocated higher-thanbudgeted subsidies for essential goods and services, while also improving the BKM to help the B40 address the rising cost of living. This is a testament to the Government’s effort to ensure the well-being of the rakyat is protected. Other downside risks include a moderation in China’s growth and tighter global monetary policy. In line with the World Bank and the IMF’s downward revision of global growth, all these developments will also impact Malaysia’s economic growth prospects, with our country’s GDP growth projected to moderate between 4% and 5% in 2023. Given the more challenging operating landscape, Budget 2023 will also prioritise reform initiatives to improve the well-being of the rakyat, strengthen business resilience, promote economic prosperity and enhance public service delivery in order to sustain the economic growth momentum. Budget 2023 is based on three key focus areas: strengthening the momentum of economic recovery, building economic resilience and catalysing comprehensive reforms. Moving forward, the Government will continue to monitor global developments and develop appropriate policies to address any external shocks, be responsive towards protecting the rakyat’s livelihoods and well-being, and ensure business recovery. The nation’s digital transformation agenda will also be fast-tracked, including measures such as the rapid adoption of digital technologies and closing the urban-rural digital divide. Structural reforms will also continue to be prioritised to enhance the country’s economic potential and talent competitiveness. As we build our socioeconomic resilience and develop sustainably, we are also planting the necessary seeds for the long-term prosperity of our children in #KeluargaMalaysia. Insya-Allah. TENGKU DATUK SERI UTAMA ZAFRUL TENGKU ABDUL AZIZ Minister of Finance 7 October 2022 vi T.PAGE n PREFACE 2023.indd 6 economic outlook 2023 29/09/2022 12:31 PM
9. TH E E CO N O M Y 2 0 2 3 in constant 2015 prices (share to total in %) Public Consumption 7.9% Exports of Services 4.4% Public Investment1 2.7% Private Consumption 37.6% Private Investment1 9.5% DEMAND RM2,503,498 MILLION Exports of Goods 37.9% Agriculture 4.1% Mining 3.9% Construction 2.2% Imports of Services 6.3% Manufacturing 15% Includes change in stocks Source: Ministry of Finance, Malaysia 1 Services 36.3% SUPPLY RM2,503,498 MILLION Imports of Goods 32.2% ECONOMIC OUTLOOK T.PAGE n PREFACE 2023.indd 7 2023 vii 29/09/2022 12:31 PM
10. T .PAGE n PREFACE 2023.indd 8 29/09/2022 12:31 PM
11. MALAYSIA : KEY DATA AND FORECAST AREA (square kilometres) Malaysia Peninsular Malaysia1 Sarawak Sabah2 330,548 132,104 124,450 73,994 POPULATION (million) 202110 202211 202312 32.6 32.7 32.8 RM million DOMESTIC PRODUCTION Gross Domestic Product (constant 2015 prices) change (%) 1,386,738 Agriculture Mining and quarrying Manufacturing Construction Services Import duties RM million change (%) RM million change (%) 6.5 - 7.0 1,539,026 4.0 - 5.0 99,036 0.1 101,266 2.3 3.1 1,476,919 98,898 -0.2 93,150 0.3 95,087 2.1 96,165 1.1 337,219 9.5 358,615 6.3 372,458 3.9 50,802 -5.2 51,948 2.3 54,407 4.7 791,068 1.9 856,329 8.2 898,808 5.0 15,602 1.7 15,904 1.9 15,920 0.1 9.0 1,712,348 10.8 - 11.3 1,815,445 5.5 - 6.5 Gross Domestic Product (current prices) 1,545,372 Final consumption expenditure: Public 196,472 6.0 199,122 1.3 203,961 2.4 894,881 3.7 998,954 11.6 1,089,211 9.0 3 66,997 -10.0 69,652 4.0 72,220 3.7 Private 231,149 4.0 241,443 4.5 253,403 5.0 – 67,922 Private Gross fixed capital formation: Public Changes in inventories and valuables 46,028 – 33,009 – Exports of goods and services 1,063,817 21.8 1,264,686 18.9 1,322,984 4.6 Imports of goods and services 953,972 21.8 1,129,431 18.4 1,159,342 2.6 Gross National Income (constant 2015 prices) 1,367,707 2.7 1,446,321 5.7 1,508,577 4.3 Gross National Income (current prices) 1,503,821 8.2 1,642,844 9.2 1,745,075 6.2 Gross National Savings (current prices) 402,874 19.0 429,857 6.7 431,673 0.4 Per Capita Income (current prices, RM) 46,051 8.0 50,314 9.3 53,286 NATIONAL INCOME AND EXPENDITURE FEDERAL GOVERNMENT FINANCE 2021 2022 2023 13 5.9 14 Revenue 233,752 3.9 285,217 22.0 272,570 -4.4 Operating expenditure 231,516 3.1 284,700 23.0 272,340 -4.3 Current balance 2,236 517 230 Development expenditure (net) 63,267 26.3 71,200 12.5 94,300 32.4 COVID-19 Fund4 37,711 -0.8 28,800 -23.6 5,000 -82.6 Overall balance -98,742 -99,483 -99,070 -6.4 -5.8 -5.5 % GDP Domestic borrowings (net) 98,584 99,994 – Offshore borrowings (net) 1,734 -320 – -1,576 -191 – Change in assets5 economic outlook 2023 ix
12. MALAYSIA : KEY DATA AND FORECAST (cont’d) 2021 RM million Federal Government Debt6 2022 % GDP 2023 RM million % GDP RM million % GDP 979,814 63.4 1,044,960 61.0 – – 950,084 61.5 1,015,605 59.3 – – 28,000 1.8 34,500 2.0 – – Malaysian Government Investment Issues 423,266 27.4 444,966 26.0 – – Malaysian Government Securities 480,718 31.1 518,039 30.2 – – 18,100 1.2 18,100 1.1 – – 29,730 1.9 29,355 1.7 – – Market loans 25,147 1.6 25,383 1.5 – – Project loans 4,583 0.3 3,972 0.2 – Domestic debt Treasury bills Government Housing Sukuk Offshore borrowings 2021 2022 10 – 2023 11 12 BALANCE OF PAYMENTS (NET) RM million RM million RM million Balance on current account 58,700 50,841 73,040 Goods 170,573 195,001 216,243 Services -60,728 -59,746 -52,601 Primary income -41,551 -69,504 -70,370 -9,594 -14,911 -20,231 Secondary income Balance on capital and financial accounts Net errors and omissions Overall balance 12,451 – – -25,465 – – 45,686 – – RM million EXTERNAL TRADE Gross exports of which: change (%) RM million change (%) RM million change (%) 1,241,022 26.1 1,456,448 17.4 1,488,859 2.2 1,068,431 25.8 1,228,384 15.0 1,256,892 2.3 Agriculture 98,093 36.8 123,777 26.2 125,901 1.7 Mining 69,757 19.4 97,496 39.8 99,054 1.6 987,344 23.3 1,178,309 19.3 1,180,533 0.2 Intermediate goods 545,801 27.2 658,656 20.7 660,292 0.2 Capital goods 103,823 14.4 113,028 8.9 113,349 0.3 83,893 13.2 98,168 17.0 98,333 0.2 2,228,366 24.9 2,634,757 18.2 2,669,393 1.3 38.4 278,139 9.6 308,326 Manufactured Gross imports of which: Consumption goods Total trade Trade balance 253,678 Index PRICES Consumer Price Index (2010 = 100) 123.1 2.5 Producer Price Index: Local Production (2010 = 100) 112.1 9.5 Labour force Unemployment7 economic outlook 2. Key Data and Forecast 2023.indd 10 Index change (%) – 121.5 15 Thousands change Thousands (%) LABOUR x change (%) 15,797.2 0.8 733.0 (4.6) 15,933.1 3.311 10.2 15 change (%) 0.9 629.3 (3.8 - 4.0) Index – – 10.9 change (%) 2.8 - 3.312 – Thousands change (%) 16,140.2 1.3 576.3 (3.5 - 3.7) 2023 29/09/2022 12:40 PM
13. MALAYSIA : KEY DATA AND FORECAST (cont’d) 2021 End-July FINANCIAL AND CAPITAL MARKETS RM million 2022 End-July change (%) RM million change (%) Money supply M1 550,825 10.8 602,157 9.3 M2 2,100,135 3.8 2,214,012 5.4 M3 2,106,362 3.8 2,222,147 5.5 Fund8 2,149,780 4.0 2,233,562 3.9 Loans 1,739,730 2.6 1,835,858 5.5 Banking system (including Islamic banks) Loan-to-fund ratio (%) 80.9 Interest rates (average rates, %) 82.2 July July 1.89 2.70 Fixed deposits: 3-month 1.56 2.01 12-month 3-month interbank Commercial banks 1.70 2.20 Savings deposit 0.58 0.69 Weighted base rate (BR) 2.43 2.62 Base lending rate (BLR) 5.49 5.97 Treasury bills (3-month) Malaysian Government Securities 1-year 5-year Movement of ringgit – – 9 1.77 3.00 2.62 3.72 End-August End-August RM per unit of change16 (%) RM per unit of change16 (%) Special Drawing Rights (SDR) 5.9204 -0.4 5.8386 1.4 US dollar 4.1690 0.1 4.4845 -7.0 Euro 4.9213 0.6 4.4834 9.8 100 Japanese yen 3.7981 2.8 3.2359 17.4 Bursa Malaysia FBM KLCI 1,601.38 1,512.05 Market capitalisation (RM billion) 1,832.10 1,706.31 Includes the Federal Territory of Kuala Lumpur and Federal Territory of Putrajaya Includes the Federal Territory of Labuan Includes investment of public corporations 4 A specific trust fund established under the Temporary Measures for Government Financing (Coronavirus Disease 2019 (COVID-19)) Act 2020 to finance economic stimulus packages and recovery plan 5 (+) indicates drawdown of assets; (-) indicates accumulation of assets 6 For 2022, data is at end-June 2022 7 Figures in parentheses show the unemployment rate 8 Funds comprise deposits (exclude deposits accepted from banking institutions and Bank Negara Malaysia) and all debt instruments issued (including subordinated debt, debt certificates/sukuk, commercial papers and structured notes) 9 Market indicative yield 10 Preliminary 11 Estimate 12 Forecast 13 Revised estimate 14 Budget estimate, excluding Budget 2023 measures 15 January to July 2022 16 Annual rate of appreciation (+) or depreciation (-) of the ringgit Note: Total may not add up due to rounding 1 2 3 economic outlook 2023 xi
14. CONTENTS FOREWORD iii PREFACE v ACRONYMS AND ABBREVIATIONS xvii CHAPTER 1 ECONOMIC MANAGEMENT AND PROSPECTS Leveraging Economic Recovery 3 Enhancing Environmental , Social and Governance 4 Information Box 1.1 – Towards Malaysia's Net-Zero GHG Emissions 2050 5 Outlook 6 Updates on the Budget 2022 7 Economic Management 10 Feature Article 1.1 – The Golden Years: Facing the Challenges of an Ageing Nation 10 Feature Article 1.2 – The Need for Escaping the Wage Curse 19 Feature Article 1.3 – Prioritising Government Efficiency in Boosting Malaysia’s Global Competitiveness 32 Feature Article 1.4 – Climate Risks and Impacts on the Economy 40 Strategic Initiatives – Budget 2023 47 Conclusion 49 References 50 CHAPTER 2 MACROECONOMIC OUTLOOK Overview 57 Economy in 2022 57 Global Economy 57 Feature Article 2.1 – Spillover Effects of Russia-Ukraine Conflict on Malaysia xii economic outlook 2023 59
15. Domestic Economy 62 Feature Article 2 .2 – Strengthening Construction Sector towards a Sustainable Economic Growth 69 Feature Article 2.3 – Malaysia’s Trade Performance: Pre-, During and Post-Pandemic (2017 – June 2022) 84 Feature Article 2.4 – Food Inflation in Malaysia 92 Outlook for 2023 99 Global Outlook 99 Domestic Outlook 100 Conclusion 106 References 107 CHAPTER 3 MONETARY AND FINANCIAL DEVELOPMENTS Overview 115 Monetary Developments 115 Performance of Ringgit 116 Banking Sector Performance 117 Capital Market Performance 120 Information Box 3.1 – Key Capital Market Measures 125 Islamic Banking and Capital Market Performance 126 Conclusion 128 References 129 STATISTICAL TABLES 131 ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA 181 economic outlook 2023 xiii
16. figures The Economy 2023 Figure 2 .1. Global Real Gross Domestic Product, Trade and Inflation Growth 58 Figure 2.2. Selected Indicators for the Services Sector 64 Figure 2.3. Output of Manufacturing Sector 65 Figure 2.4. Supply Indicators of Residential Property 68 Figure 2.5. House Price Index 68 Figure 2.6. Supply Indicators of Non-Residential Property 68 Figure 2.7. Savings-Investment Gap 78 Figure 2.8. Top 10 Trading Partners 81 Figure 2.9. International Reserves 84 Figure 2.10. Consumer Price Index and Producer Price Index Trends 92 Figure 3.1. Monetary Aggregates 116 Figure 3.2. Performance of Ringgit Against Selected Currencies 117 Figure 3.3. Banking System: Impaired Loans and Net Impaired Loans Ratio 118 Figure 3.4. Malaysian Government Securities Indicative Yields 122 Figure 3.5. Share of Foreign Holdings in Total Malaysian Government Securities Outstanding 122 Figure 3.6. 5-Year Corporate Bond Yields 122 Figure 3.7. Performance of Bursa Malaysia 123 Figure 3.8. Performance of Selected Stock Markets 123 Figure 3.9. Global Sukuk Outstanding by Country 127 xiv economic outlook 2023
17. tables Table 2 .1. Gross Domestic Product by Sector 62 Table 2.2. Services Sector Performance 62 Table 2.3. Manufacturing Indices by Export- and Domestic-Oriented Industries 66 Table 2.4. Value-Added in the Agriculture Sector 67 Table 2.5. Gross Domestic Product by Aggregate Demand 76 Table 2.6. Gross Domestic Product by Income Components 79 Table 2.7. Gross Domestic Product by Income in Selected Countries 79 Table 2.8. External Trade 80 Table 2.9. Gross Exports 80 Table 2.10. Exports of Manufactured Goods 81 Table 2.11. Gross Imports by End Use 82 Table 2.12. Current Account of the Balance of Payments 83 Table 2.13. Consumer Price Index 91 Table 2.14. Producer Price Index 91 Table 2.15. Labour Market Indicators 98 Table 2.16. Employed Persons by Sector 99 Table 3.1. Factors Affecting M3 116 Table 3.2. Banking System: Loan Indicators 119 Table 3.3. Banking System: Loans Outstanding by Sector 119 economic outlook 2023 xv
18. Table 3 .4. Funds Raised in the Capital Market 121 Table 3.5. New Issuance of Corporate Bonds by Sector 121 Table 3.6. Bursa Malaysia: Selected Indicators 124 Table 3.7. Islamic Banking: Key Indicators 126 xvi economic outlook 2023
19. acronyms and abbreviations Acronyms and Abbreviations 12MP Twelfth Malaysia Plan , 2021-2025 4IR Fourth Industrial Revolution 5G fifth-generation cellular network ADB Asian Development Bank AEV alternative-energy vehicles AFC Asian Financial Crisis AI artificial intelligence AiF Academy in Factory AKPK Credit Counselling and Debt Management Agency ALR Average lending rate AP Approved Permit ASEAN Association of Southeast Asian Nations ASEAN – 5 Association Southeast Asian Nations – 5 ASM Akademi Sains Malaysia B40 bottom 40% of household income group B50 BWE Bantuan Warga Emas CAD Canadian Dollar CAGR Compounded Annual Growth Rate CBAM Carbon Border Adjustment Mechanism CCPT Climate Change and PrincipleBased Taxonomy CE compensation of employees CEO Nudging Chief Executive Officer CIDB Construction Industry Development Board COVID-19 Coronavirus Disease 2019 CPI Consumer Price Index CPO crude palm oil CPTPP Comprehensive and Progressive Agreement for Trans-Pacific Partnership CSOs civil society organizations DAP diammonium phosphate DE development expenditure bottom 50% of household income group DFIs Development Financial Institutions BDA big data analytics DOSM BIM building information modelling Department of Statistics Malaysia BKM Bantuan Keluarga Malaysia DSAN National Water Resources Policy BNM Bank Negara Malaysia DSR debt service ratio BOP balance of payments E&E electrical and electronic bps basis points E10 Express Construction Permit BR base rate ECRL East Coast Rail Link Bursa RISE Bursa Research Incentive Scheme EEV energy-efficient vehicles economic outlook 2023 xvii
20. acronyms and abbreviations EFT Ecological Fiscal Transfers GNI gross national income EMDEs Emerging Market and Developing Economies GNS Gross National Savings EPF Employees Provident Fund GOS gross operating surplus ESG environmental , social and governance GTFS Green Technology Financing Scheme eSPO e-Shared Prosperity Organization HPAE high-performing Asian economies EU European Union HRW hard red winter wheat EV electric vehicles HV hybrid vehicles FBM 100LC FTSE Bursa Malaysia Top 100 ESG Low Carbon Select Index IBS industrialised building system ICM Islamic Capital Market FBM 100LS FTSE Bursa Malaysia Top 100 ESG Low Carbon Select Shariah Index IDSS Intraday Short Selling IEO Initial Exchange Offering FBM KLCI FTSE Bursa Malaysia Kuala Lumpur Composite Index IMD Institute for Management Development FDI foreign direct investment IMF International Monetary Fund Fed US Federal Reserve i-MILIKI FEPO East Malaysia Crude Palm Oil Futures Contract Keluarga Malaysia Home Ownership Initiative INFF FIFA Federation Internationale de Football Association Integrated National Financing Framework IO Input-Output FISIM Financial Intermediation Services Indirectly Measured IoT internet of things FIT Feed-In-Tariff IPCC Intergovernmental Panel on Climate Change FTAs free trade agreements IPOs Initial Public Offerings GBP British Pound Sterling JC3 GDP Gross Domestic Product Joint Committee on Climate Change GFC Global Financial Crisis JENDELA Jalinan Digital Negara GGP Government Green Procurement kg kilogramme LCTF Low Carbon Transition Facility GHG greenhouse gases LFPR labour force participation rate GLCs government-linked companies LNG liquefied natural gas GLICs government linked investment companies LRT3 Light Rail Transit Line 3 xviii economic outlook 2023
21. acronyms and abbreviations LSS Large-Scale Solar MRT Mass Rapid Transit LT-LEDS Long-Term Low Emission Development Strategies MRT3 Mass Rapid Transit Line 3 M40 middle 40 % of household income group MSMEs micro, small and medium enterprises MARCOP Mechanisation and Automation Research Consortium of Oil Palm MyCAC Malaysian Climate Action Council MyGP Malaysian Licensing Guidelines Portal MyMudah Malaysia Mudah MYOR-i Malaysia Islamic Overnight Rate MySTEP Malaysia Short-Term Employment Programme n.e.c. not elsewhere classified NCD Non-Communicable Disease NCTF National Conservation Trust Fund NDC Nationally Determined Contributions NDPC National Development Planning Commission Mbps megabits per second MCOs movement control orders MED4IRN National Council of Digital Economy and Fourth Industrial Revolution MGII Malaysian Government Investment Issues MGS Malaysian Government Securities MHTC Malaysia Healthcare Travel Council MIDA Malaysian Investment Development Authority MNCs multinational corporations MoF Ministry of Finance NEEAP MOTAC Ministry of Tourism, Arts and Culture The National Energy Efficiency Action Plan NEM Net-Energy Metering MoU Memorandum of Understanding NGOs non-governmental organisations MPB Malaysia Productivity Blueprint NIA National Investment Aspirations MPC Malaysia Productivity Corporation NIE newly industrialized economies MPC Monetary Policy Committee NPDIR MPI Multi-Dimensional Poverty Index National Policy on the Development and Implementation of Regulations NPGRP MRANTI Malaysian Research Accelerator for Technology & Innovation National Policy on Good Regulatory Practice NRW non-revenue water MRO maintenance, repair and overhaul NZD New Zealand Dollar OADR Old Age Dependency Ratio economic outlook 2023 xix
22. acronyms and abbreviations OPEC Organization of the Petroleum Exporting Countries OPR Overnight Policy Rate OS SOP standard operating procedure SPAN National Water Services Commission operating surplus SRI PDT Short Sale Intraday Short Selling by Proprietary Day Traders Sustainable and Responsible Investment SRR Statutory Reserve Requirement PEMULIH National People ’s Well-Being and Economic Recovery Package SRW soft red winter wheat SSL self-sufficiency level PGG Principles of Good Governance SSR Self-Sufficiency Ratio PICK National COVID-19 Immunisation Programme SST Sales Tax and Service Tax PLCs public listed companies STEM Science, Technology, Engineering & Mathematics PLWS Productivity-Linked Wage System T20 top 20% of household income group POME palm oil mill effluents TEUs twenty-foot equivalent units PPE personal protective equipment UK United Kingdom PPI Producer Price Index UN United Nations R&D&C&I research, development, commercialisation and innovation UNFCCC United Nations Framework Convention on Climate Change RE renewable energy URUS RIA Regulatory Impact Assessment Financial Management and Resilience Programme RM Ringgit Malaysia US United States RTS Rapid Transit System Link USD US Dollar SBR Standardised Base Rate VCM Voluntary Carbon Market SDGs Sustainable Development Goals WBG World Bank Group SJKP Skim Jaminan Kredit Perumahan WCY World Competitiveness Yearbook SMEs small and medium enterprises WGI Worldwide Governance Indicators WTO World Trade Organisation xx economic outlook 2023
23. ch ap ter 1 Economic Management and Prospects 03 le v e r agi ng econom ic r ecov e ry 04 e nh a nc i ng e n v i ronme nta l , soc i a l a nd gov e r n a nce Information Box 1.1 ­– Towards Malaysia's Net-Zero GHG Emissions 2050 06 outlook 07 update s on the budge t 2022 10 econom ic m a n age me nt Feature Article 1.1 ­– The Golden Years: Facing the Challenges of An Ageing Nation Feature Article 1.2 ­– The Need for Escaping the Wage Curse Feature Article 1.3 ­– Prioritising Government Efficiency in Boosting Malaysia's Global Competitiveness Feature Article 1.4 ­– Climate Risks and Impacts on the Economy 47 s tr ategic i n i t i at i v e s – budge t 2023 49 conclus ion 50 r e fe r e nce s
25. chapter 1 economic management and prospects chapter 1 Economic Management and Prospects Leveraging Economic Recovery The scarring effects of the COVID-19 pandemic have highlighted to the world that economic recovery has to be more adaptive towards becoming more resilient against any unforeseen crises in the future . As such, nations across the globe are beginning to roll out various measures to steer their economies back to pre-pandemic growth momentum. Following the dwindling impact of the COVID-19 pandemic, most nations have reopened their borders, signalling a more encouraging prospect of an accelerated economic recovery. Nonetheless, the world continues to face various challenges including the ongoing effects of the Russia-Ukraine conflict, high commodity prices and other regional and global issues, posing downside risks to economic growth. The International Monetary Fund (IMF) revised its projection downwards for the global economy to 3.2% in 2022 after recording a strong growth of 6.1% in 2021 on the back of prolonged Eastern Europe conflicts, sanctions on Russia, strict zero-COVID-19 measures in China, tighter monetary policy in the United States and possible emergence of new COVID-19 strains. Subsequently, the growth of world trade which accelerated by 10.1% in 2021, is expected to be lower at 4.1% in 2022. The IMF also projected global crude oil prices to remain high at an average of USD107 per barrel in 2022 following Russia-Ukraine conflicts. Fuelled by high commodity and food prices, the inflation is projected at 6.6% in advanced economies and 9.5% in the emerging market and developing economies (EMDEs). On the domestic front, the pace of economic recovery has gained momentum, with a rebound in growth of 3.1% in 2021 compared to a contraction of 5.5% in 2020. The growing trend of the economy has continued into 2022 with a growth of 5% and 8.9% in the first and second quarters, respectively. Currently, the economic recovery process is well underway and as the nation transitions into endemicity, efforts are now focused on quick execution of post-COVID-19 measures and strategies including expediting business recovery, providing conducive business environment, facilitating trade and investment, improving labour market conditions, safeguarding households’ livelihood and inculcating sustainability principles throughout the whole spectrum of the economy. To further accelerate growth, Malaysia reopened its borders on 1 April 2022 with the aim of reviving the tourism industry which is one of the major contributors to the economy. The Ministry of Tourism, Arts and Culture (MOTAC) reported that for the month of May and June 2022, over 1.6 million tourist arrivals were registered compared to about 490,000 in the first four months of the year. The month of June recorded a remarkable comeback of the industry with tourist arrivals totalling to over 971,000, an increase of more than 150 folds compared to the same month last year which saw arrivals of only around 6,500. economic outlook 2023 3
26. chapter 1 economic management and prospects Enhancing Environmental , Social and Governance The sustainability and climate change agenda have gained traction around the world, particularly after the COVID-19 pandemic. In the efforts of post-disaster reconstruction and recovery, governments and businesses are identifying new opportunities and developing holistic approaches for businesses in creating a more resilient economy in an effective and efficient manner. The use of environmental, social and governance (ESG) principles in making informed investment decisions is increasing over the years, driving consumer preferences and public attitudes, thus influencing businesses to adopt sustainable practices. By advocating the agenda as an integral part of the company’s policies and practices, corporates will reduce the impact of their business decisions on the environment and at the same time benefit local communities, while improving their sustainability disclosure and transparency through the ESG principles. 4 economic outlook 2023 The sustainability agenda is also influenced by unilateral actions taken by nations and economies in addressing carbon emissions, such as the Carbon Border Adjustment Mechanism regulation introduced by the European Union which limits and regulates the imports of carbon-intensive products related to certain industries. Responding to these unilateral actions, Malaysia will expedite and strengthen the domestic sustainability agenda and ESG ecosystem to ensure local products and services continue to be competitive. In the long run, Malaysia is committed to achieve the Sustainable Development Goals (SDGs) and the Paris Agreement, as well as the aspiration to achieve net zero greenhouse gas (GHG) emissions by as early as 2050. In achieving these aspirations, several initiatives have been put in place including the establishment of the Voluntary Carbon Market (VCM) by Bursa Malaysia as a trading platform for carbon offsets. Meanwhile, realising the importance of having a proper national-level coordination on green growth in the country, the Malaysian Climate Action Council (MyCAC) brings together the economic and environmental ministries as well as state governments to ensure policy alignment regarding climate change issues and the green development agenda.
27. chapter 1 economic management and prospects information box 1 .1 TOWARDS MALAYSIA’S NET-ZERO GHG EMISSIONS 2050 RIO EARTH SUMMIT • United Nations Framework Convention on Climate Change (UNFCCC) was established at the Rio Earth Summit in 1992. UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE • In 1994, Malaysia ratified the UNFCCC and became a party. • Malaysia ratified the Kyoto Protocol in 2002. 1992 1994-2022 NATIONAL POLICY ON CLIMATE CHANGE • It serves as the framework to mobilise and guide government agencies, industry, community as well as other stakeholders in addressing the challenges of climate change in a concerted and holistic manner. 2009 THE NATIONAL RENEWABLE ENERGY POLICY AND ACTION PLAN • Enhancing the utilisation of indigenous renewable energy (RE) resources to contribute towards national electricity supply security and sustainable socioeconomic development. PARIS AGREEMENT • The UNFCCC adopted the Paris Agreement in 2015. • Malaysia ratified the Paris Agreement in 2016. 2016 NATIONAL REDD PLUS STRATEGY • Guide the country in reducing emissions from deforestation and forest degradation, while maintaining 50% forest cover. • Assist the nation in achieving: i. The Nationally Determined Contributions (NDC) pledge made under the UNFCCC’s Paris Agreement; ii. The National Policy on Biological Diversity (2016-2025); and iii. National and state-level forest policies. 2017 MALAYSIA’S COMMITMENT TO BECOME A NET-ZERO GHG EMISSIONS AS EARLY AS 2050 • In September 2021, the Honourable Prime Minister pledged for Malaysia to become net-zero GHG emissions by as early as 2050. • The Government will take into account sustainability as well as environmental, social, and governance (ESG) principles in the decision-making process. 2021 2022 AND BEYOND NATIONAL ENERGY POLICY 2021-2040 • The RE contribution in the installed capacity is projected to increase to 18,431MW by 2040. 2022 LONG-TERM LOW EMISSION DEVELOPMENT STRATEGIES (LT-LEDS) • Outline strategies and actions for mitigation of greenhouse gas (GHG) emissions for the country’s key economic sectors, which will be the basis for determining the country’s net-zero direction and the targetted year e.g. carbon pricing including carbon tax and domestic carbon trading schemes. 2022 VOLUNTARY CARBON MARKET (VCM) • Development of Malaysia’s Voluntary Carbon Market (VCM) is being coordinated by Bursa Malaysia. • Targetted to be launched by the end of the year. 2022 KEY MILESTONES AS OF 2022 • The establishment of the Malaysian Climate Action Council (MyCAC) and Joint Committee on Climate Change ( JC3). • An issuance of up to RM10 billion for Sustainability Sukuk as announced in the 2022 Budget. • Malaysia’s annual development and operational budgets are now aligned to the SDGs. • The establishment of MySDG Foundation. • The development of Integrated National Financing Framework (INFF). • The implementation of Climate Change Principle-based Taxonomy (CCPT) and Value Based Intermediation Financing and Investment Impact Assessment Framework (VBIAF) • Operationalisation of Low Carbon Transition Facility (LCTF) TO DO LIST: • To encourage reforestation efforts and increasing Malaysia’s natural carbon absorption. • To encourage renewable energy uptake and energy efficiency across all sectors. • To strengthen the carbon accounting ecosystem among all stakeholders. • To identify suitable carbon pricing mechanisms. • To encourage the electric vehicles (EV) industry and strengthen the supporting ecosystem. NDC TO THE UNFCCC • Malaysia to reduce its economy-wide carbon intensity (against GDP) of 45% in 2030 compared to 2005 levels 2030 MALAYSIA’S NET-ZERO GHG EMISSIONS COMMITMENT • To review the progress on achieving the net-zero GHG emissions aspiration and identify the best way forward. 2050 economic outlook 2023 5
28. chapter 1 economic management and prospects Outlook in the second half of the year . The growth prospects have been supported by the resumption of economic and social activities Global Economy and improvement in international travel The increasingly challenging global economic environment has prompted the IMF to revise its global economic growth forecast to a lower rate of 3.2% for 2022. The outlook was mainly due to a slowdown of economic activities in China and prolonged geopolitical conflicts. This scenario is expected to result in continuous supply chain disruptions, sharp increase in commodity prices as well as challenging financial conditions. Since March 2022, the price of Brent crude oil has been averaging above USD100 per barrel for the year, which has led to global inflation. Hence, the inflationary pressure has urged most central banks to tighten monetary policies, leading to weaker private consumption and household purchasing power. These challenges may linger on and are anticipated to continue affecting growth in 2023. Domestic Economy Malaysia’s economy expanded by 6.9% in the first half of 2022 underpinned by favourable momentum in the domestic economy and steady expansion in the external sector, as well as continued improvement of the labour market conditions. The strong performance is expected to sustain, backed by an increase in private consumption and business activities as the economy transitions to endemicity phase of COVID-19 with the surging tourist arrivals. Furthermore, the growth momentum was attributed to the Government’s consistent policy support, particularly with the implementation of initiatives under the Budget 2022 since the start of the year, as well as the spillover effects from the Budget 2021 measures coupled with various assistance and stimulus packages. activities following the relaxation of COVID-19 restrictions regionally. With better prospects as indicated by the Leading Index, the economy is anticipated to gain its growth momentum in the second half of the year attributed to strong domestic demand as the country transitions into endemicity. For the full year of 2022, the economic growth is expected to register a higher growth within the range of 6.5% – 7%. The domestic economy remains resilient and is forecast to expand between 4% – 5% in 2023 driven by the domestic demand. Nevertheless, the pace of economic recovery is also dependent on other factors, including successful containment of the pandemic, support for cost of living and efforts in mitigating the downside risks such as geopolitical uncertainties, global inflation as well as tightening financial conditions. Monetary and Financial Developments The level of monetary accommodation was reduced following strong domestic growth prospects in an environment of moderate inflationary pressures. Consequently, the Overnight Policy Rate (OPR) was increased three times, in May, July and September 2022 respectively, to a total of 75 basis points (bps) to 2.5% from its historical low of 1.75% held since 7 July 2020. The hike in the OPR was conducted in line with strong domestic economic performance. However, given that pre-pandemic OPR levels were much higher at 3% to 3.25%, the stance of monetary policy in 2022 remains accommodative and supportive of sustainable economic growth in environment of price stability. Furthermore, In tandem with continued implementation of development programmes and projects, the economy is expected to expand further 6 economic outlook 2023 the Monetary Policy Committee of Bank Negara Malaysia (BNM) had emphasised that the pace of interest rate normalisation would
29. chapter 1 be implemented in a measured and gradual manner to ensure that the market could adjust accordingly . Moving forward, the domestic financial system remains resilient supported by strong governance and prudent risk management practices despite the strengthening of the USD against major currencies and challenging global growth prospects. Moreover, Malaysia’s Capital Market Masterplan 2021 – 2025 and Financial Sector Blueprint 2022 – 2026, which outline the visions and strategies for the development of the nation’s financial sector will further enhance the overall financial market performance in line with the evolving economic and financial landscape. Updates on the Budget 2022 In line with the theme “Keluarga Malaysia, Makmur Sejahtera”, the Budget 2022 focused on strengthening recovery, building resilience, and driving reforms. Several measures were introduced to ensure the wellbeing of the rakyat, the resilience of businesses as well as the prosperity and sustainability of the economy. Accordingly, total estimated expenditure in 2022 is RM385.3 billion with RM284.7 billion for operating expenditure (OE), RM71.8 billion for development expenditure (DE) and RM28.8 billion under the COVID-19 Fund. The allocation was 15.5% higher than the total expenditure in 2021. The Rakyat’s Wellbeing The Government is persistent in implementing people-centric programmes to safeguard the wellbeing of the rakyat. In this regard, as of September 2022, RM5.9 billion from the RM8.4 billion cash assistance allocated via the Bantuan Keluarga Malaysia (BKM) programme economic management and prospects has been disbursed, benefitting 8.7 million recipients. Meanwhile, the Government continues to prioritise public health to build national resilience as Malaysia is transitioning to the endemic phase of COVID-19. Most importantly, the National COVID-19 Immunisation Programme was offered to all adults as well as extending the vaccine for children aged 6 to 17 years old. As at endSeptember 2022, more than 84% of adult population has been vaccinated with at least two doses. In addition, in the Budget 2022, the JaminKerja Keluarga Malaysia initiative was initiated with an allocation of RM4.8 billion to provide 600,000 job opportunities by the end of 2022. This initiative consists of three programmes namely JaminKerja, Malaysia Short-Term Employment Programme (MySTEP) as well as reskilling and upskilling programmes which benefitted over 310,500 people as at endAugust 2022. Resilient Businesses The resumption of economic activities is expected to enhance the recovery of businesses. The Government continues to promote a conducive business environment in ensuring economic recovery and catalysing growth towards achieving prosperity, inclusivity and sustainability in the future. In minimising the impact of the crisis, the Government has announced various initiatives under the Budget 2022 to ensure business continuity, among others, the Semarak Niaga Keluarga Malaysia Programme that provides direct loans, financing guarantees and equity-based schemes with a total allocation of RM40.1 billion. As of August 2022, more than 69,000 businesses of all sizes benefitted from the programme. Other programmes introduced to further sustain the resilience of businesses include Smart Automation Matching Grant, Innovation Hub: Industrial Revolution 4.0, Tabung Cerdik, Wage Subsidy Programme and National Rubber Industry Transformation Programme. economic outlook 2023 7
30. chapter 1 economic management and prospects In efforts to enhance the competitiveness of businesses , the Government also committed to improve the ease of doing business. The main initiatives include the extension of tax deduction of up to RM300,000 to renovate and refurbish business premises for COVID-19 standard operating procedure (SOP) compliance; and simplifying the requirements for registration to increase opportunities for participation in government procurement. The Government also continues to promote 4IR through the development of new emerging technology clusters such as drones, robotics and autonomous vehicles. The Malaysian Research Accelerator for Technology & Innovation (MRANTI) will spearhead Malaysian Drone Technology Plan as announced in September 2022. These initiatives are expected to benefit and provide exposure to E&E industry leaders, potential entrepreneurs, small and medium enterprises (SMEs) and the startup community. The Council of National Digital Economy and the Fourth Industrial Revolution will govern and monitor the progress of the implementation. The Government will strengthen the ecosystem of government-linked investment companies (GLICs) and government-linked companies (GLCs) to be more resilient towards the growth of new high-value industries. These involve, among others, the strengthening of government-owned investment institutions through Principles of Good Governance (PGG) which will be the sole reference for the governance baseline and sustainability practices for all GLICs. The PGG is based on three main principles, namely leadership and board effectiveness; ensuring an optimal, qualified and credible board composition; and supporting effective handling of investments. The tourism industry has been severely affected by the COVID-19 pandemic and still recovering towards pre-pandemic level despite the full lifting of restrictions. Through 8 economic outlook 2023 the Budget 2022, MOTAC has received a higher allocation of RM1.6 billion to boost the recovery of the industry. From this allocation, RM600 million is provided for the PENJANA Tourism Financing and Rehabilitation Scheme under Bank Pembangunan Malaysia Berhad to support micro, small and medium enterprises (MSMEs) by preserving their capacity and assisting them to undertake the necessary investment to remain viable postCOVID-19. As at 6 July 2022, RM88.1 million has been approved to 421 applicants. In addition, a total of RM85 million is allocated as special assistance to more than 20,000 tourism operators while RM10 million is for the children of Sabah and Sarawak for programmes and activities related to culture and heritage. Meanwhile, more than 26,000 employers and 330,000 workers in tourism industry benefitted from the RM600 million Wage Subsidy Programme. The sector also received several tax incentives extension, including income tax exemptions for organisers of artistic and cultural activities as well as international sports and recreational competitions until the assessment year 2025. A Prosperous and Sustainable Economy The Government is committed to strengthen the nation’s development based on prosperity, sustainability and inclusivity. In the effort to support the sustainability agenda, the Government is currently looking into the feasibility of implementing the carbon pricing policy that sets the economic cost of carbon emissions to be traded in the market. Malaysia’s VCM by Bursa Malaysia, coupled with the Low Carbon Transition Facility by BNM, will help businesses towards reducing their overall carbon emissions. The strengthening of the renewable energy sector and the electric vehicle ecosystem is envisioned to bring new business and job opportunities.
31. chapter 1 In preserving and conserving the nation 's natural heritage, various programmes targeting the environment and biodiversity have been implemented to ensure continuous availability of natural resources for future generations. This includes the engagement and involvement of indigenous and local communities in conservation and enforcement efforts for wildlife rehabilitation sanctuaries, tree planting and reforestation campaigns and programmes, as well as enhancing the role of nongovernmental organisations (NGOs) and civil society organisations (CSOs) in their respective localities. In reducing non-revenue water (NRW), the Government has implemented projects in Perlis, Kedah, Pahang, Kelantan, Sarawak, Sabah and Labuan, with an allocation of RM300 million in 2022. A matching grant programme has also been rolled out to water operators that achieve the targets set out by the National Water Services Commission (SPAN) to reduce NRW rates. The Government has also introduced various initiatives to provide economic benefits to the local communities and bridge the economic gap between regions in Malaysia. In terms of the implementation of national infrastructure development projects in Peninsular Malaysia, the construction of Central Spine Road and upgrading of the sewage treatment plant and construction of sewer network in Seberang Perai Utara, Penang are ongoing. Meanwhile, in Sabah and Sarawak apart from the Pan Borneo Highway, other ongoing projects include rural water supply project in Lubok Antu; construction of the Main Entrance Substation and 132V electric transmission line project in Paitan; home construction assistance programme in Sarawak; and construction of state rural link road as well as development of small rubber planting area for smallholders. In addition, the Government continues to take steps to build and upgrade infrastructure in regional areas through economic corridor authorities including transports, roads economic management and prospects and industrial parks to attract investment and increase economic activities. This will increase new job creation and entrepreneurial opportunities in the areas. Among the new projects launched by the regional corridors’ development agencies are Kedah Rubber City, Kampung Laut Redevelopment Project in Kelantan, Perlis Inland Port and Iskandar Rapid Transit in Johor. Other projects which are being carried out include upgrading of Samalaju Industrial Park road in Sarawak and Sepanggar Bay Port expansion in Sabah. As at end-June 2022, around 7.2 million premises have gained access to gigabit broadband, while 95.8% of all populated areas have access to 4G network under the Jalinan Digital Negara (JENDELA) programme. Meanwhile, the broadband speed has increased to 47.04 Mbps exceeding the 35 Mbps target as part of phase 1 which ends this year. In addition, 839 sites have been deployed with satellite broadband while 5G services is provided at selected areas in Cyberjaya, Putrajaya and Kuala Lumpur. The services will be further expanded to other major cities in nine other states. Among the current initiatives under MyDIGITAL Corporation includes providing knowledge on science, technology, engineering and mathematics (STEM) to students, teachers, and the wider public in areas aligned to the objectives of the Malaysian Digital Economy Blueprint and the National 4IR Policy. The Corporation also continues the effort to expand the use of e-payment within the community and provides business digitalisation training to MSMEs. Several initiatives that have been planned include reducing the processing time by 50% for the approval of aerial work certificates for agricultural drones. Additionally, smart solutions such as Smart Highway and Smart Mobility will be developed for the transportation and logistics sector to enhance road safety, reduce congestion and provide a seamless mobility experience for road users. economic outlook 2023 9
32. chapter 1 economic management and prospects Economic Management Malaysia ’s economy will remain in a positive growth trajectory in 2023 mainly driven by domestic demand following the transition to the endemic phase and the reopening of international borders. The Government continues to support the economy through implementing policies and measures to ensure a conducive business environment that facilitates economic activities and meet the needs of the rakyat. In enhancing economic resilience and sustainable growth, the Government will prioritise the structural reform agenda to sustain the post-COVID-19 economic recovery momentum, amid the challenges arising from geopolitical uncertainties and climate change. Issues and Challenges Rakyat Social Protection Currently, it is not mandatory for the selfemployed including informal and gig workers to contribute into the social security scheme as provided under the existing Self-Employment Social Security Act 2017 [Act 789]. As of July 2022, only 14% of 2.8 million self-employed workers contributed into the scheme as per the Act. This indicates a low awareness among the workers in protecting themselves against unforeseen circumstances that could lead to the loss of income. Meanwhile, the fragmented databases among various ministries resulted into inclusion and exclusion errors that could lead to either duplication or overlook of assistance provision. feature article 1.1 The Golden Years: Facing the Challenges of An Ageing Nation Introduction Population ageing is a worldwide phenomenon, commonly faced by developed nations with high standards of living. However, in the recent decade, this phenomenon is becoming more prevalent in many developing countries. The United Nations (UN)1 defines an ageing population as a community composed of people aged 65 and over. A country becomes an ageing nation when the ageing population reaches 7% of its total population. Japan is one of the countries that has long become a super-aged nation2 with 28.7% of its total population being above the age of 65. Other examples of super-aged nations include Italy with 23%, followed by Finland (21.9%), Portugal (21.8%), Germany (21.4%) and Serbia (20.2%)3. As an ageing nation, a country will normally experience an increase in life expectancy as a result of better healthcare services and living standards as well as a decline in the fertility rate. The patterns of declining fertility rate and expand in life expectancy have started to become more obvious in Malaysia. In 2020, Malaysia’s fertility rate declined to 1.7% as compared to 2.1% in 2010 as shown in Figure 1.1.1. While the population aged 65 years and over is higher at 6.8% of 32.4 million total population compared to 5% of 27.5 million during the same period. 1 2 3 United Nations Department of Economic and Social Affairs, World Population Ageing 2019. Ageing nation - ageing population more than 7% of total population; aged nation - more than 14%; super-aged nation - more than 20%. United Nations Population Division, World Population Prospects 2019. 10 economic outlook 2023
33. chapter 1 economic management and prospects FIGURE 1 .1.1. Life Expectancy and Fertility Rate in Malaysia, 2010 – 2020 Life Expectancy 76 75 74 2.1 74.1 Fertility Rate 2.2 74.3 2.3 2.2 74.4 74.5 74.5 74.6 2.0 2.1 2.0 73 74.4 74.4 1.9 1.9 74.6 74.8 75.1 2.1 2.0 1.8 1.9 1.8 72 1.7 71 70 2.2 1.8 1.7 1.6 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1.5 LIFE EXPECTANCY FERTILITY RATE (RIGHT SCALE) Source: Department of Statistics, Malaysia Based on Housing and Population Census 2020, Malaysia was not categorised as an ageing nation then, however the Department of Statistics Malaysia (DOSM) projected 7.3% of total population4 will reach age 65 and over by 2022. The ageing population in Malaysia is growing at a faster rate than initially expected in 2030. It is also anticipated that by 2050, Malaysia’s population aged above 65 will be more than 15%, qualifying Malaysia as an aged nation. Population ageing is a demographic trend that will significantly influence various public policies. As the proportion of the old age population becomes larger, the public expenditure will be higher to cover the expected increase in spending on healthcare, pension and long-term care. In addition, larger old-age population will cause labour shortages and create potential risk of old-age income security. In coping with the challenges arising from population ageing, the Government, businesses and society at large should be prepared to adapt to the changing needs and structural demographics in the economy. This is to ensure that no one is left behind while improving the wellbeing of all Malaysians particularly senior citizens, in line with the Shared Prosperity Vision 2030 and the Sustainable Development Goals (SDG).5 Hence, this article will analyse the challenges facing by the Government as Malaysia becomes an ageing nation. Malaysia’s Population: Demographic and Age Structure Malaysia has experienced a rapid demographic change for the past 50 years as shown in Figure 1.1.2. The young-age (0 to 14 years) shows a declining trend while the working-age (15 to 64 years) and old-age (65 years and over) indicate the opposite. Generally, the increase in the working-age population positively implies potential employment supply in the country. However, a contrasting trend between the young- and old-age population suggests that the size of the working-age population will shrink in the long run. Moreover, further aggravated by the falling birth rates, the country could face difficulties in providing adequate workforce for the labour market thus impacting the economy. 4 5 Current Population Estimates Malaysia, 2022, Department of Statistics, Malaysia. SDG Goal 3: Good Health and Wellbeing. economic outlook 2023 11
34. chapter 1 economic management and prospects FIGURE 1 .1.2. Age Structure (%) and Dependency Ratio, 1970 – 2022 Age Structure (%) 100 Dependency Ratio 100 86.2 80 80 69.5 60 44.9 60 52.1 40 23.2 20 5.9 0 40 33.4 1970 10.5 3.1 1980 1991 2000 2010 2020 2021 2022 20 7.3 0 YOUNG AGE DEPENDENCY RATIO (RIGHT SCALE) OLD AGE DEPENDENCY RATIO (RIGHT SCALE) AGED 0 TO 14 YEARS AGED 15 TO 64 YEARS AGED 65 YEARS AND OVER Source: Department of Statistics, Malaysia The increasing dependency of the young- and old age population on the working age group is also a concern for Malaysia. The age dependency ratio is often used to measure the financial pressure of the actively working population of a community. For the purpose of the analysis pertaining to an ageing nation, the old age dependency ratio (OADR) measures the number of old age per 100 persons of the working age. A ratio of 10.5 in 2022, higher than 7.5 in 2010, signifies that a greater dependency on the working age group. The reducing workforce composition will increase the burden of the working age in supporting the needs of the young and elderly groups. Therefore, a higher OADR is expected to lead to slower productivity and economic growth (ASM Science Journal, 2020) in the long run as a result of an expansion in the size of the non-productive segment of the population. Although population ageing is normally measured at the national level, the measurement by state has provided some useful insights. In 2020, Perak, Kedah, Perlis and Sarawak were considered as ageing states, with the percentage of people aged 65 and over was more than 7%. If the current trend continues to persist, the number of ageing states will gradually increase in the coming years since eight other states, namely Selangor, Negeri Sembilan, Kuala Lumpur, Pulau Pinang, Kelantan, Melaka, Pahang and Johor, have recorded more than 6% of elderly people as shown in Figure 1.1.3. 12 economic outlook 2023
35. chapter 1 economic management and prospects FIGURE 1 .1.3. Population Aged 65 and Over by States, 2010 and 2020 5.0 MALAYSIA 6.8 PERAK 7.7 6.1 KEDAH 7.2 PERLIS 5.6 SARAWAK 6.9 5.7 NEGERI SEMBILAN PULAU PINANG 6.4 6.1 6.3 5.0 PAHANG 6.3 5.2 JOHOR 2.9 SABAH 4.8 TERENGGANU 2.4 LABUAN 0.7 PUTRAJAYA 2010 2020 6.6 5.5 KELANTAN MELAKA 6.8 6.4 6.6 4.6 KUALA LUMPUR 7.9 7.5 3.5 SELANGOR 8.9 7.9 6.1 5.6 5.5 4.2 1.4 0 2 4 6 8 10 Source: Department of Statistics, Malaysia Ageing Population in terms of Economic and Social Aspects The changing age structure in the population of a country would present major economic and social challenges to the Government (United Nations, 2019). The rising OADR would impact negatively on future economic growth, savings, consumption, taxation and pensions (Ingham, Chirijevskis, & Carmichael, 2009). As older people age further, the Government is required to undertake certain social adjustments such as assistance for senior citizens6 which may involve additional financial allocation. Longer life expectancy is attributed to the effective role of the Government in providing various facilities and basic needs for the people. With a longer life expectancy, healthy older citizens continue to contribute to the society through paid or unpaid job such as care work. However, ageing population are at a higher risk of falling into poverty and resorting to various social protection programmes provided by the Government. Therefore, ensuring access to social safety net such as provident fund, healthcare, long-term care and other social support is crucial in an ageing society to protect the lives and the livelihood of the older people. Ageing and the Implications on Government Expenditure The Government has the responsibility to ensure the economy generates revenue sustainably; allocate resources efficiently; and distribute income effectively. As the working-age group is dwindling and the old-age group is expanding, the Government is expected to allocate more resources mainly towards pensions, health- and shelter-related programmes Thus, it is undeniable, that ageing population will have implications on the Government’s spending, especially to support various social programmes and other related facilities. 6 Senior citizens refer to the older persons with aged 60 years and over. economic outlook 2023 13
36. chapter 1 economic management and prospects Pension Expenditure Developed countries such as Norway and Japan have good funding arrangements in place , particularly through existing pension and provident funds to cope with the high projected OADR. Emulating the good practices in these developed countries, Malaysia also provides funding for pensioners. In 2021, the Government final consumption expenditure on social protection provided to senior citizens increased to RM2.4 billion from RM2.3 billion and RM1.4 billion recorded in 2020 and 2015, respectively. Corresponding to the expected increase in OADR, the public pension expenditure is also expected to rise further. In 2021, the Federal Government spent RM28 billion for pension expenditure involving about 887,000 public pensioners, of which RM7.9 billion or 28.3% represents payments for those aged 65 and over as shown in Figure 1.1.4. Moreover, with life expectancy in Malaysia reaching 75 years old (DOSM, 2021), the Government has to maintain the policies that support this age group for the next 10 years, thus requiring higher fiscal commitment in the future. Assuming the pension expenditure for recipients aged 65 and over continues to grow at an annual average rate of 12.1%7, the amount of pension payment is projected at RM22.3 billion in 2030, almost triple the current pension commitment. The higher obligation is commensurate with the size of the aged population and the extension in life expectancy. FIGURE 1.1.4. Number of Public Pensioners, 2013 – 2030 Number of Pensioners (’000) 1000 847 800 600 709 562 539 517 845 828 765 400 200 194 207 941 887 869 238 221 258 278 298 321 357 0 2013 2014 2015 2016 2017 2018 2019 NUMBER OF PENSIONERS (AGED 65 AND OVER)('000) NUMBER OF PENSIONERS ('000) Source: Public Service Department and Ministry of Finance, Malaysia 7 The pension expenditure of RM7.9 billion based on the analysis using CAGR for the period from 2013 to 2021. 14 economic outlook 2023 2020 2021 2030f
37. chapter 1 economic management and prospects Healthcare Expenditure Expectedly , healthcare is more essential to senior citizens as it is common for the people in this age group to face health problems or afflicted by diseases. The most common non-communicable diseases associated with the senior citizens are dementia, diabetes, high blood pressure and high cholesterol.8 Statistics show that the prevalence of these diseases is increasing, in tandem with the growing older population as shown in Table 1.1.1. Based on the Alzheimer’s Disease Foundation, Malaysia, the size of the population with end-stage dementia and dependent on a 24-hour care was estimated around 204,000 to 264,000 in 2020. This number is projected to treble to 637,500 to 825,000 by 2050. Consequently, the increasing need of healthcare by this age group has put pressure on the public health expenditure. table 1.1.1. Prevalence to Non-communicable Diseases (NCD), 2019 sociodemographic characteristics prevalence of overall raised blood glucose among adults aged 18 years and above count estimated population prevalence (%) prevalence of overall raised blood pressure among adults aged 18 years and above count estimated population prevalence (%) prevalence of overall raised blood cholesterol among adults aged 18 years and above count estimated population prevalence (%) Age Group 18 - 19 24 38,232 4.3 18 60,095 6.8* 43 121,415 13.6 20 - 24 50 155,085 5.4 71 162,822 5.7 179 485,017 16.9 25 - 29 71 203,573 6.8 98 304,754 10.2 227 658,806 22.0 30 - 34 132 300,307 11.3 163 426,074 16.0 308 742,225 27.9 35 - 39 161 288,418 12.2 230 523,693 22.1 373 796,221 33.6 40 - 44 186 316,161 17.3 265 525,172 28.7 391 804,458 43.9 45 - 49 248 410,130 24.7 383 677,854 40.8 489 829,036 49.9 50 - 54 330 467,184 30.4 473 717,053 46.7 592 921,120 60.0 55 - 59 35 418,253 31.3 560 741,478 55.5 633 842,962 63.0 60 - 64 359 468,937 42.4 567 725,754 65.6 544 694,474 62.8 65 - 69 289 349,022 43.4 455 558,702 69.5 433 495,042 61.6 70 - 74 204 223,736 40.6 360 422,048 76.7 301 348,726 63.4 75 & above 210 252,927 38.4 413 537,366 81.7 296 357,669 54.4 * Prevalence with high RSE, interpret with caution Source: National Health and Morbidity Survey Report 2019, Ministry of Health, Malaysia Senior Citizens Assistance Expenditure The Government is committed to provide support to senior citizens through the provision of facilities and financial assistance. The Government has provided comfortable care centres based on the increasing needs to provide care services for the senior citizen. The number of registered care centres has increased since the last five years that translates into higher spending on facilities, staffing and maintenance. From the statistics shown in Figure 1.1.5, the number of registered care centres had increased from 309 in 2017 to 384 in 2021. 8 Non-communicable-diseases, health and care (https://www.helpage.org). economic outlook 2023 15
38. chapter 1 economic management and prospects FIGURE 1 .1.5. Number of Registered Care Centre for Senior Citizen, 2017 – 2021 358 343 309 2017 2018 2019 378 384 2020 2021 Source: Department of Social Welfare, Malaysia In addition, Government also provides financial assistance of RM500 per month to eligible senior citizens under the Bantuan Warga Emas (BWE) programme. This programme is one of the initiatives under the Ministry of Women, Family and Community Development which targets senior citizens aged 60 years and over with a monthly household income of less than RM1,169. In 2021, a total of RM823.8 million was disbursed to 139,400 recipients. Based on the increasing number of potential recipients at an average growth rate of 6.3% annually, the expenses are estimated to be RM1.4 billion in total by 2030 as shown in Figure 1.1.6. FIGURE 1.1.6. Bantuan Warga Emas, 2010 – 2030 Number of Recipients ('000) RM Million 180 1,422.6 157.1 160 140 120 1000 800 80 40 600 422.5 400 200 20 0 2010 2011 2012 2013 2014 2015 VALUE (RM MILLION) (RIGHT SCALE) NUMBER OF RECIPIENTS ('000) Source: Department of Social Welfare and Ministry of Finance, Malaysia 16 1400 1200 120.5 100 60 1600 economic outlook 2023 2016 2017 2018 2019 2020 2021 2030f 0
39. chapter 1 economic management and prospects The Government also provides some financial support for health and medical treatment , which includes in-kind support. Through Tabung Bantuan Perubatan programme, eligible Malaysian citizens, including the disadvantaged senior citizens, are able to get financial assistance either partly or in full to cover the cost of outpatient treatment, medical and rehabilitation equipment as well as medicines. The Government also provided cash assistance through Bantuan Keluarga Malaysia (BKM) as announced in Budget 2022. This assistance involved an allocation of RM7.8 billion benefitting around 8.6 million recipients in 2022 of which, 1.8 million recipients are 65 years and over with assistance amounting to RM1.7 billion. The growing ageing population will require additional allocation for cash assistance under this programme which is estimated about RM1.8 billion in 2030 as shown in Figure 1.1.7. In addition, the Government provides incentives such as tax relief for self-funded vaccination and full medical check-ups including mental health. Senior citizens are also eligible for discount when receiving treatment at private healthcare centres. FIGURE 1.1.7. Bantuan Keluarga Malaysia for Recipients Aged 65 and Over, 2018 – 2030 Total Assistance (RM Billion) 2 Number of Recipients (Million) 1.8 4 1.7 1.5 1.4 2.6 3 1.2 1 1.3 2 1.8 1.2 1.3 1 0 2018 2019 2020 2021 2030f 0 TOTAL ASSISTANCE (RM BILLION) NUMBER OF RECIPIENTS (MILLION) (RIGHT SCALE) Source: Ministry of Finance, Malaysia Savings for the Golden Age It is pertinent for senior citizens to have sufficient savings and financial security upon retirement. However, the Employees Provident Fund (EPF) has voiced concern on inadequate savings for retirement that could pose risk to its members falling into old-age poverty and addresses social protection coverage among senior citizens. As shown in Table 1.1.2, active contributors who contribute to the EPF would have an average savings at the age of 54 amounting to RM246,635 in 2021. A simple calculation, given the amount of savings with life expectancy of 75 years old, shows that the assumed monthly withdrawal for retirees who contribute to EPF will receive less than RM1,000. These withdrawal levels are markedly lower than the minimum wage bracket and put them at the B40 group. Therefore, as ageing society progresses and more households fall under this category, the Government has to increase the spending in order to cater for the needs of the people in this group. economic outlook 2023 17
40. chapter 1 economic management and prospects TABLE 1 .1.2. Savings for EPF Contributors at the age of 54, 2019 – 2021 year active contributors number of active contributors aged 54 total average savings (rm) 2019 94,871 227,861 2020 97,458 241,942 2021 98,194 246,635 Source: Employees Provident Fund Moving Forward Cognisant of Malaysia becoming an ageing nation, the Government will continue to enhance the ecosystem for senior citizens. Society and family also need to play a role in ensuring the welfare of senior citizens is not neglected. Under the Twelfth Malaysia Plan, the Government will build more care centres for elderly as well as enhancing cities to become more senior citizen-friendly in the future. Sistem Pendaftaran Warga Emas Nasional will be improved and its coverage will be expanded. In addition, the Government will encourage the senior citizens to maintain an active and a healthy lifestyle. This would allow the senior citizens to keep productive and earn their own income while contributing to the economy and society through their skills, knowledge, experiences and expertise. However, the awareness to maintain the healthy and active lifestyle should start from the young age. Similarly, a proper awareness programme for financial literacy should also start from the young age to educate the importance of sound financial management, particularly on investment, saving and spending. Conclusion Addressing the impending ageing population in Malaysia will implicate the Government expenditure in assuming the responsibility to provide for senior citizens in terms of pension, healthcare and other assistance. The Government will support through relevant measures in order to safeguard the wellbeing, empower and improve the quality of life of senior citizens. 18 economic outlook 2023
41. chapter 1 economic management and prospects Subsidies Wages The Government has provided various type of subsidies and social assistances with substantial allocation to ease the financial burden of multiple segments of society . However, subsidies for certain items such as petroleum, cooking oil and flour, provided on a blanket basis have also benefitted the highincome group. Furthermore, this unsustainable approach has encouraged leakages and abuse of subsidised goods. Continuous inefficient allocation of subsidies will adversely affect the long-term fiscal sustainability. For almost a decade, the economy managed to record an encouraging mean wage growth of 6% – 7% between 2010 and 20191. Despite this growth, the mean wage2 level remained low at RM3,224 in 2019 as compared to RM1,936 in 2010, or an average increment of around RM140 yearly. The situation had worsened during the pandemic with more incidents of wage cuts, retrenchments and closing of business operations, which have led to lesser income prospects. Even though the revised minimum wage of RM1,500 per month was implemented beginning 1 May 2022, the average salaries and wages in Malaysia are considered low. Given that two-third of the household income is sourced from the labour market, the low-wage market structure may not help some segments of households to cope with the increasing cost of living, particularly the B40. feature article 1.2 The Need for Escaping the Wage Curse In collaboration with EIS-UPMCS Centre for Future Labour Market Studies (EU-ERA) The common assumptions that increasing wages could lead to market distortion and reversely affect economic performance seem to be an “unspell curse” to the Malaysian economy. These assumptions are strongly held by the majority of employers as a result of the lack of evidencebased facts and scientific evaluation. This article provides exposure of the attainable benefits to employers, employees and the economy as a whole when wage rates are raised higher than the current level. This article also addresses the multidimensional wages by not only focusing on the average wages but also on minimum and living wages. At the end of this analysis, recommendations are provided on the approaches that can be used to increase wages without impacting economic competitiveness. 1 2 Wage growth for 2020 and 2021 may not portray the normal distribution as these years were affected by the pandemic COVID-19. Refers to Malaysian citizen only. economic outlook 2023 19
42. chapter 1 economic management and prospects Low-Wage Economy Limits Economic Opportunities Labour compensation or wage share has always been debated as a measure of how the “benefits of growth” are fairly distributed between labour and capital. The decent level and growth of wages represent the concept of economic justice or fairness for households as almost two-thirds of their income is sourced from the labour market. This implies that wage is uncertain, especially if someone loses a job, unlike property rights which have greater security in ensuring rents and other form of capital incomes perpetually. From the national accounts perspective, total income of the nation is shared by labour, capitalowner and government. Income received by labour is essentially measured by compensation of employees (CE) or also known as labour compensation. Whereas, income for the capital is commonly represented by the operating surplus. In Malaysia’s context, the share of CE to GDP is considerably low despite it increased from 31.7% in 2010 to 35.9% in 2019, as shown in Panel A of Figure 1.2.11. The share is much lower compared to that in other countries such as Germany (53.4%), the United Kingdom (48.7%), Republic of Korea (47.5%), Australia (47.2%) and Singapore (39.9%) in 2019. The distribution of GDP growth on CE and gross operating surplus (GOS) is different. Both CE and GOS are positively correlated with GDP but the latter has a much stronger relationship, which implies that the distribution of growth benefits the capital owner more than the workers (Panel B of Figure 1.2.1). For example, a 1% increase in GDP growth contributes 1.05% to the growth of GOS compared to 0.63% to the growth of CE. These confirm that the benefits of economic growth are more in favour of the owners of capital. 1 CE shares of GDP for 2020 and 2021 may not portray the normal distribution as these years were affected by the pandemic COVID-19. 20 economic outlook 2023
43. chapter 1 economic management and prospects FIGURE 1 .2.1. Trend and Correlation of Compensation of Employees and Gross Operating Surplus to Gross Domestic Product, Malaysia Panel A: Share of compensation of employees and gross operating surplus to GDP* 65.5 64.6 64.9 2010 33.9 33.2 32.1 31.7 2011 64.0 2012 2013 62.8 34.3 60.2 35.0 2014 2015 35.6 60.9 59.7 59.3 35.5 2016 2018 2019 62.9 60.1 37.1 35.9 35.8 2017 60.5 2020 34.8 2021 COMPENSATION OF EMPLOYEES GROSS OPERATING SURPLUS Panel B: Relationship between growth in compensation of employees and gross operationg surplus relative to GDP** % 16 12 10 8 6 4 2 Elasticity = 1.05 Correlation = 0.94 20 Growth in Gross Operating Surplus Growth in Compensation of Employees 14 15 10 5 0 -5 0 -10 -2 -4 -10 % 25 Elasticity = 0.63 Correlation = 0.72 -5 0 5 10 15 20 -15 -10 Real GDP growth (%) -5 0 5 10 15 20 Real GDP growth (%) Note: (*) The total may not add up to 100% because it excludes taxes less subsidies on production and imports (**) All models throughout this study have been estimated using OLS with robust standard error due to Newey and West (1987) that correct for both autocorrelation and heteroscedasticity Source: Department of Statistics and EIS-UPMCS Centre for Future Labour Market Studies, Malaysia Higher labour compensation is found to be the answer for some of the structural issues in Malaysia. Among the structural issues are low labour force participation rate (LFPR), inequality in income distribution as well as slow rate of technological innovation and adoption. A cross-country evidence, as shown in Figure 1.2.2 clearly indicates that a high rate of labour compensation could increase LFPR, reduce income inequality, boost technological innovation and support economic growth. If the level and growth of labour compensation are considerably low, this situation will likely hinder the opportunity for Malaysia to maximise its true economic potential. economic outlook 2023 21
44. chapter 1 economic management and prospects FIGURE 1 .2.2. Relationship between Compensation of Employees and Selected Macroeconomic Indicators Cross-Sectional Countries, 2019 Elasticity = 0.44 Correlation = 0.19 405 360 Real GDP 315 270 225 180 135 90 45 0 20 30 40 50 60 % 80 Labour Force Participation Rate USD billion 450 70 60 50 40 30 20 70 Elasticity = 0.14 Correlation = 0.13 18 Compensation of Employees (% of GDP) Gini index 65 48 58 68 78 88 Elasticity = 3.01 Correlation = 0.48 35 30 60 25 Innovation Income Inequality 38 % of GDP Elasticity = -0.57 Correlation = -0.36 70 55 50 45 20 15 10 40 5 35 30 28 Compensation of Employees (% of GDP) 20 30 40 50 Compensation of Employees (% of GDP) 60 0 20 30 40 50 60 70 Compensation of Employees (% of GDP) Note: Income inequality represented by the Gini index, innovation defined as research and development expenditure (% of GDP) and real GDP expressed in USD billion Source: Development Indicator, Penn World Table and EIS-UPMCS Centre for Future Labour Market Studies, Malaysia Higher labour cost borne by industries, causing them to hire less or lay-off some of the workers, and the tendency to push up prices are the common reasons used to limit the wage increment. However, the reasons may not be true as far as empirical evidences are concerned. A brief explanation on the benefits of minimum wages in increasing employment demand and productivity is provided in Box 1. When productivity improves in parallel with the increase in minimum wages, there is no reason why industries need to inflate prices of products. 22 economic outlook 2023
45. chapter 1 economic management and prospects BOX 1 : Defying Job Loss Conundrum in the Wage Floor Increase An increase in minimum wage would reflect a higher cost for the employers, causing them to hire less or lay-off some of the workers to keep businesses afloat. This concern is aligned to the traditional economic theory of supply and demand, where higher prices (wages) lead to less demand for workers, implying the increase in the minimum wage induces higher unemployment. The whole idea was challenged by an empirical study by Card and Krueger (1994). A group of Princeton University economics professors conducted a survey among employers and employees on minimum wage rate at fast-food restaurants in two states: New Jersey and Pennsylvania. The New Jersey legislature was set to raise minimum wage by 18.8% from USD4.25 to USD5.05 while the minimum wage in Pennsylvania was unchanged. Based on the study, it was found that after the minimum wage was increased, no indication of employment reduction was reported but rather a 13% increase in New Jersey. Thus, there was a positive employment effect when the minimum wage rate rose. Other studies also show that the increase in minimum wage could be an anti-poverty and equality improvement strategy, which is in favour to reduce gender pay disparity as well as enhance labour productivity. Sources and Adjusters for Low-Wage Almost two-thirds of household income is generated from the labour market. Labour is the supplyside variable that is determined by the level and composition of demand-side variables such as exports and investment expenditures. For example, it is common in any country to experience an increase in demand for low-skilled workers when it concentrates on the production of low-value added products for exports. Therefore, it is essential for policy makers to blend both the demand and supply sides of the economy in the labour market planning to improve the condition towards a high-value economy. The demand-side of the economy affects the labour compensation to some extent, which is explained in Figure 1.2.3 with Panel A outlining the sources of labour compensation by decomposing the contribution of GDP by expenditure components. Private consumption and exports contribute about one-third to the generation of labour compensation, whereas the remaining portion attributed to gross operating surplus. Investment expenditure shows the equal distribution between labour compensation and gross operating surplus while the government consumption is the most equitable component, contributing 81.3% to labour compensation. As a matter of fact, the compensation multiplier indicates that every ringgit of government consumption generates RM0.60 of labour compensation, the highest compared to other final demands. It is important to note that the distribution of final demands on labour compensation is shaped by the structure of employment which is provided in Panel B whereby total employment is decomposed according to GDP by expenditure components. Approximately, less than onefourth of total employment generated by private consumption, investment and exports, are for skilled workers. Government consumption is the only final demand component that shows the highest skilled generated, contributing 47% of the total employment. But the size of government consumption is relatively smaller with the contribution of 10% to total final demands. Overall, the relatively lower wages are the results of a large concentration on the low- and semi-skilled jobs. economic outlook 2023 23
46. chapter 1 economic management and prospects For decades , the increase in the capacity of employment generation was driven by the increase of labour utilisation in the production of output. For instance, this can be verified based on the magnitude of employment elasticity-to-GDP, which increased from 0.52 in the period of 1991 – 2005 to 0.67 during 2006 – 2020, as shown in Panel C. The higher (lower) the magnitude of the elasticity requires a larger (smaller) number of employments in the production stage. The increase in labour utilisation was influenced by the expansion of semi- and low-skilled employments. In the last 30 years, the economy generated more jobs for semi- and low-skilled workers with the average of 61% compared to only 39% for the skilled workers. FIGURE 1.2.3. Sources of Labour Compensation and Employment Generation Panel A Contribution of final demand to labour compensation and gross operating surplus Contribution to Gross Operating Surplus (%) Contribution to Labour Compensation (%) 35.3 Private 64.7 Consumption 51.0 Investment 49.0 Expenditure 37.3 81.3 Panel C Employment elasticity to GDP Average annual new employment generation, 1990-2020 Percentage change of job creation with respect to percentage change in GDP 1990 2000 258k 2000 2010 263k 2010 2020 62.7 Export Panel B Contribution of final demand to employment by skills Government 18.7 Consumption Compensation Multiplier for each Ringgit of: 0.23 0.32 0.21 0.60 Private Consumption Investment Expenditure Export Government Consumption 326k 39% 61% Skilled Jobs Semi-& low-skilled Jobs Contribution of private consumption, Government consumption, investment & export to employment generation by skills Private consumption 14.5% 85.5% Investment 17.6% 82.4% Export 14.6% 85.4% Government 47.1% Consumption Skilled 52.9% 0.52 1991-2005 0.67 2006-2020 % increase in employment required to produce 1% increase in GDP Higher labour utilisation indicating reliance of economy on labour input Semi-& low-skilled Note: Estimated using input-output structural decomposition analysis Source: Department of Statistics and EIS-UPMCS Centre for Future Labour Market Studies, Malaysia The empirical assessment shows that the incidence of low-wage paying jobs is a result of a labourintensive economy. Although the structure of the country's economy is essentially labour-intensive, this does not restrict a more generous sharing of wealth between employers and employees. As shown in Figure 1.2.4, the role of adjuster is pertinent in balancing the share of GDP between capital and labour. In this context, the pragmatic approach is to announce specific initiatives that bring benefits to employees without impacting the industry's competitiveness. For instance, the introduction of e-Shared Prosperity Organisation (eSPO)2 Acknowledgement Certificate by Malaysia Productivity Corporation (MPC) is a profound initiative in practising the mutual wealth creation and sharing between employers and employees. e-Shared Prosperity Organisation (eSPO) is an online system that issues electronic acknowledgment certificates to organisations that have successfully implemented the Productivity-Linked Wage System (PLWS). To date, there are 22,331 eSPO certificates issued to MSMEs and large firms. 2 24 economic outlook 2023
47. chapter 1 economic management and prospects FIGURE 1 .2.4. The Role of Policy Adjuster in Balancing the Unequal Distribution Value Added Adjuster 62.9% Profit Labour Compensation 34.8% Note: Numbers refer to 2021 data Source: Department of Statistics, Malaysia Higher Wages Would Help, Not to Hurt the Economy The need to increase wages post-COVID-19 pandemic has become a common issue in most countries, including Malaysia. From the workers’ perspective, an increase in wage is necessary to compensate for the higher prices of goods and services. Generally, employers claimed that wage increases could inflate prices, leading to market distortions that could pose a threat to the economy. However, cross-country studies show that increment in wage will generate more income to businesses (Lupu et al., 2022). This section will enlighten the impacts of higher wages to Malaysia’s economy. Economic Impacts of Higher Wages An economy functions as a system of interaction between expenditure and income flows, as depicted in Figure 1.2.5. Households provide labour input to the economic sector and receive wages in return. The more wages earned, the higher consumption of goods and services, hence generating additional profits for the business sector. For example, a simulation of 3% to 5% increment to the current wages of the semi- and low-skilled workers results to higher GDP growth and labour productivity. Meanwhile, another analysis using Gini index shows that higher wages reduces income inequality as reaffirms by Sotomayor (2021). economic outlook 2023 25
48. chapter 1 economic management and prospects FIGURE 1 .2.5. Economic Impacts of Higher Wages gi tempoh % kenaikan A projection of macroeconomic indicators for the periods 2021 - 2025 as a result of simulation 3% - 5% of additional increases in total wage: Net Taxes Net Taxes Wages Salaries Government Government Purchases of Goods 3% 4% 5% Wages, Rent, Interest & Profit Factor Payments Labour Services Households +5.6% +6.0% +6.5% GDP (current price) +4.2% +4.8% +5.4% Labour Productivity -2.2% -2.4% -2.5% Income Inequality (Gini index) Consumption Expenditure on Goods and Services Firms Note: Increase in wage rates induces additional consumption which in turn generates additional output and profit Description of Model: The simulation results are derived based on a computable general equilibrium (CGE) model developed by EU-ERA. The CGE Model is able to produce projection of economic, social and environmental indicators up to 2030 Source: EIS-UPMCS Centre for Future Labour Market Studies, Malaysia Higher Wages Attract More Women Participation in the Labour Force Labour is an important input in the production process. An increase in labour input will increase production, vice versa. In the event that labour shortages do occur, higher wages tend to attract more women outside of the labour force into the labour market. An empirical assessment as shown in Figure 1.2.6(a) suggests that a 1% increase in labour compensation tends to increase female LFPR by 1.2%. This finding suggests that the policy approach to increase wages plays an important role in achieving the women LFPR target of the Twelfth Malaysia Plan, 2021 – 2025 from 55.3% in 2020 to 57% in 2025. Higher Wages Promote Technological Adoption Adopting technology in the production process is a way to increase output by optimising the use of production inputs such as labour and energy (Maneejuk and Yamaka, 2020). Increasing wages for labour-intensive industries will increase the adaptation of the use of technology. The empirical assessment as shown in Figure 1.2.6(b) indicates that a 1% increase in labour compensation tends to increase technological adoption by 3.7%. Technological adoption is found to complement the demand for skilled workers that help to increase wages. Thus, firms must be willing to share their wealth by increasing wages that commensurate with higher skills. 26 economic outlook 2023
49. chapter 1 economic management and prospects FIGURE 1 .2.6. Impact of Higher Wages on Selected Macroeconomics Indicator, Malaysia % of GDP 1.8 (a) 56 1.6 54 1.4 Elasticity = 1.2 Correlation = 1.0 52 50 Technology Female Labour Force Participation Rate % 58 1.0 0.8 46 0.6 30 32 34 36 0.4 38 29 Compensation of Employees (% of GDP) % of GDP 30.5 Elasticity = -0.5 Correlation = -0.9 29.5 35 29.0 28.5 28.0 27.5 (d) 100 Labour Productivity Shadow Economy 33 RM thousand 110 27.0 37 Elasticity = 2.2 Correlation = 0.8 90 80 70 60 26.5 26.0 29.5 31.5 33.5 50 35.5 29 Compensation of Employees (% of GDP) ‘000 persons 1200 Elasticity = -2.3 Correlation = -0.5 800 600 400 200 33 38 33 ‘000 persons 1600 (e) 1000 28 31 43 48 Compensation of Employees (% of GDP) 35 37 39 Compensation of Employees (% of GDP) 53 Skills-related Underemployment Low-skilled Foreign Worker 31 Compensation of Employees (% of GDP) (c) 30.0 0 Elasticity = 3.7 Correlation = 0.9 1.2 48 44 (b) (f) 1400 Elasticity = -2.7 Correlation = -0.6 1200 1000 800 600 400 200 0 28 33 38 43 48 53 Compensation of Employees (% of GDP) Note: Technology index denotes research and development expenditure to GDP. Shadow economy measures were estimated using computable general equilibrium approach (Elgin et al., 2021) Source: World Development Indicator, Department of Statistics and EIS-UPMCS Centre for Future Labour Market Studies, Malaysia economic outlook 2023 27
50. chapter 1 economic management and prospects Higher Wages Improve Economic Efficiency by Reducing the Size of Shadow Economy Shadow economy includes all market-based legal production of goods and services that are deliberately concealed from public authorities to avoid payment of taxes and social security contributions as well as to avoid complying with labour market standards and administrative obligations (Schneider, 2011). The size of the shadow economy in Malaysia for the period of 2010 – 2019 is estimated at approximately 21.2% of GDP (Economic Outlook, 2021). Shadow economy creates economic inefficiencies as it could potentially reduce government tax revenue, cause a fragmented labour market and lower economic growth. Shadow economy and the shadow labour market are closely connected. Any labour activities taking place as part of the shadow economy are considered involving in the shadow labour market or informal labour market. People may be excluded from the formal labour market due to lack of opportunities or choose to exit the formal sector voluntarily because of both monetary and nonmonetary benefits of informality. If wages in the formal sector can be increased, this will encourage people to shift out of the shadow economy into the formal sector (Hohberg and Lay, 2015). The empirical assessment depicted in Figure 1.2.6(c) shows that the size of the shadow economy is likely to reduce by 0.5% for every 1% increase in labour compensation. In this regard, wage is considered as an indirect policy intervention to increase the formalisation of the economy in addition to direct interventions in the forms of regulations and enforcements. Higher Wages Promote Labour Productivity Growth Productivity growth is the primary determinant of an economy's long-term growth and higher wages. If an employer is willing to share the wealth by raising wages, employees will consistently exert extra efforts in response to higher wages, in line with the so-called “efficiency wage” theory (Riley and Bondibene, 2017; Georgiadis, 2013). Workers, therefore, may be more motivated to work with higher pay that subsequently contribute to higher productivity. The analysis in Figure 1.2.6(d) confirms this expectation, showing that productivity tends to expand by 2.2% for every percentage increase in wage. Higher Wages Reduce the Dependency on Low-Skilled Foreign Labour According to the Ministry of Home Affairs, in 2021, low-skilled foreign workers in Malaysia made up about 8% of the total employment or 1.2 million persons. Over 90% of the non-Malaysian citizens occupied the low-skilled and semi-skilled employment. The economic costs of extensively relying on low-skilled foreign workers in Malaysia are well documented in the literature, which highlighted the high reliance of low-skilled foreign workers would suppress the domestic wage growth and adversely affect productivity growth (Bank Negara Malaysia, 2018b). The empirical analysis, as explained in Figure 1.2.6(e) indicates that the size of low-skilled foreign workers can be reduced by 2.3% for every percentage increase in labour compensation. The results suggest that wage adjustment is the most effective market-based price mechanism to be used as a policy tool to reduce the dependency on low-skilled foreign workers. Higher Wages Reduce the Size of Skills-Related Underemployment Skills-related underemployment is a condition where workers hold skills or qualifications higher than that required to perform their jobs. Indirectly, the skills-related underemployment can be portrayed as the indicator of skills underutilisation which measures those workers with tertiary education and working in the semi- and low-skilled occupations. In 2021, the skills-related underemployment increased by 6.3% to record 1.9 million workers compared to 1.8 million in 2020 (DOSM, 2022b). 28 economic outlook 2023
51. chapter 1 economic management and prospects The incidences of skills-related underemployment are still significant in Malaysia and have been persistent , depicting a structural issue similar to unemployment (Zakariya, 2014). If underemployment continues to remain, the true potential of workers will not be maximised. Furthermore, those who have higher skills but working in lower-skilled jobs normally earn lower labour compensation or wages. Based on the empirical assessment, shown in Figure 1.2.6(f), the size of skills-related underemployment can be reduced by 2.7% for every percentage increase in labour compensation. This finding suggests that policy intervention to increase wages could lead to higher adoption of automation and technological upgrading, which in turn stimulate the demand for high-skilled occupations. As more demand for high-skilled occupations is generated within the economy, it should be able to reduce the skills-related underemployment (Lee and Wie, 2015). Ideal Wages to Support Living Standard Ideal wage levels that provide for a sufficiently high standard of living are important to ensure the economy is constantly being supported by consumption spending (Jung et al., 2020). Higher (lower) consumption spending implies higher (lower) standard of living and thus promotes (constraint) long-term economic growth. Is the Current Wage Enough to Balance the Rising Living Cost? Having a sufficient level of disposable income is important for households to have financial stability. The gap between income and expenditure manifests resource adequacy to cover household expenses and financial security. Figure 1.2.7 shows that 51.2% of households receive less than RM6,000 per month, and 79.7% of them are experiencing financial imbalances as the expenditure is larger than the income share. The income-expenditure gap is more detrimental for the RM2,000 – RM3,999 household income bracket. In general, this indicates that more than half of households in the country require more income to absorb the surging living cost. FIGURE 1.2.7. Income and Expenditure Gaps by Income Classes (%), 2019 INCOME Less Than RM2000 RM2,000 - RM3,999 RM4,000 - RM5,999 EXPENDITURE 5.6 14.8 41.4 20.8 RM8,000 - RM9,999 RM10,000 - RM11,999 23.5 15.0 10.6 10.2 4.6 7.1 2.1 SURPLUS -9.2 24.8 RM6,000 - RM7,999 DEFICIT -16.5 -2.7 4.4 5.5 5.0 RM12,000 - RM13,999 4.7 1.1 3.6 RM14,000 - RM15,999 3.4 0.5 2.9 RM16,000 - RM17,999 2.2 0.4 RM18,000 - RM19,999 1.4 0.3 RM 20,000 and above 4.9 0.7 2.8 1.1 4.2 Source: Department of Statistics, Malaysia economic outlook 2023 29
52. chapter 1 economic management and prospects The gap of income and expenditure for 2016 and 2019 were relatively similar at about 28 % but annual increment of 4.3% of the average gross household income failed to support the consumption expenditure within the period for the household groups with income less than RM6,000 per month. Furthermore, although the minimum wage was increased by RM100 to RM1,100 in 2019, the small increment in the minimum wage may not give a significant impact on the overall net income. Hence, it is important to consider moving to the bigger definition of a wage floor marked by a living wage standard as argued by Adams (2017) and Schulton and Müller (2019). Are We Ready to Implement the Living Wage? The living wage differs from the minimum wage in a few aspects. While the latter is statutory and covers the minimum level of remuneration for basic needs fulfilment, the former is usually higher after being adjusted to the changes in the living costs and does not necessarily conform to public regulations. The concepts of “living wage” have been introduced and implemented in a few countries, aiming to provide a decent living for the people beyond their subsistence remuneration (Schulton and Müller, 2019). However, the implementation is not standardised and normally be decided by the authority of the administrative spatial units concerned. Table 1.2.1 illustrates the difference in the rates of living wage and how they are operationalised. The United Kingdom provides city- and state-level living wage rates that are distinctive to the respective region. Similarly, in Canada, the Ontario province has established the living wage starting from CAD16.20 per hour, the British Columbia starting from CAD16.33 per hour, and likewise with the other provinces and territories using their respective rates. On the other hand, a few states in the United States passed a legal ordinance and mandated the specified living wage rate to employers. table 1.2.1. Living Wage in Selected Benchmarking Countries COUNTRY MINIMUM WAGE* New Zealand NZD21.20 Canada – British Colombia LIVING WAGE NZD23.65 DIFFERENCE OPERATIONAL MECHANISM 12% Employer accreditation. Federal regulated CAD16.33 – industries: CAD15.55 CAD21.15 Provincial rates: CAD15.65 5% Employer accreditation. The living wage is set at different rates for cities and communities across the country. Canada – Ontario Federal regulated CAD16.20 – industries: CAD15.55 CAD22.08 Provincial rates: CAD15.00 5% Employer accreditation. The living wage is set at different rates for cities and communities across the country. UK – London GBP6.83 – GBP9.50 Real living wage: GBP11.05 62% Employer accreditation. National living wage in the UK is the obligatory payment for people above 23 years old, computed based on the median wage. UK – other than London GBP6.83 – GBP9.50 Real living wage: GBP9.90 45% Employer accreditation. US – Los Angeles Federal minimum wage: USD7.25 USD16.04 121% By legal ordinance to public sector and private sector who has services contract with local government. Note: (*) Exclude minimum wage for those below 18 years old and apprentice Source: Living Wage Foundation, Retail Council of Canada, Ontario Living Wage Network, The Living Wage, Bureau of Contract Administration Los Angeles and U.S. Department of Labor 30 economic outlook 2023
53. chapter 1 economic management and prospects Generally , there are two approaches of how the living wage rate are implemented for employees in the benchmarking countries. These countries undertake a volunteer-based strategy to encourage employers to raise wages to the minimum acceptable standard of living. For instance, New Zealand, the United Kingdom and Canada have issued an official accredited certification to employers who are committed to fulfilling the living wage standard. On the other hand, the United States and several local governments in the Republic of Korea have enacted a legal ordinance to oblige employers who have services contracts with the government to follow the living wage standard. From the macroeconomic view, GDP per capita, labour productivity, capital-output ratio and income inequality are among the important variables for a country to consider implementing the living wage as depicted in Figure 1.2.8. The selected countries that have adopted living wage, achieved GDP per capita three times larger than Malaysia with higher labour productivity and more efficient output production through automation. Moreover, the gap between income-classes in these countries are smaller. FIGURE 1.2.8. Macroeconomic Indicators for Malaysia and Selected Countries, 2019 NEW ZEALAND CANADA UNITED KINGDOM MALAYSIA GDP PER CAPITA USD 40,599 USD 45,109 USD 47,750 USD 11,414 LABOUR PRODUCTIVITY USD 82,033 USD 94,398 USD 91,700 USD 58,970 0.32 0.30 0.37 0.41 10.67% 11.85% 10.59% 5.16% GINI INDEX CAPITAL OUTPUT RATIO Source: World Development Indicators, International Labour Organization, Organisation for Economic Co-operation and Development and Department of Statistics, Malaysia Conclusion Necessary interventions may be required in a situation that the labour market is less efficient but requires wage increment. An accreditation can be given to companies that pledge to pay higher than the current wage rate to their employees voluntarily. The available platform such as eSPO can be used and expanded on a larger scale. On the other hand, possible implementation of living wage may also be undertaken through ordinance and regulation as practised by developed countries. The empirical findings provide some insights to the possible scenario when wages are adjusted higher than the current rate. The empirical analyses clearly show the role of higher wages in addressing pertinent structural issues such as women participation in the labour market, technological adoption, shadow economy and skills-related underemployment. The analysis also highlights that the existing wage rate is not inclusive as there are some segments of the household groups that cannot cope with the current cost of living. Another perspective demonstrates that the existence of the minimum and living wage reflects the inefficiency of the labour market’s response on both demand and supply sides. Thus, more dedicated studies on the possible impact from the multidimensional aspects of wages are needed, as Malaysia aspires to become a high-income economy. economic outlook 2023 31
54. chapter 1 economic management and prospects Businesses Productivity and Competitiveness Overall , MSMEs represent 98.5% from total businesses in Malaysia with 89.2% operates in the services sector. In view of the severe effects of the pandemic on the services sector, various assistances were provided, among others, Geran Prihatin Nasional, wage subsidies and moratorium on loan repayment. However, despite the availability of the Government’s assistance, MSMEs experienced a marginal growth of 1% in 2021 due to lack of good management practices, innovation, digital and technology adoption, access to financing as well as shortage of workers. Meanwhile, labour productivity grew 1.8% in 2021 which remains lower than the targetted annual growth of 3.6% as in the Twelfth Malaysia Plan, 2021 – 2025 (12MP). The lack of investment in R&D and limited transfer of technology from multinational companies (MNCs) pose a great challenge to achieve the labour productivity growth as targetted. feature article 1.3 Prioritising Government Efficiency in Boosting Malaysia’s Global Competitiveness Introduction As aspired in the Twelfth Malaysia Plan, 2021 - 2025 (12MP), Malaysia aims to become a highincome country by 2025 and envisages being a prosperous, inclusive and sustainable nation. Therefore, emphasis will be placed on restoring economic growth, addressing socioeconomic challenges, ensuring balanced regional development, and enhancing the nation’s competitiveness to be economically more resilient and sustainable. From the mid 1980’s until 2010, Malaysia recorded strong economic growth annually. This good performance prompted the World Bank in 1993 to recognise Malaysia as one of the highperforming Asian economies (HPAEs)1. However, while undergoing various stages of development, Malaysia remains a middle-income country with slower productivity growth, lagging behind the Asian developing economies such as Hong Kong, the Republic of Korea, Singapore and Taiwan that achieved high-income nation status during the period. Malaysia’s gross national income (GNI) per capita in 2021 was USD10,930, below the threshold level of USD12,695 for a high-income economy (World Bank, 2021). Meanwhile, the COVID-19 pandemic has exposed structural vulnerabilities, highlighting the need for Malaysia to reform and rebuild to position the economy on a stronger and more sustainable footing. This article is a collaborative effort between the Ministry of Finance and Malaysia Productivity Corporation (MPC) to analyse factors that drive Malaysia’s competitiveness and the Government’s efforts to address challenges that hamper productivity growth and competitiveness. Moreover, this will highlight the importance of Government efficiency and regulatory reforms in driving Malaysia towards greater global competitiveness. HPAEs encompasses Hong Kong, Republic of Korea, Singapore and Taiwan (the Four Tigers); Indonesia, Malaysia and Thailand (three of the newly industrialized economies – NIEs); and Japan. 1 32 economic outlook 2023
55. chapter 1 economic management and prospects Malaysia ’s Position in the World Competitiveness Index Malaysia ranked 12th in the 2014 World Competitiveness Yearbook (WCY) of the Institute for Management Development (IMD). However, the position continuously decelerated and dropped by seven positions from the 25th spot in 2021 to the 32nd in 2022, as shown in Figure 1.3.1. Hence, Malaysia is at risk of losing out on competitiveness in comparison to high-income economies such as Hong Kong and the Republic of Korea, as shown in Figure 1.3.2. FIGURE 1.3.1. Malaysia’s Position in the World Competitiveness FIGURE 1.3.2. Correlation between Competitiveness and GNI per Capita Ranking 10 Ranking 10 0 Hong Kong 12 Singapore 10 15 China 20 20 30 25 Malaysia United States Republic of Korea 40 25 50 30 60 100,000 90,000 80,000 70,000 60,000 50,000 High-income threshold 40,000 70 30,000 2017 2018 2019 2020 2021 2022 2016 2012 2013 2014 2015 2005 2006 2007 2008 2009 2010 2011 35 20,000 32 10,000 Declining phase GNI per capita (USD Atlas method) Source: The Institute for Management Development (2005-2022) Source: The Institute for Management Development (2022), World Bank and selected National Statistical Office Based on the four categories highlighted in the 2022 IMD Report, the government efficiency category dropped from 30th to the 38th position dragged down by the business legislation subcategory. At the same time, the business efficiency category fell from 24th to 38th due to low scores in the productivity and efficiency subcategory. Meanwhile, the infrastructure category fell from 32nd to 37th position due to matters related to health and environment; and education subcategories. Nevertheless, in the economic performance category, Malaysia performed strongly to improve from the 15th to the 12th position, indicating a favourable economic recovery and signalling a positive growth trajectory, as shown in Figure 1.3.3. economic outlook 2023 33
56. chapter 1 economic management and prospects Education Health and Environment Scientific Infrastructure Technological Infrastructure Basic Infrastructure Attitudes and Values Management Practices Finance Labour Market Productivity & Efficiency Societal Framework Business Legislation Institutional Framework Tax Policy Public Finance Prices Employment International Investment International Trade Ranking Domestic Economy FIGURE 1.3.3. Malaysia’s Competitiveness Performance Excellent (1-10) Average (11-40) Below average (41and below) 45 50 50 Economic Performance Government Efficiency 44 46 Business Efficiency 44 Infrastructure Source: The Institute for Management Development (2022) In Malaysia’s journey to become a high-income nation, issues surrounding the reallocation of economic resources, limited technology creation and structural issues in the labour market such as skills gap and low female labour force participation rate need to be addressed accordingly (Mottain, M., 2021). In addition, World Bank states that accelerating productivity growth is Malaysia’s central economic policy challenge and a key factor in building a more competitive economy2. The report also revealed that, among others, Malaysia has a lower share of employment in the skilled category. Further, in the input to the IMD WCY Report 2022, MPC has identified four challenges faced by Malaysia, which include: • expanding regulatory reform initiatives to micro levels through public-private collaboration; • enhancing technological adoption to increase productivity at the firm level; • accelerating talent development initiatives to keep up with new and emerging job challenges and nurture a future-ready workforce; and • strengthening productivity and competitiveness through mindset change and creativity. Despite the challenges, Malaysia is committed to improve its performance and targets rankings under the 12MP including to reach the top 30 in the Corruption Perceptions Index and top nine in the Government Efficiency category of the IMD WCY (EPU, 2021). In addition, Malaysia continues to pursue a target of 80% end-to-end Government online services by the year 2025. Malaysia’s Productivity Productivity is  a cornerstone of a nation’s economic growth that measures efficiency by comparing the outputs with the inputs used for goods and services. Productivity is closely linked to competitiveness whereby higher productivity, among others, will benefit a country in terms of expansion of capital investment thus attracting foreign investment. Productivity will also lead to the 2 Aiming High-Navigating the Next Stage of Malaysia’s Development (World Bank, 2021). 34 economic outlook 2023
57. chapter 1 economic management and prospects development of personal skills which could translate to higher wages and salaries thus improving standard of livings (MPC, 2019). Realising the importance of sustaining higher productivity, under the Eleventh Malaysia Plan, Malaysia targetted labour productivity to be raised from RM77,100 per worker in 2015 to RM92,300 by 2020 (EPU, 2015). To this note, Malaysia exceeded the target earlier in 2019, recording RM94,138 per worker. However, due to the COVID-19 pandemic, Malaysia’s productivity growth contracted by 5.3% at RM89,106 per worker in 2020. In 2021, Malaysia’s labour productivity performance started to regain the momentum, rebounding by 1.8% with a level of RM90,697 per worker. Malaysia Productivity Blueprint (MPB) was introduced in 2017 as a strategy to raise labour productivity (EPU, 2017). The MPB outlines five strategic thrusts to ensure holistic and systematic change across all economic sectors, as shown in Figure 1.3.4. Furthermore, improving productivity continues to be emphasised in the 12MP and the Shared Prosperity Vision 2030. The 12MP has identified boosting productivity growth as one of the key priority areas and as the way forward to strengthen the macroeconomic fundamentals as well as restore the country’s growth momentum. In this regard, labour productivity growth is expected to register at 3.6% per annum during the 12MP period. FIGURE 1.3.4: Malaysia Productivity Blueprint – Five Strategic Thrusts THRUSTS 1 Building Workface of the Future 2 Driving Digitalisation and Innovation 3 Making Industry Accountable for Productivity 4 Forging a Robust Ecosystem 5 Securing a Strong Implementation Mechanism NATIONAL INITIATIVE Enforce structural changes to the workforce by formulating a comprehensive labour market policy, including reducing reliance on low-wage and low-skilled workers Conduct national strategic workforce planning in anticipation of changing needs across the sectors Strengthen readiness, knowledge and adoption of technology by enterprise across sectors Strengthen digitalisation among SMEs through e-commerce and adoption of innovative technology Gradually reduce the reliance on non-critical subsidies, and ensure liberalisation efforts are linked to productivity outcomes Realign key grants, incentives, soft loans and other funding mechanisms to productivity metrics and outcomes Accelerate efforts to enhance whole-of-government approach towards addressing regulatory constraints Establish an accountability mechanism for the implementation of regulatory reviews by the government Institutionalise a strong coordination and governance model to secure implementation certainty across government, sector, and enterprise levels Launch nationwide productivity movement to inculcate a stronger culture of productivity across all segments of society Source: Economic Planning Unit, Prime Minister’s Department (2017) The Drivers of Malaysia’s Competitiveness Based on the MPB and strategies in the 12MP, a solid productivity foundation was outlined to accelerate economic growth momentum and boost global competitiveness. This feat will be accomplished through venturing into knowledge-intensive and high value-added economic activities that lead to generating high-paying jobs. More importantly, the Government has recognised the significance of effective talent development, rapid digital technology adoption as well as quality regulations as the key to accelerating higher productivity. economic outlook 2023 35
58. chapter 1 economic management and prospects Effective Talent Development Talents are crucial assets to productivity growth . Based on the IMD World Talent Ranking 2021, economies with high productivity growth achieved commendable positions in the global talent ranking, denoting the significance of human resources to productivity performance. Realising the importance of talent in driving sustainable growth, there is a need for the country to implement a holistic and comprehensive talent ecosystem3. This initiative is important to ensure a sufficient pool of home-grown talents to drive productivity and innovative-led business growth. Towards this end, MPC has been working on talent development with the relevant stakeholders to build a productive workforce of the future. This effort will address the shortage of workers and provide opportunities for low performers in the national education system through dedicated programmes, the latest being Academy in Factory (AiF). Digital Technology Adoption The pandemic COVID-19 has alerted the need to rapidly shift to digital technology, which is essential under the new norms. Digital adoption provides a suitable avenue for all sectors to engage and collaborate virtually in order to increase productivity. The Government is committed to accelerating technology adoption through the establishment of the National Council of Digital Economy and Fourth Industrial Revolution (MED4IR). The Council provides clear and coherent policies on digitalisation and technology to scale up capabilities in technological advancements and spur the growth of the digital economy. In supporting the plan, the “Go B.I.G4 with Digital” initiative which focuses on catalysing productivity growth through technology adoption was introduced by MPC in 2020. The initiative advocates the need for a mindset transformation among leaders to unleash the industry’s potential. In promoting and boosting the adoption of digital technology, the initiative emphasises three key strategies, namely Nudging Chief Executive Officer (CEO)5, Advisory Programme6, and Experiential Learning7. Essentially, digital transformation driven at the top level will lead to huge leaps in productivity and performance. Quality Regulations The Worldwide Governance Indicators (WGI)8 by the World Bank (2021) capture regulatory quality as a perception of a government’s ability to formulate and implement sound policies and regulations that enable and promote private sector development. Meanwhile, Organisation for Economic Co-operation and Development (2009) defines regulatory quality as countries’ ability to manage both the stock of existing regulations and the flow of new regulations to sustain growth and maximise welfare. Most OECD countries have introduced burden-reduction programmes by adopting Regulatory Impact Assessment (RIA) in an effort to counteract the growing layers of red A loose interconnected relationship between talent and the environment in which it operates such as education system that mould them, the training and incentive at work place, and the norms and culture they live in. It encompasses the whole infrastructure, process and environment of talent development which enable the system to produce and educate, creative and well-rounded human capital (Baharin, I., & Abdullah, A., 2011). 4 B.I.G refers to Breakthrough results, Integrity and Good values. 5 Programme of mindset change among business leaders in transforming their business operation towards productivity enhancement through digitalisation. 6 Program that the companies are matched and arranged for a one-to-one session between the industry leader and advisor or mentor from the industry. It’s aims to assist businesses in rebuilding capacity and capabilities to bounce back after the pandemic. 7 Hands-on programme where the participants learn internet of things (IoT) and Artificial Intelligence (AI), and they are required to develop Proof of Concepts. 8 WGI consists of 6 broad dimensions of governance namely Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption 3 36 economic outlook 2023
59. chapter 1 economic management and prospects tape . Regulatory quality is one of the essential external factors that can enhance the ease of doing business and create a supportive business ecosystem. In facilitating businesses, quality regulations would form a competitive and supportive business ecosystem, leading firms, industry, and the economy in totality to be more productive and competitive. Malaysia’s performance in regulatory quality registered a consistent improvement between 2011 and 2020, implying the effectiveness of the Government’s regulatory reform initiatives. In 2020, Malaysia scored 74 percentile rank in Regulatory Quality Indicator, indicating the need to further improve the ease of doing business. Good regulatory governance is essential for the profitability of the private sector (Malaysian Institute of Economic Research, 2022). Meanwhile, burdensome regulations lead to excessive red tape that results in a slowdown in productivity (International Business Review, 2022). In moving towards a high-income nation status, the country’s regulations must be agile and responsive in responding to the current needs and requirements; transparent in formulation and delivery; as well as inclusive and comprehensive (Naharul, M. A., 2022). Initiatives in Driving Malaysia Towards Global Competitiveness In strengthening Malaysia’s productivity, several initiatives have been implemented and successfully charted the encouraging results. Among the initiatives are as follows: • The “Silent Implies Consent” approach by several technical agencies has expedited the issuance of the Certificate of Completion and Compliance for construction projects. The method has managed to clear the regulatory backlog and enable businesses to restart operations faster during the movement control orders. • The adoption of agile regulation approach in the Express Construction Permit initiative (E10) which reduces red tapes in approval processes will expedite construction projects and issuance of licence for businesses to operate within a shorter timeframe. It leads to compliance cost savings, generates faster revenue, creates new job opportunities and supports the domestic economy. • The National Policy on Good Regulatory Practice (NPGRP) was introduced in 2021 to improve the quality of new as well as existing regulations to be more efficient, effective and transparent, replacing the National Policy on the Development and Implementation of Regulations (NPDIR) (MPC, 2021). NPGRP acts as an instrument to formalise the development processes of quality regulations and emphasises on the use of RIA for informed rule-making decisions (Izham, M. I. M., 2020). It provides guidance on the implementation of GRP for government institutions in developing policies and regulations. The most significant improvement in the NPGRP involves expansion of scope to focus on all regulations affecting economy, social and environment as compared to NPDIR which only applied to all regulations relating to business, investment and trade. Other improvements include clarification of roles and responsibilities of the oversight body (National Development Planning Commission-NDPC), the implementing agency (MPC), and regulators; update of old and issuance of new guiding documents; and flexibility and ease in the process through the Initial Assessment and Final Assessment phases (Izham, M. I. M., 2021). Through NPGRP, public sector governance would be strengthened and at the same time helps to improve the country’s productivity by stakeholders’ involvement in rule-making process. economic outlook 2023 37
60. chapter 1 economic management and prospects • The Malaysian Licensing Guidelines (MyGP) Portal, a one-stop platform was established in 2021 to facilitate the setting up of businesses. The platform helps to ensure transparency and efficiency in business application approvals by compiling and centralising all guidelines and information related to business licensing and permits application. • The Malaysia Mudah programme (MyMudah) was introduced in 2020 as a strategy to mitigate the regulatory challenges due to the COVID-19 pandemic as well as a platform to facilitate fast-forward solutions to cushion the impact. To further strengthen and scale up the programme through the whole-of-government approach, Economic Action Council initiated the establishment of MyMUDAH Unit at business associations, ministries, government agencies, state governments, and local authorities. This initiative will help to reduce regulatory compliance costs by 25% per annum (MPC, 2020), and ensure good quality, comprehensiveness, agility, and responsiveness of regulations to boost Malaysia’s productivity. Conclusion Malaysia has a strong potential for robust productivity growth which is in line with the 12MP aspiration to be a high-income nation. The Government has implemented several initiatives to strengthen Malaysia’s productivity which include accelerating shift to digital technology, undertaking effective talent development, strengthening public-private collaboration, adopting good regulatory practices and enhancing innovation that could pave the way to advance the economy. The strengthening of Malaysia’s productivity will provide a solid foundation to accelerate economic growth momentum and boost Malaysia’s global competitiveness. New Growth Areas Economy In accelerating the transformation into a highincome nation amid the economic challenges, Malaysia needs to develop new growth areas as its comparative advantage. In view of this, it is important to identify the growth areas that will increase Malaysia’s competitiveness and provide a conducive investment ecosystem through the formulation of facilitative policies to accelerate the development of the new growth areas. To support the ecosystem, the National Investment Aspirations (NIA) is expected to attract quality investments through the provision of incentives, modernised industries, and the creation of high-paying jobs. Inclusivity and Sustainability 38 economic outlook 2023 In achieving inclusive and sustainable economy, the Government needs a robust policy tools to monitor the progress of inclusivity and sustainability. The MultiDimensional Poverty Index (MPI) which was developed in 2016, is used to measure the non-monetary aspects of poverty such as access to education, healthcare, digital connectivity and other standard of living dimensions. Being a robust policy tool, the MPI could help the effort to achieve inclusive development and can be mainstreamed to ensure shared prosperity among the rakyat, including addressing Bumiputera participation in the economy. The multi-dimensional aspects of MPI can also support the tracking of Malaysia’s progress in implementing the sustainability agenda.
61. chapter 1 Food Security Malaysia will remain vulnerable to food insecurity if the heavy reliance on imports persists , particularly cereals, vegetables and fruits. Among the food items that recorded less than 100% Self-Sufficiency Ratio (SSR) are sweet potato (75.6%), coconut (66.6%), rice (63%), round cabbage (37.5%) and chilli (30.9%). The situation is made worst by the global food inflationary pressures whereby the value of agricultural imports increased about four times in 2021 compared to 2000, translating into a larger deficit of RM24.9 billion. In addition, lack of focus on food crop cultivation and the reduction in land for agriculture use contribute towards food security and self-sufficiency issues. In 2016, the size of agricultural land for food crops was 918.2 thousand hectares but declined to only 868.7 thousand hectares in 2020 (DOSM, 2021)3. Government Governance and Service Delivery The IMD World Competitiveness Yearbook (IMD, 2022) reports that Malaysia’s ranking in 2022 is at 38th spot compared to 30th in 2021. Meanwhile, Transparency International’s 3 economic management and prospects Corruption Perception Index which measure the perceived level of public sector corruption placed Malaysia at the 62nd position in 2021, a drop of five places from 57th position in 2020. As the international ranking is a reflective of the governance and institutional quality of a country, Malaysia will continue to increase the level of its governance in order to improve the country’s performance and reputation. Improving efficiency, transparency and service delivery remain the focus of the Government. It is important for the Government to provide quality services to accelerate post-pandemic recovery and support efforts to achieve a high-income nation while facing tough scrutiny over its fiscal management in order to sustain economic stability. Disaster Risk Management Malaysia generally experiences various natural disasters. However, the recent floods and landslides which occurred in late 2021 and early 2022 in some parts of the country have revealed the importance to enhance Malaysia’s preparedness against any disasters. In addressing the recent flood catastrophe, the Government disbursed around RM2 billion for immediate support and relief efforts to help the affected rakyat. MOF’s calculation based on the data of planted area for selected crops (2016 – 2020) by DOSM. economic outlook 2023 39
62. chapter 1 economic management and prospects feature article 1 .4 Climate Risks and Impacts on the Economy Introduction The world is currently facing a looming climate crisis that will have overarching impacts on the global economy and countries’ development pathways. Growing concerns about global warming and climate change which impact energy, water and food security; slow down economic growth; as well as increasing occurrences of natural disasters, have become central to the global agenda in the past decades. As human activities such as industrialisation and urbanisation have intensified, the amount of greenhouse gases (GHG) released into the atmosphere have also risen, resulting in the increase of global temperatures and the changing of climatic systems in an unprecedented way as shown in Figure 1.4.1. According to Intergovernmental Panel on Climate Change (IPCC) (2021), it is reported that these will continue to worsen in the coming future, putting many countries at risk. FIGURE 1.4.1. Cascading Impacts of Rising Greehouse Gas Emissions TY LA ER O S AV AI BIL IT Y GHG N T EA SE Q A Y U IT C PRE AS R UR H ER PA T TE O RN N TR AL EN CH DS AN GE TY GL RI T Y LA EL EX TR E Y ON I AT IT O CU SE L /W S EC TE WA AL S LI IT W AT E A ERATURE R IS MP E TE UR EC U IC SE RA TI RS E AT HE R SE C AI AV OM MI G EV M GY R IO N TE CLI M A CO O L I N G N E E D S OCI RE D U C E A G R I C U LT U R E P ROD UCTIVITY ECON I S EA S E A L D I SA ST E NATUR Y BI RI IT D E NE R TY E AT W LI AB I L I L ST CA PA T TE RNS CO S NDOIL ITI ST R E ON N GTH E FERTI LIT Y UR DE CT S HY TRUION DR S A R T A T IO N INF NDI FO CO OD S EC URI TY O OP GE I LI T BIO IP SI DIVER OB AL E HE M E A CO N O M I C AL SU RES TH PR E AS SU R E TY SH IF T ER AT ON T W SI S AL TR U INS TO U RIS M Source: Ministry of Finance, Malaysia Malaysia is not spared from the impacts of global warming and climate change. The Third National Communication dan Second Biennial Update Report to the UNFCCC highlights that an increase in the mean surface temperature of the country will lead to a rise in sea levels as well as a shift in rainfall patterns in terms of occurrences and volumes. The overall impacts of climate change are expected to be far-reaching and will affect various sectors that are crucial to Malaysia’s economy. In the absence of effective interventions, there will be higher risks to energy and water supply, food security, tourism, and the rakyat’s wellbeing as shown in Figure 1.4.2. The global move towards addressing the climate crisis including unilateral actions by certain countries will also impact the nation’s economy and fiscal position, if not properly addressed. 40 economic outlook 2023
63. chapter 1 economic management and prospects FIGURE 1 .4.2. General Climate Risks and Impacts in Malaysia Excess GHG Emissions from Human Activities Emissions increased from energy, transport, agriculture, waste & land use sectors for development Decreased Quality of Life Changes in community lifestyle, increasing inequality & risk, migration and conflict Source Degradation Loss of food & clean water resources, loss of jobs & income sources Increased Frequency & Intensity of Natural Disaster Damage to infrastructure & crops, & loss of life Extreme Temperature Rises Illness, diseases & death, damage to infrastructure & crops Changing Patterns of Biodiversity Spread of disease vectors and pests, change in habitat, movement patterns and animal & plant life suitability Sea Level Rises Loss of clean water source, coastal land loss, seaside settlement sedimentation, salt water intrusion Changing Precipitation Patterns Uneven and extreme distribution of rain - excess leading to floods, reduced leading to drought Source: Ministry of Finance and Ministry of Environment and Water, Malaysia Climate Risks And Impacts In Malaysia Food And Water Security Malaysia’s water supply comes mainly from the rain that it receives annually, channeled into the rivers and lakes from the mountain and forest areas. However, the increase in temperature and prolonged drought will cause ground water, lakes and other water bodies to dry up. On top of that, heavy precipitation and floods will also result in the deterioration of the water quality. These changes will affect soil fertility, crop conditions and harvest productivity. The increase in temperature will put stress on livestock and reduce food produce yield. The temperature increase coupled with rising sea levels will also heavily affect coastal agricultural activities and the fishery industry, through increased erosion, saltwater intrusion, storms and unpredictable monsoon seasons. A rise in the ocean’s temperature will have a negative impact on coral reefs, with massive bleaching occurrences as well as reducing local fish and seafood supply drastically. All these factors will adversely impact the nation’s overall clean water availability and food production capabilities. As a net food importer country, Malaysia is considered as having some level of overdependency on food and agricultural imports. As seen during the COVID-19 pandemic and the Russia-Ukraine conflict, other countries could potentially reduce their exports which would result in supply shocks and increased prices. A decrease in domestic agricultural productivity as well as import disruptions will jeopardise the country’s food security and export earnings, putting the whole economy and nation at risk. Natural Disaster Temperature and rainfall fluctuations will weaken the structures of soils, rocks and the state of the earth’s surface, contributing to an increase in the frequency and magnitude of geological disasters like land- and mud-slides. Flooding and drought event frequencies will also increase at a varying degree, between regions and periods, resulting in economic and social repercussions to the surrounding communities, incurring great losses to the nation. In 2007, the floods in Kota Tinggi, Johor caused about RM2.4 billion of economic, infrastructure and agricultural losses. The economic outlook 2023 41
64. chapter 1 economic management and prospects 2014 floods that hit the nation cost the Government RM1 .5 billion, while the floods in December 2021 cost the Government around RM2 billion for immediate disbursements, with an additional RM15 billion committed to flood mitigation efforts until 2030. In addition, coastal protection and improvement efforts to counter the rising sea levels will also be costly and challenging. Managing floods, rising sea levels and other related disasters will increase the government’s fiscal burden. Tourism The nation’s coastal area and natural landscape are highly visited tourist destinations. However, coastal wetland ecosystems such as salt marshes, mangroves, seagrass beds and coral reefs will be heavily altered if the sea level rises, climate fluctuates as well as temperature increases. These changes will have an impact on local livelihoods as well as the tourism industry. With rising sea levels, tourism infrastructures will face higher risks of inundation. Increased frequency of flooding, landslides, water rationings and coral bleaching would also affect the country’s attractiveness. As the recent pandemic highlighted, reduced tourism activities will impact tourism-related industries, and put the livelihood of communities at risk. Social Security The increase in heat and frequencies of weather extremes will also see an increase in water-related sicknesses and diseases. The warmer climate will exacerbate the spread of tropical diseases such as malaria and dengue. Drier conditions and heat waves will increase wildfire incidences thus triggering haze events, leading to increased cases of respiratory illnesses. These health impacts will add pressure to the national health system and affect the overall productivity of the nation. Climate change will cause more populations to be displaced and forced to migrate. Conflicts over the depleting resources, famine from drought and floods, as well as increased extreme weather events, could intensify geopolitical tension and climate refugee (IPCC, 2022a). Locally, the impacts of a changing climate, coupled with the advancements in technology and education as well as the growing population, could potentially lead to more migration of the population into the cities, putting pressure on the overall resources. Energy Malaysia is heavily dependent on available and affordable energy for its consumption and development purposes, from electricity generation to power industries, technologies and homes, as well as to the petrol and diesel fuelling vehicles and machinery. In ensuring that energy is easily accessible by the rakyat, the Government spends a large amount annually on energy subsidies in the downstream segment, including petrol and diesel. Yet, blanket subsidies are unsustainable and put pressure on the fiscal space of the country. Being pollutive and finite as well as subject to volatile market fundamentals and geopolitical situations, fossil fuels are risky options for sustainable development moving forward. Economy In the global move towards decarbonisation, GHG emissions will have an influence on the marketability of businesses, and have even become a new form of tradable commodity, generally known as carbon. Nowadays, consumer demand for lower-carbon products and services is gaining traction. The climate economy has been tougher than before as the increasing prices for energy and basic resources have generally pushed up the operating and production costs, impacting profit margins. As most businesses and economies around the world are adapting to green, climatefriendly, low-carbon and sustainable products and services, more ESG1-compliant companies have improved their ways of doing business and shifted away from the past norms. 1 ESG refers to a system to measure the sustainability of a company or investment in three specific categories, namely Environmental, Social and Governance. 42 economic outlook 2023
65. chapter 1 economic management and prospects On the international front , carbon pricing policies are being adopted by both developed and developing nations to advance the climate change agenda. The European Union (EU) has gone to the extent of instituting the Carbon Border Adjustment Mechanism (CBAM) regulation that targets to impose some ad-valorem amount on the imports of carbon-intensive products related to certain industries. Tighter regulations and requirements on products implemented by certain economies such as the EU, will have an impact across the supply chain locally and internationally. As the EU scrutinises GHG emissions across the supply chain, exports that fail to meet the requirements will need to adhere to additional taxation or face the possibility of being prohibited from entering the EU market. The implementation of the CBAM will weigh on trade competitiveness among the EU’s trading partners, including Malaysia. Subsequently, more countries are in the midst of adopting similar mechanisms to safeguard their industries and economy, in their efforts to reduce GHG emissions. As it stands, the use of market mechanisms is expected to gain traction whereby each country will be scrutinised by its key climate parameters and the possible impacts on communities, livelihoods and the economy. In addition, international organisations such as the World Bank Group (WBG) and the Asian Development Bank (ADB) conduct and publish country profiles on climate risk that highlight every country’s economic standing and its attractiveness to investors and businesses. Current Efforts And Way Forward The Government is aware that without proper planning and preparedness, global warming and climate change will put pressure on the country’s economic and social standing in the long run. Therefore, the National Policy on Climate Change and other relevant policies and measures were formulated to guide the country in navigating the challenges ahead as shown in Figure 1.4.3. Latest, the Twelfth Malaysia Plan (12MP) 2021 – 2025 guided by the pillars of sustainability (economy, social and environment) aims to achieve net-zero GHG emissions by as early as 2050. FIGURE 1.4.3. Among Malaysia’s Climate-Related Policies and Initiatives National Policy on Climate Change The National Renewable Energy Policy and Action Plan 2019 Twelfth Malaysia Plan (12MP) (2021-2025) The National Energy Efficiency Action Plan (NEEAP) Government Green Procurement (for GGP) Feed-InTariff (FIT) 2010 The Green Technology Financing Scheme (GTFS) 2011 2012 National Water Resources Policy (DSAN) Tax Exemption Energy Efficient Vehicle 2013 National Conversation Trust Fund (NCTF) 2014 FTSE4Good Bursa Saham Malaysia Index 2015 Ecological Fiscal Transfer (EFT) The National REDD Plus Strategy 2016 Net-Energy Metering (NEM) Large-Scale Solar (LSS) 2017 2018 Sustainable and Responsible Investment (SRI) 2019 The National Energy Policy (2021-2040) Voluntary Carbon Market (VCM) The Water Sector Transformation Agenda 2040 2021 Integrated National Financing Framework (INFF) 2022 Long-term Low Emission Development Climate Change Strategies and Principle(LT_LEDS) Based Taxonomy (CCPT) Sustainability Sukuk Tax Exemption Electric Vehicle Source: Ministry of Finance, Malaysia In this regard, Malaysia will develop the Long-Term Low Emission Development Strategies (LT-LEDS), which will outline strategies and actions for GHG mitigation, particularly for the main economic sectors. The LT-LEDS will form the foundation as well as determine the way forward and targets in achieving the net-zero emissions aspiration. economic outlook 2023 43
66. chapter 1 economic management and prospects Energy Renewable energy sources such as wind and solar , emit little to no GHG and are readily available and in most cases cheaper than coal, oil or gas (IPCC, 2022b). The National Renewable Energy Policy and Action Plan was launched in 2009 to spearhead renewable energy uptake in Malaysia. This is further strengthened by the National Energy Policy 2021-2040 launched in 2022, which aims to continue meeting the nation’s growing energy demands, while ensuring a cleaner and more resilient economy to achieve a net zero pathway. Based on the energy mix in Malaysia, hydropower is currently the highest contributor to the total renewable energy use. However, large hydropower could be affected as river sources deplete as well as siltation and sedimentation increase. Therefore, changing climate and weather patterns must be taken into consideration when planning for the use of hydropower, to ensure the effectiveness and success of projects like the Bakun hydroelectric power plant as well as other hydropower plants. On the other hand, solar power has the potential to contribute more to the energy mix. Being one of the main suppliers of solar-photovoltaic panels in the world, Malaysia’s local uptake still needs to be further encouraged. With the introduction of the Net-Energy Metering (NEM) system, excess energy produced from solar panels fixed on private or commercial buildings can be sold back to the grid based on the Feed-In-Tariff (FIT) and Large-Scale Solar (LSS) systems, creating a new economic market ecosystem. Furthermore, the sustainable waste management industry could offer a dynamic and profitable revenue stream to the economy, as well as a potential alternative energy source through biomass and biogas utilisation. Malaysia currently exports some of its waste products to other countries for this purpose, for example, used cooking oils exported to Singapore to be further processed into aircraft fuel; and palm oil mill effluents (POME) to Japan for biomass energy production. The advancements in the waste management industry, including recycling, upcycling and biofuel generation, as well as the push toward a circular economy2 and waste-to-wealth economy3, will open new revenue streams for local businesses and create new job opportunities. Moving forward, the Government through relevant agencies with the support of public and private research institutions, is looking into other sources of potential alternative energy such as wind, thermal and wave. Reducing energy consumption through energy efficiency measures4 is one of the most costeffective options utilised by the Government in addressing the economic impacts of the rising fuel prices. The National Energy Efficiency Action Plan (NEEAP) outlines strategies to encourage efficient use of electricity and promote energy-efficient products among industries and consumers. Meanwhile, the Government Green Procurement (GGP) initiative has encouraged the utilisation of energy-efficient products as well as other green products and services in government buildings since 2013. In 2021, the GGP was valued at approximately RM616.8 million, involving 27 ministries. Mobility As part of the energy used for industries and the public, mobility is another key category that needs to be addressed, especially through cleaner transportation technology. With the rising fuel prices, energy-efficient vehicles (EEV) and alternative-energy vehicles (AEV) present a solution for more sustainable mobility. The Government provided special tax exemption for the purchase of EEVs in 2012 which include hybrid vehicles (HV) and electric vehicles (EV). As more car manufacturers started producing HV options, the market experienced a booming period in the past decade. Additionally, the Government has provided a special tax exemption on fully battery- 2019 United Nations Environment Assembly defines circular economy as a model in which products and materials are designed in such a way that they can be reused, remanufactured, recycled or recovered and thus maintained in the economy for as long as possible. Waste-To-Wealth, towards a Sustainable Zero-Waste in a Circular Economy: An Overview (2019) defines Moving waste from a platform of exhausted utility to valuable and desirable level. 4 Some of the key initiatives are Promotion of 5-Star Rated Appliances, Minimum Energy Performance Standards (MEPS), Energy Efficient Building Design and Promotion of Cogeneration 2 3 44 economic outlook 2023
67. chapter 1 economic management and prospects powered EVs to further encourage the uptake among consumers . Moving forward, the Government will look into enhancing the EV ecosystem, and the potential of the AEV industry including hydrogen-powered vehicles. Water Malaysia’s National Water Resources Policy (DSAN) was launched in 2012 to ensure more sustainable and integrated management of water resources, including sustainable utilisation of groundwater sources; as well as the preservation and management of water catchment areas and river basins. The Water Sector Transformation Agenda 2040 was further highlighted in the 12MP to steer the development of the sector in ensuring water security and sustainability as well as to emphasise the importance of the water sector for the country’s economic development. Specialised education and awareness programmes for the public will be further enhanced to encourage proper practices towards water usage. Moving forward, the water sector will be developed as a dynamic growth engine while ensuring water security in the country. This will be achieved by empowering people as drivers of water sector transformation, strengthening governance, enhancing data-driven decision-making, as well as developing sustainable and cost-effective infrastructure. Food The Government will increase its efforts in advancing a more resilient agriculture ecosystem to address the issue of food security. Proper irrigation systems and infrastructure will be put in place to supply farms and plantations with adequate water at all times, including during the dry season. Selected and modified crop varieties that can withstand drought and low water supply are also being introduced to ensure productive yield. Subsequently, effective climate resilient technology and sustainable agricultural practices will continue to be adopted to enhance crop yield and productivity, thus reducing the dependency on food imports. In addition to the programmes planned on land, efforts in conserving coastal ecosystems as breeding and feeding grounds for marine life will be enhanced to ensure the sustainability of the blue economy5. Overall, proper infrastructure development, stakeholder engagement and capacity building for industries are crucial in ensuring the sustainability and resilience of the agriculture sector. Tourism and Environment Effective implementation of sustainable forest management through preservation and conservation programmes for biodiversity, carbon sinks and natural assets both on land and underwater, is crucial to promote the livelihood of local communities and the tourism industry. Ecotourism and naturebased tourism will also be encouraged to reduce impacts on the country’s natural heritage. In this regard, efforts to support biodiversity and ecosystem conservation and management will be further strengthened through the REDD Plus6 mechanism, National Conservation Trust Fund (NCTF) and Ecological Fiscal Transfers (EFT), among others. Society and Development Malaysia will continue to increase its preparedness and adaptation capabilities to mitigate the impact of climate change to safeguard the rakyat and ensure continuous economic growth. The Government will continue to ensure sufficient food and water supplies to meet the growing demand, apart from wellmanaged and evenly-distributed resources for the wellbeing and sustainable growth of the economy. Measures to mitigate and prevent climate change-related disasters will be strengthened, as well as enhance the conservation of natural ecosystems. Furthermore, effective town planning incorporating proper climate change adaptation and mitigation aspects will be implemented to ensure climate-friendly and -resilient cities and towns with low carbon technologies, greener landscapes and better connectivity. World Bank defines blue economy as sustainable use of ocean resources for economic growth, improved livelihoods, and jobs while preserving the health of ocean ecosystem. REDD Plus – Reducing Emissions from Deforestation and Forest Degradation 5 6 economic outlook 2023 45
68. chapter 1 economic management and prospects Economy In line with the global trend for decarbonisation , the Government will put in place appropriate measures to strengthen Malaysia’s economic development. Malaysia is looking into the feasibility of introducing carbon pricing mechanisms to further encourage industries in ensuring their products continue to be competitive in the international market. The Government will assess the most suitable mechanism to entice industries to participate in domestic carbon trading. The implementation of the Voluntary Carbon Market (VCM) by the end of 2022 by Bursa Malaysia will utilise the Verra standards to certify carbon credits traded on the platform. The credits provided are of high-quality to drive large-scale investment toward high-impact activities. The country’s efforts to transition towards a net-zero pathway will see the creation of new economic sectors. The emergence of climate-friendly or low-carbon technologies, businesses and industries will further strengthen the economy through the diversification of markets, job creation and revenue generation. These efforts will be backed by strong initiatives from the financial sector as well. The number of approved Sustainable and Responsible Investment (SRI) funds has grown from two when it was first launched in 2018, to 56 funds as of June 2022. The FTSE4Good Bursa Malaysia Index initiated in 2014 recognises public listed companies (PLCs) with good practices, and the number of constituents has more than tripled since its inception. The Principles for Good Governance (PGG) for Government-Linked Investment Companies (GLICs) will push governance and the overall ESG agenda within the GLICs, while the Climate Change and Principle-Based Taxonomy (CCPT) will support businesses in their transition to low-carbon practices. In Islamic Finance, Malaysia has pioneered the green Sukuk and the social impact Sukuk through the Securities Commission’s SRI Sukuk framework, and continues to lead the Sukuk market, accounting for roughly 45% of global Sukuk outstanding. The issuance of the sovereign USDdenominated Sustainability Sukuk in April 2021 was a success, resulting in the issuance of a new domestic Ringgit-denominated RM4.5 billion in 2022. The proceeds of these sukuks will be used for sustainability programmes and projects, as listed in the Government of Malaysia SDG Sukuk Framework The Green Technology Financing Scheme (GTFS), introduced in 2010 to encourage local companies and entrepreneurs to participate in green technology-based projects, received an allocation of RM2 billion under the Budget 2022. This allocation will support the issuance of SRI Sukuk and green bonds and is open for application until 31 December 2022. Moving forward, the Government will incrementally put in place the institutional and regulatory frameworks to provide a proper ecosystem that fosters climate actions by all stakeholders in the country. The establishment of an Integrated National Financing Framework (INFF), and the development of a Sustainable Finance Roadmap, will assist in understanding the current financing landscape and identifying existing and future financing gaps towards ensuring ample and adequate finance in achieving net-zero aspiration. Conclusion Global warming and climate change will have overarching effects on Malaysia’s development path, economic growth and rakyat’s wellbeing. Many of the problems faced due to the changing climate have no simple solution as they cut across fields of governance, science, technology, economics, and communication. The solutions require a major paradigm shift in the behaviour of individuals as well as business and government operations. The Government will continue to address the climate risks in a whole-of-nation approach by engaging and collaborating with agencies, institutions, businesses, and communities. The economic and financial implications of addressing the impacts of global warming and climate change will be thoroughly examined, covering short-, medium- and long term risks and opportunities. This will enable the formulation of proper and effective policies and response measures in ensuring a sustainable economy and resilient nation. 46 economic outlook 2023
69. chapter 1 Public Health The healthcare system in Malaysia showed a significant achievement in the provision of quality healthcare services , especially during the pandemic period. However, there is a need to overcome several issues particularly shortages of technical and health personnel including specialists, long waiting time for treatment, lack of advanced facilities, and fragmented health databases of public healthcare institutions. Improvement in terms of the accessibility to healthcare services in the remote areas is also required, especially in Sabah and Sarawak. Strategic Initiatives – Budget 2023 In weathering the challenging global environment while the country is in the recovery phase, the Government will continue to provide the relevant support for the rakyat and businesses. In this regard, the Budget 2023 emphasises on strengthening the momentum of recovery, building economic resilience and catalysing comprehensive reforms. Strengthening the Momentum of Recovery A holistic approach will be adopted to strengthen the momentum of recovery in improving the wellbeing of the rakyat postCOVID-19 pandemic. In view of the rising cost of living and impact of crises, the Government will continue to mitigate the risks faced by the lower income groups in the event of an economic crisis and natural calamities. Hence, the social protection system will be strengthened to broaden coverage for the rakyat against various vulnerabilities. Towards inclusive and sustainable growth, the Government will undertake development and provide public services in order to reduce disparities between regions and communities. economic management and prospects The Budget 2023 will present strategies and programmes that focus on creating a better, safer and more inclusive society. In this respect, the Government aspires to ensure the rakyat have access to employment and business opportunities to raise their income. Priority will continue to be given towards investments that generate quality employment and business opportunities, in addition to contributing towards a more resilient, competitive and future proof industry in line with the 4IR and digitalisation agenda. Measures will be introduced to encourage more rakyat to join the labour market especially women and the younger generation through employment and entrepreneurship programmes. Strategies to expedite automation and high-value added production activities in industries will also be enhanced to stimulate higher demand for skilled workers. In addition, the Government will promote the adoption of technology by farmers and agropreneurs to increase agricultural productivity. At the same time, the community especially the youths will be encouraged to participate in urban farming and modern agriculture. Given the importance of improving the quality of life, the Government aspires to meet the housing needs of the rakyat by facilitating financing facilities including for the informal sector. The Budget 2023 also aims to improve access to quality healthcare nationwide including a focus on prevention and health screenings. The Government will also strengthen investments in security and education in addition to extending the access of basic infrastructure nationwide. Towards achieving inclusivity across the country, focus will be given on the measures to upgrade and expand education and healthcare facilities as well as transportation and communication connectivity. The effort will minimise the development gap between urban and rural areas, subsequently meeting the needs of the rakyat holistically. To further elevate the quality of healthcare, the Government will strengthen its services by increasing the number of healthcare professionals and provide a conducive environment at the public healthcare facilities. economic outlook 2023 47
70. chapter 1 economic management and prospects The Government remains committed in promoting people-centric programmes that enable the rakyat to benefit from the growth and prosperity of the nation . The Budget 2023 will focus on infrastructure development, with a particular focus on improving connectivity, in terms of transportation and internet. Meanwhile, the Bumiputera agenda will continue to focus on empowering the Malays and also Orang Asli as well as natives of Sabah and Sarawak to be actively involved in the economic activities, in line with the Tindakan Pembangunan Bumiputera 2030 roadmap. In empowering the minorities and specific vulnerable groups as well as the Orang Asli to participate more actively in the community, the Budget will continue to build on partnerships between NGOs and government agencies. Special emphasis will also be given to children with special needs, senior citizens and people with disabilities to acquire specific care as well as opportunities in education. Building Economic Resilience Businesses of all sizes, were directly impacted by the COVID-19 pandemic, forcing many of them to temporarily or permanently cease their operations. With the economy fully reopened, the Government is committed to focus on strategies to restore business and economic resilience which include ensuring access to financing, driving strategic investments and reviving targetted sectors. This effort is necessary in providing a conducive environment for businesses thus increasing the nation’s competitiveness. Realising the significant contribution of MSMEs to the economy and employment, efforts will be undertaken to expand the access to financing for businesses as well as prioritising and encouraging domestic direct investment. In driving Malaysia to become a high-income and inclusive economy, the Government is committed to accelerate the creation of high growth local start-up companies and innovative firms that will increase the demand for skilled and multiskilled employees. Concerted efforts will be made to enhance the knowledge, digital capabilities as well as managerial practices of the talent pool. Additionally, specific measures 48 economic outlook 2023 to foster linkages between the MSMEs and the innovator community, including the MNCs and academia, will be prioritised to encourage and incentivise the adoption of innovative processes. Initiatives to encourage MSMEs to embrace ESG practices and undertake more green investment will also be promoted. In this regard, the Government will focus on strengthening programme coordination across ministries to ensure swift implementation of various initiatives. Six main new growth areas have been identified to accelerate Malaysia’s transformation into a high-income nation. These new growth areas, encapsulated in the Industry4WRD, the 12MP and NIA include advanced E&E, aerospace, the biomass industry, chemicals and chemical products, pharmaceuticals as well as the digital economy. Through these growth areas, the Government will focus on promoting products, utilising processes, creating high income jobs and intensifying R&D&C&I enabled by the digital economy in Malaysia. Efforts to further modernise the agriculture sector are also ongoing. In this respect, the agro-food industry will be supported by enhancing the productivity through the implementation of best practices, modern technology and smart farming. Furthermore, the Government will continue to improve food-related supply chain in promoting price stability. The Budget 2023 will also encourage more local food production and reduce the reliance on food importation to meet the SelfSufficiency Level (SSL) requirement. Malaysia will leverage on its strengths especially the globally accepted halal logo as the marketing tool to promote Malaysia’s products. Various initiatives could be taken to increase Malaysia’s global competitiveness on halal industry. This includes enhancing marketing and promotion; encouraging R&D activities; aligning Malaysian products to global standards; attract more talents into the industry; and streamline the functions of the Governmental agencies. For the future, Malaysia’s halal industry should diversify into new products and services.
71. chapter 1 Given that the tourism receipts is one of the major sources of foreign exchange earnings for Malaysia , it is crucial to support a comprehensive recovery for the tourism industry. The Government will ensure the growth momentum of the industry is further supported through the increasing focus on higher value tourism, strengthening of cultural products and relevant tourism facilities. The implementation of the initiatives outlined under the Tourism Recovery Framework 2.0 will be accelerated. Catalysing Comprehensive Reforms In ensuring sustainable socioeconomic development, it is pertinent to promote the vibrancy of the economy with green growth in order to strengthen the nation’s resilience against the impact of climate change as well as the global move towards decarbonisation. In the Budget 2023, more emphasis will be given in enhancing green investments for the development of low-carbon, resilient and healthy urban environments, while minimising environmental degradation. Greater focus will be given in providing protection and enhancement on the wellbeing of society, as well as ensuring a proper management of natural resources and persistent preservation of the environment to ensure security of basic resources. This will be achieved by a whole-of-nation approach which ensures the nation continues to develop and achieve commendable economic growth, while leaving no one behind. The relevant frameworks and ecosystems will be strengthened while continuous engagement and promotion among the stakeholders will be further enhanced to increase the readiness of the nation in achieving green growth and sustainable development. In managing the risk of future disasters, the Budget 2023 highlights strategies, programmes and activities to raise awareness, strengthen the early response measures and improve coordination and engagement with all stakeholders as well as strengthen economic management and prospects enforcement on environmental protection. In addition, measures will be put in place to develop proper integrated early warning and response systems as well as the implementation of flood mitigation projects in high flood-prone areas. In ensuring an efficient government machinery, priority will be given on the effort to transform the public service delivery particularly through the utilisation and enhancement of digital technology. In addition, initiatives to enhance collaboration, coordination and data sharing across the different levels of government will be undertaken through streamlining administrative regulations, procedures and systems. Furthermore, emphasis will be given on implementing programmes and projects efficiently and effectively with value for money without compromising the quality of public service delivery. The Government will adopt the whole-of-nation approach in forging closer collaboration with businesses and society to be more competitive while growing the economy sustainably. Conclusion Malaysia’s economy expanded by 6.9% in the first half of 2022. With a favourable growth momentum in the domestic economy and steady expansion in the external sector as well as continued improvement of the labour market conditions, the economy is anticipated to expand between 6.5% – 7% in 2022. In 2023, the economy is expected to grow moderately between 4% – 5% backed by strong fundamentals and diversified economic structure, coupled with ongoing policy support to cushion the impact of rising cost of living and mitigate the downside risks stemming from prolonged geopolitical uncertainties and tightening global financial conditions. The Budget 2023 will advance measures to further strengthen the momentum of recovery, build economic resilience and catalyse comprehensive reforms. All measures in the Budget 2023 are aligned with 12MP and supportive Malaysia to become a progressive, inclusive and prosperous nation. economic outlook 2023 49
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77. chap ter 2 Macroeconomic Outlook 57 ov e rv i e w 57 econom y i n 2022 globa l econom y Feature Article 2 .1 –­ Spillover Effects of RussiaUkraine Conflict on Malaysia dome s t ic econom y 99 Feature Article 2.2 –­ Strengthening Construction Sector towards a Sustainable Economic Growth Feature Article 2.3 – Malaysia’s Trade Performance: Pre-, During and Post-Pandemic (2017 – June 2022) Feature Article 2.4 – Food Inflation in Malaysia outlook for 2023 globa l outlook dome s t ic outlook 10 6 conclus ion 107 r e fe r e nce s Chapter 2.indd 55 29/09/2022 12:48 PM
78. Chapter 2 .indd 56 29/09/2022 12:48 PM
79. chapter 2 macroeconomic outlook chapter 2 Macroeconomic Outlook Overview Growth momentum persists amid global headwinds Global growth is projected to moderate in 2022 , after experiencing a strong economic expansion, both in advanced economies as well as emerging markets and developing economies (EMDEs), in 2021. In addition, escalating inflationary pressure as a result of high commodity prices is projected to prompt most central banks to tighten their monetary policy. Meanwhile, a slowdown in China's economic activities, supply chain disruptions and prolonged geopolitical tensions are anticipated to soften global growth in 2023. Malaysia’s economic recovery continued its strong momentum in the first half of 2022 amid the global headwinds. The GDP grew at 6.9% during the period supported by the implementation of Budget 2022 measures, transition to the endemicity and reopening of international borders. The economy is expected to grow at 6.1% in the second half of 2022 in line with strong domestic pent-up demand from private sector, remarkable tourism activities and outstanding trade performance. Furthermore, robust performance in services and manufacturing sectors as well as improvement in the labour market conditions are envisaged to contribute significantly to the economic growth. Overall, the nation’s economy is expected to grow between 6.5% – 7% in 2022. In line with the softening global economic outlook, Malaysia’s economy is expected to moderate in 2023. Strong economic fundamentals, further improvement in employment prospects, sustained consumer and business confidence as well as continuous policy support for vulnerable households are projected to stimulate domestic demand. Steady external demand, especially for electrical & electronic (E&E) products and major commodities, is anticipated to continue driving the exports, thus maintaining a surplus in current account of the balance of payments (BOP). On the supply side, all economic sectors are projected to expand, with the services and manufacturing sectors remain as the major contributors to the economy. The services sector will benefit from an increase in domestic demand and tourism activities. The manufacturing sector is expected to be driven by global demand for E&E and rubberbased products coupled with an expansion in domestic industries such as food and construction related products. Meanwhile, the construction sector is projected to improve with the acceleration of existing infrastructure projects and higher private investment that would increase demand for more commercial and residential buildings. Thus, the nation’s GDP is forecast to expand between 4% – 5% in 2023. Economy in 2022 Global Economy Moderate growth amid global challenges Global growth is expected to expand by 3.2% in 2022, supported largely by Asia Pacific’s GDP growth despite the rising energy prices, supply chain disruptions and challenging financial economic outlook Chapter 2.indd 57 2023 57 29/09/2022 12:48 PM
80. chapter 2 MACROECONOMIC OUTLOOK conditions . The GDP growth in advanced economies is projected to moderate at 2.5% in 2022. The US growth is anticipated to record 2.3% in 2022, due to significantly lower momentum in private consumption following a weaker household purchasing power and further tightening of monetary policy. Likewise, the euro area is expected to grow at a slower pace at 2.6% in 2022, mainly due to a slowdown in the economic activities arising from the cut of energy supplies by Russia. In 2022, EMDEs’ economic growth is expected to moderate to 3.6%, as a result of lacklustre domestic and external demand. China’s economy is anticipated to grow slower at 3.3% weighed down by sluggish consumer demand and investment. Meanwhile, India’s economy is projected to grow by 7.4%, supported by both public and private investments, as well as incentives and reforms introduced to improve the business climate. The GDP growth of ASEAN-51 is envisaged to expand by 5.3%, mainly supported by robust domestic consumption and higher investment. FIGURE 2.1. Global Real Gross Domestic Product, Trade and Inflation Growth 2021 – 2023 (% change) % 14 12 1 6 6.1 5.7 4 3.2 2 0 4.7 4.1 2.9 2021 20221 20232 REAL GDP 3.2 2021 20221 20232 TRADE 2021 20221 20232 INFLATION GLOBAL ADVANCED ECONOMIES EMERGING MARKET AND DEVELOPING ECONOMIES 1 Estimate Forecast Note: Trade for Advanced Economies and Emerging Market and Developing Economies refers to the average volume of exports and imports of goods and services Source: International Monetary Fund, World Economic Outlook (July 2022) at a slower rate of 4.1% and 3.9%, respectively in 2022. Global inflation is anticipated to register 8.3% in 2022, in line with higher food and energy prices. The inflation rate is projected to record 6.6% in advanced economies and 9.5% in the EMDEs. ASEAN-5 consists of Indonesia, Malaysia, the Philippines, Thailand and Viet Nam. 58 Chapter 2.indd 58 8.3 8 2 World trade is expected to grow moderately to 4.1% in 2022 following prolonged geopolitical conflict in the Eastern Europe and lockdown measure in China to contain the spread of COVID-19. In 2022, advanced economies is expected to record growth of 5% and 6.1% in exports and imports, respectively, lower than growth recorded in the previous year. Similarly, trade in the EMDEs is expected to moderate with exports and imports are projected to grow 10.1 10 ecONOMic OutlOOK 2023 29/09/2022 12:48 PM
81. chapter 2 MACROECONOMIC OUTLOOK feature article 2 .1 Spillover Effects of Russia-Ukraine Conflict on Malaysia Introduction External Shocks Hamper Economic Growth Efforts The tension between Russia and Ukraine reached its height when Russia invaded Ukraine on 24 February 2022. Despite the recovery of economic activities due to the reopening of the global economy and improvement in labour market conditions after the COVID-19 pandemic, the RussiaUkraine conflict has sent economic shockwaves across the globe. The increase in raw material prices, freight charges, labour costs, food items, fuel and transportation add to the pressure on the cost of doing business. Against this backdrop, the growth of the global economy is projected to moderate by 3.2% in 2022 and 2.9% in 2023. In the global market, Russia is the largest wheat exporter, accounting for 18% of global exports while Ukraine accounts for another 7%. Russia is also the largest exporter of natural gas (25%), palladium (23%), nickel (22%), and fertilizers (14%). Russia also contributes to global coal exports (18%), platinum (14%), crude oil (11%), and refined aluminium (10%) as in Figure 2.1.1. Ukraine is the largest exporter of seed oil which is two-fifths of the global production and is mainly used in cooking. Ukraine is also the fourth largest exporter of corn, accounting for 13% of global exports. Likewise, Ukraine produces up to 50% of the global neon gas, which is a critical element in the manufacture of electronic chips. The Russia-Ukraine conflict has exacerbated existing global supply chain disruptions and caused commodity prices to rise. The breakdown of exports and commodity price changes in Russia and Ukraine are shown in Figure 2.1.1 and 2.1.2. FIGURE 2.1.1. Russia and Ukraine's Share of Commodity Exports, 2022 (% share) 60 RUSSIAN FED. UKRAINE 50 40 FIGURE 2.1.2. Commodity Price Changes for which Russia and Ukraine are Key Exporters, 2022 Energy Metals and minerals (% change) 200 150 Food 30 100 20 Note: Data for energy and food are trade volumes, while metals and minerals are trade values. Fertilizers are phosphate rock and potash minerals and ammonia-based non-minerals. Edible oil are palm, soybean and rapeseed oil Source: BP Statistical Review, UN Comtrade, U.S. Department of Agriculture, World Bank Maize LNG, Japan Palm oil Wheat, US HRW Soybean oil DAP Brent Nickel Natural gas, Europe Coal 0 Wheat, US SRW Edible oils Corn Barley Wheat Aluminium Platinum Fertilizers Palladium Pig iron Crude oil Coal Natural gas 0 Potassium chloride 50 10 Note: Three-month change in commodity prices through the end of March 2022. LNG stands for liquefied natural gas, DAP for diammonium phosphate, SRW for soft red winter and HRW for hard red winter Source: World Bank The impacts of the war are being felt not only across Europe but also worldwide because of Russia’s and Ukraine’s significant contribution to food and energy supplies. According to IMF, global inflation is projected at 8.3% in 2022 and 5.7% in 2023. The conflict in Ukraine is expected to keep energy costs up while the continued global supply bottleneck hampers growth. ecONOMic OutlOOK Chapter 2.indd 59 2023 59 29/09/2022 12:48 PM
82. chapter 2 MACROECONOMIC OUTLOOK Effects of Russia-Ukraine Conflict on Malaysia The direct impact of the Russia-Ukraine conflict on Malaysia is limited given the less significant trade and financial relations between Malaysia and the two countries . For the first half of 2022, trade between Malaysia and Russia amounted to RM8.8 billion (0.4%) and Ukraine RM1.5 billion (0.1%). However, the prolonged conflict has resulted in spillover effects on Malaysia, particularly the increase in food and fuel prices. Poultry Price Hike The increase in the price of chicken in Malaysia is due to the increase in the price of chicken feed. This situation is caused by the increase in the price of the main ingredients used to produce chicken feed, which is corn, soybeans and palm oil since the war broke out between Russia and Ukraine. These two countries are among the main producers and exporters of corn and wheat, which are important ingredients in the production of animal feed, including poultry feed. The increase in the average price of chicken affects the inflation rate of the entire household where the price of standard processed chicken was RM8.55 per kilogramme (kg) in June 2021 compared to RM10.02 per kg in June 2022. Meanwhile, the price of a chicken egg for all grades fluctuated between RM0.40 to RM0.45 as in Figure 2.1.3. In June 2022, the weightage of meat (including chicken) was 2.5% of the weightage of overall food items in the Consumer Price Index (CPI) basket, where the CPI was at a high rate of 8.7%. Meanwhile, the weightage for milk, cheese and eggs (including chicken eggs) was 0.5% of the entire CPI basket where the CPI was at a rate of 6.7% as in Figure 2.1.4. As a measure to curb inflation, the Government set the new ceiling retail price for standard process chicken at RM9.40 per kg, while the new ceiling price for chicken eggs was set at RM0.45 (grade A), RM0.43 (grade B) and RM0.41 (grade C) effective 1 July 2022. FIGURE 2.1.3. Eggs, Chicken and Cooking Oil Monthly Average Prices, 2021 – 2022 FIGURE 2.1.4. Consumer Price Index Weightage of Items in Food & Non-Alcoholic Beverages, June 2022 RM 12 (% share) 15 12.5 10 12 11.5 8 9 6 6 4 2 0 3 J F M A M J 10 Eggs J F M A M J Chicken J F M A M J Cooking Oil (1kg) 2021 2022 0 2.5 2.1 Others Food away Meat Vegetables from home 0.5 0.4 Oil Egg FOOD & NON-ALCOHOLIC BEVERAGES: 29.5 Source: Department of Statistics, Malaysia Source: Department of Statistics, Malaysia Fuel Prices Hike As one of the world’s largest energy exporters, the disruption of Russian oil and gas supply has hampered global supply, resulting in a surge in global crude oil and coal prices. The increase in the price of Brent crude oil from USD91.31 per barrel in early February to USD107.97 per barrel at the end of July 2022 had directly impacted retail fuel prices in Malaysia. The price of RON97 petrol 60 Chapter 2.indd 60 ecONOMic OutlOOK 2023 29/09/2022 12:48 PM
83. chapter 2 macroeconomic outlook has increased from RM3 .12 per litre in early February to RM4.30 per litre at end of August 2022. However, the subsidized fuel price is maintained at RM2.05 per litre for RON95 petrol and RM2.15 per litre for diesel. Reduced Purchasing Power The CPI for the period of January to July 2022 increased by 2.8% compared to the same period for 2021 by 2.3% as in Figure 2.1.5. The main impetus of the increase in the inflation rate is under the category of food and non-alcoholic beverages which recorded an increase of 4.8% including the price of meat (9.1%); milk, cheese and eggs (7%); and vegetables (6%). Malaysia’s average inflation from 2021 to July 2022 is 2%. The increase in the price of goods and services in Malaysia has caused a significant decrease in the rakyat’s purchasing power. FIGURE 2.1.5. Consumer Price Index, January – July 2021 and 2022 MAIN GROUP WEIGHT MISCELLANEOUS GOODS & SERVICES 6.7 RESTAURANTS & HOTELS 2.9 EDUCATION 1.3 RECREATION SERVICES & CULTURE 4.8 COMMUNICATION 4.8 TRANSPORT 14.6 HEALTH FURNISHINGS, HOUSEHOLD EQUIPMENT & ROUTINE HOUSEHOLD MAINTENANCE HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS 1.9 4.1 CLOTHING & FOOTWEAR ALCOHOLIC BEVERAGES & TOBACCO CHANGE (%) 3.6 1.0 0.0 4.2 3.2 1.3 3.2 -0.1 2.4 29.5 HEADLINE INFLATION 100.0 -2 1.6 0.4 23.8 FOOD & NON-ALCOHOLIC BEVERAGES 2021 2022 1.6 0.4 4.8 2.8 0 2 4 6 8 10 12 Source: Department of Statistics, Malaysia Caring and Responsible Government The Russia-Ukraine conflict has sparked one of the most significant commodity price shocks in the past 50 years. This conflict has also made it more difficult to support economic growth while controlling price increases. In line with the aspirations of the Malaysian Family, the Government is determined to preserve the well-being of the rakyat by formulating and implementing robust policy measures to reduce the impact of the crisis. Among the measures implemented by the Government include price controls on selected goods and services, particularly through the provision of fuel and certain food price subsidies as well as electricity rate rebates to domestic consumers. The government has also established the Pasukan Khas Jihad Tangani Inflasi to control the increase in the price of goods more efficiently and effectively. In addition, Bank Negara Malaysia’s Monetary Policy Committee has increased the Overnight Policy Ratio (OPR) by 25 basis points in May 2022 from a record low of 1.75% and another 25 basis points in July and September 2022 which makes the OPR 2.5% to curb inflationary pressure caused by the depreciation of the ringgit. Conclusion Malaysia’s economy has experienced spillover effects from the ongoing Russia-Ukraine conflict. This conflict has exacerbated supply chain disruptions due to lower-than-expected global economic growth. However, the Government will always protect the rakyat who are affected by the rise in global commodity and food prices and ensure sustainable and balanced growth. economic outlook Chapter 2.indd 61 2023 61 29/09/2022 12:48 PM
84. chapter 2 macroeconomic outlook table 2 .2. Services Sector Performance, 2021 – 2023 (at constant 2015 prices) Domestic Economy Sectoral Services Sector chaNGe (%) 2022¹ 2021 2022¹ 20232 Main driver towards sustained growth trajectory Wholesale and retail trade 29.4 1.6 8.7 3.4 The services sector rose by 9.2% in the first half of 2022, driven by the wholesale and retail trade; transportation and storage; food & beverages and accommodation; real estate and business services; as well as information and communication subsectors. The performance is attributed to the improvement in tourismrelated activities due to the reopening of international borders, increase in consumers’ spending supported by the one-off special withdrawals from the Employees Provident Fund (EPF) and special Hari Raya Aidilfitri cash assistance to civil servants including the pensioners, and increase in online transactions resulting from fast-paced adoption in digitalisation across all sectors. The services sector is estimated to grow by 7.4% in the second half of the year, supported by strong growth momentum of broad-based economic activities. Overall, the sector is projected to increase by 8.2% in 2022 with almost all subsectors recording positive growth. Finance and insurance 12.3 10.0 -0.6 3.1 Information and communication 11.6 6.3 4.7 4.6 Real estate and business services 7.2 -11.0 18.2 6.6 Transportation and storage 6.4 1.3 27.6 7.0 Food & beverages and accommodation 4.9 -11.0 29.5 7.8 Utilities 4.7 2.6 3.4 2.4 Other services 7.7 -3.3 7.8 8.5 15.8 5.4 3.3 6.1 100.0 1.9 8.2 5.0 table 2.1. Gross Domestic Product by Sector, 2021 – 2023 (at constant 2015 prices) Share (%) 20221 chaNGe (%) 2021 20221 20232 Services 58.0 1.9 8.2 5.0 Manufacturing 24.3 9.5 6.3 3.9 Agriculture 6.7 -0.2 0.1 2.3 Mining 6.4 0.3 2.1 1.1 Construction 3.5 -5.2 2.3 4.7 GDP 100.0 3.1 6.5 - 7.0 4.0 - 5.0 Estimate Forecast Note: Total may not add up due to rounding and exclusion of import duties component Source: Department of Statistics and Ministry of Finance, Malaysia 1 2 62 Chapter 2.indd 62 Share (%) economic outlook Government services Services Estimate Forecast Note: Total may not add up due to rounding Source: Department of Statistics and Ministry of Finance, Malaysia 1 2 The wholesale and retail trade subsector rose by 10.4% in the first half of 2022, supported by strong performance in all segments. The robust performance of the subsector was buoyed by an increase in household spending following improvement in the labour market and consumers’ confidence. In addition, the motor vehicles segment contributed significantly to the first half performance as vehicles purchase rose substantially, taking advantage from the sales tax exemption for passenger cars until the end of June 2022. The subsector is expected to expand by 7.2% in the second half following improvement in all segments especially the retail trade, in line with the increase in the number of new convenience store outlets. The motor vehicles segment is also anticipated to increase in line with the revised projection number of vehicle sales in 2022 from 600,000 to 630,000 (Malaysia Automotive Association, 2022). For the year, the subsector is projected to record a significant growth of 8.7%. 2023 29/09/2022 12:48 PM
85. chapter 2 macroeconomic outlook The transportation and storage subsector surged by 30 .7% in the first half of 2022, backed by the significant growth of all segments following a more vigorous highway, port and airport activities. The traffic volume of toll highways increased by 59.8% to 803.2 million vehicles in the first half of 2022, mainly due to the normalisation of interstate travel especially during festive seasons and school holidays amid the transition to endemicity. The growth of total cargo and container handled in ports was supported by strong external demand with total trade increased by 28.2% to RM1,354.9 billion. The subsector’s notable performance was also supported by a substantial increase of 597.4% to 21.2 million air passenger traffic at airports during the six-month period. In the second half of 2022, the subsector is expected to rebound by 24.8%, mainly attributed to the land transport segment following continuous increase in highway traffic volume as well as improve in ridership of rail transport. In addition, the water transport segment is projected to continue contributing to the subsector’s growth primarily through high container and cargo shipment activities. The air transport segment is expected to record a strong growth in tandem with higher air passenger traffic amid gradual resumption of international flights. Overall, the subsector is projected to increase by 27.6% in 2022. Ministry of Tourism, Arts and Culture. The popularity of the nation as a Muslim travel destination is reflected in the Global Muslim Travel Index 2022 of which Malaysia continues to maintain in the top position for four consecutive years (CrescentRating, 2022). The food & beverages and accommodation subsector is projected to turn around significantly by 29.5% in 2022 following the expansion in all segments. The subsector rebounded by 29.6% in the first half of 2022 due to substantial recovery in hotel occupancy rate and patronage at eateries, mainly attributed to the increase of tourist arrivals to 2.1 million. The subsector is expected to further increase by 29.5% in the second half of the year attributed to the continuous expansion in tourism-related activities. The favourable outlook is in line with the revised projection of 9.2 million tourist arrivals and RM26.8 billion tourist receipts in 2022 by the The information and communication subsector expanded by 6.1% in the first half of 2022, supported by telecommunication segment following a higher digital usage among businesses and individuals and increased subscription of services offered by telecommunication companies. The subsector is projected to increase by 3.3% in the second half of the year, supported by sustained high usage of the e-commerce services and increased subscriptions to media streaming such as sport packages in conjunction with the 2022 Commonwealth Games and 2022 FIFA World Cup campaign. Therefore, the subsector is anticipated to rise by 4.7% in 2022. The real estate and business services subsector registered a turnaround of 15.4% in the first half of 2022, supported by improved activities in leasing and renting of properties as well as higher demand for professional services, particularly legal and accounting activities. The subsector is expected to continue its growth momentum by 21.2% in the second half due to robust improvement in business and trade activities. The growth momentum is also supported by the Government’s initiatives such as Keluarga Malaysia Home Ownership Initiative (i-MILIKI) and Malaysia Housing Financing Initiative (i-Biaya). The i-MILIKI offers 100% stamp duty exemption for first-time homeowners on the purchase of properties valued at up to RM500,000 while the i-Biaya facilitates access to home financing for households in the bottom 40% of income group (B40) and households in the middle 40% of income group (M40) groups. For the year, the subsector is anticipated to grow by 18.2%. economic outlook Chapter 2.indd 63 2023 63 29/09/2022 12:48 PM
86. chapter 2 MACROECONOMIC OUTLOOK FIGURE 2 .2. Selected Indicators for the Services Sector Volume Index of Wholesale & Retail Trade (2015 = 100) Tourist Arrivals and Receipts RM billion 120 Million 42 TOURIST RECEIPTS (RM BILLION) TOURIST ARRIVALS (MILLION) 100 35 80 28 60 21 40 14 20 7 0 2018 2019 2020 2021 20221 0 Index 200 WHOLESALE & RETAIL TRADE RETAIL TRADE WHOLESALE TRADE MOTOR VEHICLES 160 120 80 40 0 J Units 60,000 Index 200 25 50,000 160 20 40,000 15 30,000 10 20,000 5 10,000 TEUS 2018 2019 2020 2021 20221 0 O J A J 2021 O J A J 2022 INFORMATION AND COMMUNICATION INDEX COMPUTER AND INFORMATION SERVICE INDEX TELECOMMUNICATIONS INDEX PUBLISHING AND BROADCASTING ACTIVITIES INDEX SHIP CALLS (RIGHT SCALE) 0 J 2020 Information and Communication Index (2015 = 100) Container Handling and Ship Calls Million 30 A 120 80 40 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2018 2019 2020 2021 2022 Electricity Consumption Air Passengers and Cargo Million 150 Million tonne 1.5 AIR CARGO PASSENGER TRAFFIC (RIGHT SCALE) Million kilowatt-hours 18000 DOMESTIC AND PUBLIC LIGHTING INDUSTRIAL, COMMERCIAL AND MINING 1.2 120 0.9 90 0.6 60 0.3 30 15000 12000 9000 0.0 1 2018 2019 2020 2021 20221 0 6000 3000 0 J A J 2020 O J A J 2021 O J A 2022 Estimate Source: Department of Statistics, Malaysia; Malaysia Airports Holdings Berhad; Malaysia Tourism Promotion Board; Senai International Airport; and seven major ports (Bintulu, Johor, Klang, Kuantan, Kuching, Pulau Pinang and Tanjung Pelepas) 64 Chapter 2.indd 64 ecONOMic OutlOOK 2023 29/09/2022 12:48 PM
87. chapter 2 The utilities subsector recorded an increase of 3 .8% in the first half of 2022 and is anticipated to improve further by 3% in the second half. For the whole year, the subsector is expected to expand by 3.4% following a higher electricity consumption by industrial, commercial and domestic segments attributed to the reopening of all economic sectors and resumption of social activities. In the first half of 2022, the finance and insurance subsector declined marginally by 1.2% due to negative growth in Financial Intermediation Services Indirectly Measured (FISIM) and fee-based income following low interest rate environment. Similarly, the insurance segment experienced a contraction due to the higher claims and lower return on investments. In the second half, the subsector is projected to record a marginal increase of 0.1% attributed to the expected increase in finance segment of 2.9% following the improvement in FISIM. However, the insurance segment is anticipated to continue contracting by 7.4%. Overall, the subsector is anticipated to register a negative growth of 0.6%. The other services subsector rebounded by 7.7% in the first half of 2022 following improvement in private education and health segments in line with a higher enrolment in private colleges and universities as well as strong demand for private healthcare services. The rebound was also supported by the recovery in sports and recreational activities as the country transitions into normalcy. The subsector is expected to grow by 7.8% in the second half of the year, driven by strong demand for private education and healthcare services as well as continuous effort to promote health tourism. Overall, the subsector is anticipated to turn around by 7.8% in 2022. Meanwhile, the government services subsector grew by 5.5% in the first half of 2022 and expected to increase by 1.3% in the second half. For the year, the subsector is forecast to grow at a rate of 3.3%. MACROECONOMIC OUTLOOK Manufacturing Sector Broader base of manufacturing sector The manufacturing sector continued to expand, recording a growth of 7.9% in the first half of 2022, supported by both the export- and domestic-oriented industries. The export-oriented industries, which constitute 68.9% of the manufacturing sector, grew by 7.1%, while the domestic-oriented industries increased by 9.7%. The sector is expected to improve further in the second half with an expansion rate of 4.9%, driven by higher output across all industries, particularly from the E&E, transport equipment as well as metal-related segments. Within the export-oriented industries, the E&E segment is anticipated to be driven by strong demand from the global semiconductor market, especially for chip products. The chemicals segment is projected to increase FIGURE 2.3. Output of Manufacturing Sector (% change) % 70 60 50 40 30 20 10 0 -10 -20 -30 -40 J A J O J A 2020 J O 2021 A 2022 J MANUFACTURING PRODUCTION INDEX INDUSTRIAL PRODUCTION INDEX Source: Department of Statistics, Malaysia ecONOMic OutlOOK Chapter 2.indd 65 J 2023 65 29/09/2022 12:48 PM
88. chapter 2 macroeconomic outlook table 2 .3. Manufacturing Indices by Export- and Domestic-Oriented Industries, January – July 2021 and 2022 (2015 = 100) iNDeX 2021 Export-oriented industries Manufacture of vegetable and animal oils and fats chaNGe (%) 2022 2021 Share (%) 2022 2021 2022 128.9 137.9 13.6 7.0 70.0 68.9 92.7 88.6 -14.7 -4.5 4.1 3.6 Manufacture of textiles 111.6 118.2 18.1 6.0 0.8 0.7 Manufacture of wearing apparel 110.1 116.4 4.4 5.7 0.8 0.8 Manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials 107.7 122.5 13.1 13.7 1.8 1.9 Manufacture of coke and refined petroleum products 111.6 116.8 12.1 4.6 12.4 11.9 Manufacture of chemicals and chemical products 116.5 122.4 9.1 5.1 8.8 8.5 Manufacture of rubber products 249.3 196.1 49.3 -21.3 6.6 4.7 Manufacture of plastics products 125.0 131.5 15.3 5.2 3.4 3.2 Manufacture of computer, electronics and optical products 139.9 164.7 16.5 17.7 23.0 24.9 Manufacture of electrical equipment 130.6 147.0 12.5 12.6 3.4 3.5 Manufacture of machinery and equipment n.e.c. 138.0 146.2 9.4 5.9 3.5 3.4 Manufacture of furniture 119.5 136.9 8.8 14.5 1.5 1.6 Domestic-oriented industries 112.8 127.4 8.4 12.9 30.0 31.1 Manufacture of food processing products 142.7 156.7 8.7 9.8 6.2 6.3 Manufacture of beverages 110.5 131.6 11.1 19.0 0.8 0.9 82.7 109.0 1.6 31.9 0.5 0.6 Manufacture of leather and related products 122.9 145.9 22.0 18.7 0.2 0.2 Manufacture of paper and paper products 125.8 137.6 14.5 9.4 1.7 1.7 Printing and reproduction of recorded media 111.3 119.0 7.3 7.0 1.2 1.2 Manufacture of basic pharmaceuticals, medicinal chemical and botanical products 151.0 162.5 14.5 7.6 0.7 0.7 97.4 109.0 5.9 11.9 3.4 3.5 Manufacture of basic metals 107.2 118.5 3.7 10.5 3.0 3.0 Manufacture of fabricated metal products, except machinery and equipment 103.2 111.5 9.2 8.0 4.6 4.6 Manufacture of motor vehicles, trailers and semi-trailers 114.0 145.1 11.4 27.2 4.3 5.0 Manufacture of other transport equipment 90.7 97.8 5.6 7.8 1.3 1.3 Other manufacturing 102.9 116.7 10.6 13.4 0.9 0.9 Repair and installation of machinery and equipment 116.4 129.8 3.2 11.5 1.1 1.1 123.6 134.4 12.0 8.8 100.0 100.0 Manufacture of tobacco products Manufacture of other non-metalic mineral products Manufacturing Note: Total may not add up due to rounding Source: Department of Statistics and Ministry of Finance, Malaysia 66 Chapter 2.indd 66 economic outlook 2023 29/09/2022 12:48 PM
89. chapter 2 attributed to higher demand for industrial products especially for digital-related usage following greater adoption of advanced technology . Meanwhile, within the domesticoriented industries, all segments are expected to grow further, mainly driven by the transport-, food- and metal-related segments. Stronger demand for transport-related segments is backed by the normalisation of industrial and business activities. Food-related segments are expected to benefit from the potentially higher private consumption and improvement in tourism industry. In addition, the rebound in construction sector is projected to result in a better performance for metal-related segment. Overall, the manufacturing sector is forecast to expand by 6.3% in 2022. Agriculture Sector Recovery in the oil palm subsector drives growth The agriculture sector registered a contraction of 1.2% in the first half of 2022 attributed to lower output in most subsectors due to prolonged labour shortage. Nevertheless, the sector is projected to turn around by 1.3% in the second half of the year supported by improvement in crude palm oil (CPO) production following expectation of an increase in mature planted areas and improvement in labour market. In addition, a rise in output of table 2.4. Value-added in the Agriculture Sector, 2021 – 2023 (at constant 2015 prices) Share (%) 20222 Oil palm chaNGe (%) 2021 20222 20233 35.6 -5.6 1.5 3.2 1.9 -8.4 -15.7 2.8 Livestock 16.8 3.2 0.7 2.7 Other agriculture¹ 29.0 5.8 -0.8 1.9 Fishing Rubber 11.7 -0.6 3.3 1.4 Forestry and logging 5.0 0.9 -5.3 -2.3 Agriculture 100.0 -0.2 0.1 2.3 1 Including paddy, fruits, vegetables, coconut, tobacco, tea, flowers, pepper, cocoa and pineapple 2 Estimate 3 Forecast Note: Total may not add up due to rounding Source: Department of Statistics and Ministry of Finance, Malaysia macroeconomic outlook the livestock and other agriculture subsectors is expected to provide further impetus to the sector’s performance. However, growth of the rubber subsector is forecast to remain negative following anticipation of decreased tapping activity towards end of the year due to unfavourable weather conditions as well as low demand for natural rubber from China due to lockdowns in certain cities following zero-COVID policy. For the year, the agriculture sector is estimated to turn around by 0.1%, supported by positive growth in the oil palm, livestock and fishing subsectors. Mining Sector Crude oil production recovers The mining sector declined by 0.8% in the first half of 2022 due to lower production of crude oil and condensates following temporary shutdown of several plants for maintenance purposes. Nevertheless, the mining sector is expected to recover in the second half of the year to record a growth of 5.1%, driven by higher natural gas output from existing and new gas fields. The improved production of crude oil and condensates, especially with the resumption of a major oil field operation in Sabah also supported the sector's recovery. Global energy prices which are projected to remain high, bode well for the sector to increase its output. Brent crude oil price is expected to average at USD100 per barrel for the year following the pent-up demand arising from the transition into the endemic phase and supply disruption due to prolonged geopolitical tension in Eastern Europe. Overall, the mining sector is expected to record a growth of 2.1% in 2022. Construction Sector Strong domestic activities to spur growth The construction sector contracted by 2.1% in the first half of 2022, mainly due to lower construction activities in civil engineering and residential buildings subsectors. In contrast, non-residential buildings and specialised construction activities subsectors registered a growth during the same period, in line with expansion in business activities, albeit rising prices of construction-related materials. The sector is expected to turn around in the economic outlook Chapter 2.indd 67 2023 67 29/09/2022 12:48 PM
90. chapter 2 MACROECONOMIC OUTLOOK second half with an expansion rate of 6 .9%, supported by positive growth in all subsectors. Improvement in private investment and robust domestic economic activities are anticipated to increase demand for more industrial buildings. In addition, the acceleration of major infrastructure projects will continue to drive the sector’s performance. FIGURE 2.4. Supply Indicators of Residential Property FIGURE 2.5. House Price Index (% change) Units ('000) 6,500 Units ('000) 480 % 10 8 6,000 460 6 5,500 4 440 5,000 4,500 2 0 420 -2 4,000 400 3,500 3,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2018 2019 2020 2021 2022 EXISTING STOCK INCOMING SUPPLY PLANNED SUPPLY -4 -6 380 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2018 2019 2022 JOHOR MALAYSIA KUALA LUMPUR RIGHT SCALE 2021 2020 PULAU PINANG SELANGOR Source: National Property Information Centre Source: National Property Information Centre FIGURE 2.6. Supply Indicators of Non-Residential Property Incoming Supply Square meter ('000) Units 50,000 3,000 40,000 2,400 30,000 1,800 20,000 1,200 Occupancy Rate % 86 84 82 80 78 10,000 0 600 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2018 2019 SHOPS INDUSTRIAL 2020 2021 OFFICE SPACES RETAIL SPACES 2022 RIGHT SCALE 0 76 74 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2018 2019 2020 2021 2022 OFFICE SPACES RETAIL SPACES Source: National Property Information Centre 68 Chapter 2.indd 68 ecONOMic OutlOOK 2023 29/09/2022 12:48 PM
91. chapter 2 The development of residential property is expected to remain active supported by continuous implementation of measures under the Budget 2022 including a total government guarantee of up to RM2 billion macroeconomic outlook to banks via Skim Jaminan Kredit Perumahan (SJKP) as well as housing projects for low income group with an allocation of RM1.5 billion. In 2022, the sector is projected to rebound by 2.3%. feature article 2.2 Strengthening Construction Sector towards a Sustainable Economic Growth Introduction The construction sector is vital in the development of Malaysia’s economy. In line with Vision 2020 and the Sixth Malaysia Plan, Malaysia has experienced a robust construction sector during the period from 1991 to 2000 with an average annual growth rate of 7.2%, as shown in Figure 2.2.1. The sector contributed to the national GDP with an annual average share of 3.9% for the period from 1991 to 2020. Although the contribution is relatively small, it provides a valuable multiplier effect to the aggregate economy attributed to its extensive backward and forward linkages with other sectors (Khan et al., 2014). Thus, as a developing nation, the sector’s contribution remains significant in ensuring a sustainable economic growth. This article highlights the Government’s initiatives in strengthening the role of the construction sector to support the economy especially during economic crises; provides an analysis on inter-sectoral linkages of construction sector1 as well as how the change in productivity of each subsectors impacts the related economic indicators; identifies issues and challenges faced by the sector as well as way forward for the sector. FIGURE 2.2.1. Performance of Malaysia’s Construction Sector, 1981 – 2020 (% average growth and share to Gross Domestic Product at constant prices) % 8 7.2 7 6 5.3 5 4 4.3 4.3 4.1 3.5 3.5 3.3 3 2 1 0 1981 – 1990 1991 – 2000 2001 – 2010 2011 – 2020 GROWTH SHARE TO GROSS DOMESTIC PRODUCT Source: Department of Statistics and Ministry of Finance, Malaysia 1 Based on 124 industries in the 2019 Input-Output Table economic outlook Chapter 2.indd 69 2023 69 29/09/2022 12:48 PM
92. chapter 2 macroeconomic outlook Construction Sector ’s Evolution A series of economic crises has caused Malaysia’s construction sector to perform inconsistently over the last four decades as shown in Figure 2.2.2. The commodities shock in 1985/1986, Asian Financial Crisis (AFC) in 1997/1998, Global Financial Crisis (GFC) in 2008/2009 and the COVID-19 pandemic had brought significant repercussions to the sector and the economy as a whole. The sector was badly affected either from the cancellation or postponement of major construction projects. Given the sector’s contribution and its significant spillover effects to other sectors of the economy, the Government had taken actions to mitigate the negative impacts of the crises, particularly by initiating public infrastructure projects and providing policy support to rejuvenate the sector. FIGURE 2.2.2. Gross Domestic Product and Construction Sector Growth (%) 40 30 Commodities Shock Asian Financial Crisis COVID-19 Pandemic Global Financial Crisis 20 10 0 -10 -20 20 18 20 16 20 20 14 20 12 20 10 08 20 06 20 20 04 20 02 20 00 98 20 96 19 19 94 19 92 19 90 19 88 86 19 84 19 19 82 19 19 80 -30 CONSTRUCTION SECTOR GROSS DOMESTIC PRODUCT Source: Department of Statistics, Malaysia The commodities shock crisis in 1985/1986 had heavily impacted Malaysia’s fiscal position, which caused the Government to reprioritise public development expenditure to help strengthen the various affected sectors, including construction. While reviving the economy from the crisis, the Government prioritised infrastructure projects and promoted private sector investment in developing low-cost housing to relocate squatters from prime land areas to the designated residential areas. This was also in line with the country’s transition towards an industrialised nation. In addition, the liberalisation of landed property foreign ownership regulations in 1986 had encouraged foreigners to own commercial and residential buildings in Malaysia, thus contributing to an increase in construction activities. The construction sector was again badly affected during the AFC, contracting significantly by 24% in 1998 from a growth of 10.6% in 1997. As a move to revive the economy, the Government launched the National Economic Recovery Plan to respond to the crisis. Among the measures undertaken include the setup of three major entities namely Danaharta, Danamodal and Corporate Debt Restructuring Committee, aimed at easing liquidity in the private sector, which bode well in supporting the entire construction ecosystem. In addition, Infrastructure Development Fund worth RM5 billion was established to finance infrastructure projects including integrated transportation systems, highways and ports. As a result, the sector’s performance had improved by almost 20 percentage points to record a smaller negative growth of 4.4% in 1999. 70 Chapter 2.indd 70 economic outlook 2023 29/09/2022 12:48 PM
93. chapter 2 macroeconomic outlook About 10 years after the AFC , the world experienced another major crisis in the form of GFC. Being an open economy, Malaysia was also affected by the crisis. In cushioning the impact of global economic slowdown, the Government had again implemented fiscal stimulus packages, among others, aimed at supporting industries related to transportation, education, healthcare, public utilities and housing, whereby construction was the major element involved. Due to swift response from the Government, the sector’s growth accelerated from 4.4% in 2008 to 6.2% in 2009 and 11.4% in 2010. Subsequently, in addressing the impact of COVID-19 pandemic, various stimulus packages were introduced to revive the domestic investment activities mainly in the construction sector. Under these packages, new allocations were provided for projects such as improving roads and upgrading and repairing dilapidated schools, which are over and above the continued implementation of projects under the existing 2020 annual budget. In addition, the ongoing mega projects such as Mass Rapid Transit (MRT) Putrajaya Line and Light Rail Transit Line 3 (LRT3) were also given priority due to its high multiplier effects to the economy. Thus, the sector’s growth recorded a small contraction of 5% in 2021 compared to significant deterioration of 19% in 2020. The construction sector in Malaysia has also played a major role in accumulating the nation’s capital stock such as buildings, roads, railways, ports and airports. Accordingly, the Harrod-Domar model of economic growth highlights that net investment, which is defined as the change in capital stock is necessary for economy to grow (Domar, 1947; Harrod, 1948). United Nations (1990) also indicates that infrastructural development was an essential part of economic development in Asia and does appear to lead economic growth by improving the capacity as well as the efficiency of the economy. Moreover, a sustainable construction sector can ensure both social prosperity and economic stability (Alaloul et al., 2021). Siong H.C. (2006) also highlighted the significance of urban development in Malaysia that can provide a balanced ecosystem benefitting the local society and economy as can be seen in the development of Putrajaya. The Federal capital is an example of a successful integrated urban development project in Malaysia which combines the development of government institutions with a balanced ecosystem consisting of accompanying amenities and infrastructure as well as commercial and residential development. This mega project has significant spillover effects on the economy including creating new settlements, increasing household income, rising property value, providing jobs and boosting the tourism industry. Inter-sectoral Linkages The construction sector’s linkages to other economic sectors are vital as they encompass both backward and forward relations with other areas, despite their small contribution to the GDP. The sector requires various sources of inputs from the economy, creating backward linkages. Similarly, the output from the construction sector is channelled back to the sector as well as to other sectors resulting in forward linkages. Bon (1988) highlights that the input–output analysis has been considered as an ideal framework to study the direct and indirect resource utilisation in the construction sector and its interdependence with other sectors. For example, bricks (manufacturing sector) are used to construct a commercial lot (construction sector) which will be used as a restaurant (services sector). The strong relationship between economic sectors can be seen through the calculation of power and sensitivity of dispersion indices. The power and sensitivity of dispersion indices are produced through normalisation of backward and forward linkage respectively (DOSM, 2022). Both indices are measured to identify potential sectors in the economy. Sector that has an index value of more than one has more propensity to provide bigger output and has greater influence on the economy. Using the 2019 Input-Output (IO) Table, Ministry of Finance (MoF) estimates that the construction sector has a power of dispersion index of more than one and the largest compared to the other economic sectors. Meanwhile, the sensitivity of dispersion index for the construction sector has a value of less than one. The power and sensitivity of dispersion indices between the construction sector and other economic sectors are shown in Figure 2.2.3. economic outlook Chapter 2.indd 71 2023 71 29/09/2022 12:48 PM
94. chapter 2 macroeconomic outlook FIGURE 2 .2.3. Power and Sensitivity of Dispersion Indices of Construction Sector and Other Sectors Sensitivity of dispersion index 1.3 Mining 1.2 Agriculture 1.1 Manufacturing Services 1.0 0.9 0.8 Construction 0.7 0.6 0.5 0.4 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 Power of dispersion index Source: Ministry of Finance, Malaysia (estimates) Based on the 2019 IO Table, four out of 124 industries fall under the construction sector, namely residential buildings, non-residential buildings, civil engineering and specialised construction activities subsectors. The MoF’s analysis using the Dynamic Computable General Equilibrium model estimates that increased productivity in the construction subsector will contribute to economic growth due to high inter-sectoral linkages as shown in Table 2.2.1. At the same time, industries such as mining of metal ores; builders’ carpentry and joinery; food crops; and wiring devices, electric lighting equipment and other electrical are also expected to benefit from the inter-sectoral linkages as shown in Figure 2.2.4. table 2.2.1. Implication of a 1% Improvement in Productivity of Construction Subsectors to Economic Indicators Baseline deviation (percentage point) CIVIL ENGINEERING RESIDENTIAL BUILDINGS NON-RESIDENTIAL BUILDINGS SPECIALISED CONSTRUCTION ACTIVITIES Real GDP 0.01 0.01 0.00 0.01 Investment 0.05 0.02 0.04 0.03 Exports 0.01 0.00 0.00 0.00 Imports 0.01 0.01 0.01 0.01 Source: Ministry of Finance, Malaysia (estimates) 72 Chapter 2.indd 72 economic outlook 2023 29/09/2022 12:48 PM
95. chapter 2 MACROECONOMIC OUTLOOK FIGURE 2 .2.4. Biggest Winners from Productivity Improvement in Construction Subsectors Civil Engineering Residential Buildings Non-Residential Buildings Specialised Construction Activities Mining of metal ores Builder’s carpentry and joinery Food crops Wiring devices, electric lighting equipment and other electrical Highway operation services, bridge and tunnel Refractory, clay, porcelain and ceramic products Vegetables Electricity distribution & control apparatus, batteries Water Non-metallic mineral products Other agriculture Mining of metal ores Quarring of stone, sand and clay Rental and leasing Poultry farming Food crops Other private Services Quarrying of stone, sand and clay Quarrying of stone, sand and clay Vegetables Source: Ministry of Finance, Malaysia (estimates) Issues and Challenges Rising Cost of Doing Business Construction input is susceptible to the rising cost of building materials and this has become a major concern to the sector. As the sector relies heavily on cash flow position for their operation, the increasing cost of raw materials will greatly affect firms’ cash flow and their long-term sustainability. Price materials are volatile and easily affected by factors such as inflation pressure, supply chain disruptions and poor planning and scheduling. Musarat et al. (2020) highlights that inflation rate significantly influences the price deviation of construction materials. The rising cost coupled with requirements for substantial investment, pose a big challenge for a new player to enter the industry, especially for small and medium companies. Time Constraint Time management is a crucial factor to the sector’s performance. Any occurrences of project timeline rescheduling, time overruns and other delays have negative implications and adversely affect the construction progress. According to Zamani et al. (2021), changes to projects’ timelines due to the shortened duration of construction activities and lengthy process for approvals by related authorities besides unforeseen circumstances, have affected the project operation. Frequent change in conditions and requirements may lead to disruption in achieving time and cost effective of the sector. Low Labour Productivity Low labour productivity is one of the main challenges faced by the Malaysian construction sector as the nation relies heavily on a large foreign labour workforce (Najib et al., 2019). High reliance on foreign workers may have an adverse impact towards productivity and quality levels since most ecONOMic OutlOOK Chapter 2.indd 73 2023 73 29/09/2022 12:48 PM
96. chapter 2 MACROECONOMIC OUTLOOK of the foreign workers were unskilled , which leads to low productivity of construction output. Similarly, Wong et al. (2020) highlights that the construction sector in Malaysia has recorded an unsatisfactory productivity level, mainly due to a large proportion of the construction workforce consisting of low-skilled foreign workers. Way Forward Acceleration of Digitalisation Malaysia’s construction business models and operations are mainly reliant on manual labour and low technology adoption. World Bank (2018) highlights that Malaysians use digital technologies widely, but digital adoption by Malaysian businesses still lags behind the global average with only 29% of businesses having web presence while a meagre 5.2% engaged in e-commerce in 2015. Notwithstanding that the sector is more labour intensive, the usage of suitable technologies and digitalisation products such as building information modelling (BIM), industrialised building system (IBS), internet of things (IoT) and big data analytics (BDA) will drive the sector to better manage and control the construction process. Zhang et al. (2018) advocates BIM as a tool to achieve the principles of lean construction in order to improve the coordination and collaboration of work teams, enhance the project quality and reduce waste towards higher productivity. Embrace New Practices Malaysia is moving towards automation in construction sector and encouraging the adoption of environmental, social and governance (ESG) policies into business practices. This shift will ensure businesses competitiveness and sustainability in the long run. The enhancement of digital construction was enshrined in Malaysia’s Construction 4.0 Strategic Plan (2021 – 2025). The fiveyear Plan comprises of 12 emerging technologies as shown in Figure 2.2.5, which is expected to boost the construction sector in line with the Fourth Industrial Revolution (4IR). This Plan has FIGURE 2.2.5. 12 Emerging Technologies in Construction 4.0 Strategic Plan 2021 – 2025 Prefabrication and Modular Construction Building Information Modelling (BIM) Autonomous Construction Augmented Reality and Virtualization Cloud and Realtime Collaboration 3D Scanning and Photogrammetry Big Data and Predictive Analytic Internet of Things 3D Printing and Additive Manufacturing Advanced Building Materials Blockchain Artificial Intelligence Source: Construction Industry Development Board 74 Chapter 2.indd 74 ecONOMic OutlOOK 2023 29/09/2022 12:48 PM
97. chapter 2 macroeconomic outlook outlined a framework to improve the capabilities of the construction sector through the four enablers identified , namely people, integrated technologies, economy and governance. Hence, construction projects are expected to be implemented efficiently through value optimisation and waste minimisation. Ferrero-Ferrero et al. (2016) highlights that a company’s commitment and effectiveness can be measured through ESG consistency towards creating competitive advantage. Development of workers’ skills Skills and expertise are needed for the execution of technical construction methods as the sector is growing towards automation and digitalisation. Ibrahim et al. (2010) outlines that human resources and skills in construction sector are the main challenges to fulfil rapid change of demand in the industry. Hence, the Malaysian construction sector should invest in building capacity for workers and professionals to improve the capability, competitiveness and operational performance. According to the Construction 4.0 Strategic Plan, the construction technology transformation requires companies to invest in talent development to increase productivity and overall sector performance. Conclusion The construction sector plays a significant role to Malaysia’s economy particularly through its linkages to other sectors of the economy. In view of this, the Government prioritises construction sector through various initiatives for the sector to recover from the impact of economic crises. The issues and challenges addressed by the sector thus far, have strengthened the sector to be more resilient. The adoption of automation, digitalisation and ESG policies as well as creating relevant skills and expertise would transform the sector to keep abreast with emerging demands in the economy. Thus, the importance of boosting the sector’s development and growth will not only contribute to the GDP, but also gear the industrial players to become major global competitors. economic outlook Chapter 2.indd 75 2023 75 29/09/2022 12:48 PM
98. chapter 2 macroeconomic outlook Domestic Demand Domestic demand continues to fuel the recovery momentum Domestic demand continued to drive growth , expanding at 8.6% in the first half of 2022, mainly supported by pentup demand in line with the transition to endemicity and reopening of international borders, allowing for acceleration in economic activities. Domestic demand is expected to expand further at 4.1% in the second half and grow by 6.3% for the whole year, contributing 5.8 percentage points to the GDP growth. The private sector is anticipated to continue its role as the engine of growth and expand at 7.5% in 2022 with the share to GDP at 75.1%, propelled by both consumption and investment spending. Simultaneously, public sector expenditure is expected to grow by 1.3% with the share to GDP at 17.4%. table 2.5. Gross Domestic Product by Aggregate Demand, 2021 – 2023 (at constant 2015 prices) Share (%) 20222 chaNGe (%) 2021 20222 20233 Domestic demand 92.5 1.7 6.3 5.1 Private expenditure 75.1 2.0 7.5 5.8 Consumption 60.0 1.9 8.7 6.3 Investment 15.1 2.6 3.0 3.7 17.4 0.6 1.3 2.0 Public expenditure Consumption Investment External sector1 13.1 5.3 1.0 2.0 4.3 -11.3 2.2 2.1 6.2 -4.1 10.0 3.2 Exports 70.6 15.4 8.8 1.6 Imports 64.4 17.7 8.7 1.4 GDP 100.0 3.1 6.5 - 7.0 4.0 - 5.0 Goods and non-factor services Estimate Forecast Note: Total may not add up due to rounding and excluding change in stocks component Source: Department of Statistics and Ministry of Finance, Malaysia 1 2 3 76 Chapter 2.indd 76 economic outlook Private consumption grew by 11.5% in the first half of 2022 buoyed by rising household income following a broad-based economic recovery, improved labour market conditions with more job opportunities, revision of the minimum wage to RM1,500 as well as higher income in commodity-related industry. The reopening of international borders has also contributed to the strong consumption performance mainly through an upbeat in tourism-related activities as shown by the increasing trend of tourist arrivals and receipts since April 2022. In supporting the labour market, the Government continued its policy measures which include the wage subsidy programme, JaminKerja, Malaysia Short-Term Employment Programme (MySTEP) as well as upskilling and reskilling initiatives. The special EPF withdrawal in April 2022 had also provided an additional boost to private spending, especially among contributors who are significantly impacted by the COVID-19 pandemic. In addition, the growth in private consumption was reflected by sales of passenger cars which grew 31.2% in the first half of 2022, mainly induced by the sales tax exemption on purchase of passenger cars. Other consumption indicators such as imports of consumption goods and consumption credit disbursed also registered an increase of 21.1% and 31.9%, respectively. In the second half of 2022, private consumption is expected to grow by 6% in line with steady recovery in the labour market through lower unemployment rate as well as increase in salaries and wages; and greater economic and social activities including tourism-related activities. In addition, the Government measures particularly cash assistance for the B40 households and continuation of consumption subsidies on selected goods and services are expected to sustain household spending while minimising the impact of rising cost of living. Thus, private consumption is estimated to expand by 8.7% in 2022. 2023 29/09/2022 12:48 PM
99. chapter 2 In the first half of 2022 , private investment increased 3.3% as economic activities resumed following the ease of containment measures and opening up of international borders. Indicators such as imports of intermediate goods and imports of capital goods expanded by 32.8% and 12.4%, respectively, signalling improving performance of investment. Furthermore, Malaysia remains an attractive investment destination and continues to receive encouraging foreign investments following the growing external demand and ramped up in the manufacturing and services sectors. The foreign direct investment (FDI) continued to surge in the first six months of 2022 to reach a net inflow of RM41.7 billion compared with RM20.2 billion in the corresponding period in 2021. The inflows were mainly in the manufacturing, financial and insurance/takaful activities as well as wholesale and retail sectors. In the second half of the year, private investment is anticipated to grow by 2.5% in line with the Leading Index which exceeded the 100-point threshold and recorded 109.5 points in July 2022, signalling greater confidence in the coming months. Overall, private investment in 2022 is expected to increase by 3% supported by continued capital spending, especially in the manufacturing and services sectors. The Government will continue to promote conducive business environment as well as facilitate the private sector in accelerating the adoption of digitalisation and intensifying innovation activities. Guided by the National Investment Aspirations (NIA), continued efforts will be intensified to secure more high quality and high impact projects which will create high-income jobs. This is reflected by the total approved investment of RM123.3 billion by the Malaysian Investment Development Authority (MIDA) during the first six months of 2022 which involved new projects as well as expansion and diversification of existing macroeconomic outlook projects, mainly in the services sector (RM78 billion). Approved foreign investment continued to lead with a value of RM87.4 billion of the total approved investment, primarily from China (RM48.6 billion), Germany (RM9 billion) and Singapore (RM6 billion). Public investment rebounded 1% in the first half of 2022, mainly driven by public corporations’ higher capital outlays. Public investment is projected to expand by 3.1% in the second half and 2.2% for the whole year. The Federal Government’s development expenditure (DE) continues to prioritise investment with high multiplier impact to the economy. The DE will be channelled mainly for projects which promote sustainable development, enhance the living standards of people, accelerate technology adoption and innovation as well as improve transport infrastructure, in tandem with the objectives outlined in the Twelfth Malaysia Plan, 2021 – 2025 (12MP). Public consumption registered a growth of 4.7% in the first half of 2022, attributed to spending on emoluments as well as supplies and services. For the year, public consumption is projected to expand by 1% in line with the continuous effort by the Government to optimise operating expenditure while ensuring efficient public service delivery. Gross National Savings (GNS) is anticipated to post a growth of 6.7% in 2022, in line with the expected increase in nominal national income at 9.2%. Subsequently, the GNS is envisaged to remain significant at RM429.9 billion or 26.2% of gross national income (GNI). Total investment expenditure is projected to rise by 10.1% to RM379 billion or 23.1% of GNI. Therefore, the savings-investment gap is expected to record a surplus of RM50.8 billion or 3.1% of GNI, enabling Malaysia to finance its economic activities primarily from domestic sources. economic outlook Chapter 2.indd 77 2023 77 29/09/2022 12:48 PM
100. chapter 2 MACROECONOMIC OUTLOOK FIGURE 2 .7. Savings-Investment Gap (% of GNI) % 30 % 15 25 10 20 5 15 2019 2020 2021 20221 20232 0 GROSS NATIONAL SAVINGS TOTAL INVESTMENT3 SAVINGS-INVESTMENT GAP (RIGHT SCALE) 1 Estimate Forecast 3Including change in stocks 2 Source: Department of Statistics and Ministry of Finance, Malaysia Income Reasonable sharing of national income is still a challenge The creation of more employment opportunities attributed to the normalisation of more business operations post-COVID-19 pandemic has generated positive income growth to the economy. The compensation of employees (CE)2 increased by 2.2% to RM537.9 billion in 2021 as compared with RM526.6 billion in the previous year. Nevertheless, the share of CE to GDP decreased to 34.8% due to faster growth of nominal GDP by 9% as compared with CE. The similar situation was also experienced in many countries during the pandemic. However, the share of CE is expected to expand slightly to 34.9% in 2022 in tandem with better economic growth prospects. The highest proportion of CE will continue to be contributed by the services (63.1%) and manufacturing (23.1%) sectors, particularly in wholesale & retail trade, food & beverage and accommodation subsectors as well as electrical, electronic and optical products. Gross operating surplus (GOS)3 grew by 14% and recorded a share of 62.9% to GDP in 2021. The capital owners have profited a double-digit income growth of 24.5% from the economic expansion as the selected industries have benefitted significantly from higher commodity prices. Meanwhile, the mixed-income earned by self-employed, unincorporated enterprises and others recorded a contraction of 6.5% attributed to a lesser employment and income prospects for these groups during the pandemic. Overall, the share of GOS to GDP is expected to further improve to 64.4% in 2022 supported by better economic performance. However, as businesses are yet to regain full recovery post-pandemic, mixed-income for the self-employed group is projected to expand at a slower pace of 0.7% compared to 18.4% for capital owners. Taxes less subsidies on production and imports4 recorded a lower contraction of 8% in 2021 attributed to a positive growth in income received from taxes of 5.8%, while expenditure on subsidies and incentives increased by 28.7%. Almost half of these subsidies and incentives were provided for the wage subsidy programme and special grant for micro, small and medium enterprises in assisting businesses to remain afloat during the COVID-19 pandemic. In 2022, income from taxes on production and imports is expected to increase by 8.2% following higher income from indirect tax and non-tax revenue on production and imports. Nevertheless, the overall net taxes on production and imports is expected to record a higher contraction of 64.8% due to upsurge in subsidy expenditure, particularly for petroleum subsidy. Includes wages and salaries payable in cash, allowances and other expenses to employees received in-kind (including meals, uniform, transportation, etc.) as well as social contributions related to employment. Consists of operating surplus for capital owners and mixed-income for self-employed and unincorporated enterprises and others. 4 Consists of taxes on products and other taxes on production less subsidies on products and other subsidies on production. 2 3 78 Chapter 2.indd 78 ecONOMic OutlOOK 2023 29/09/2022 12:48 PM
101. chapter 2 macroeconomic outlook table 2 .6. Gross Domestic Product by Income Components, 2020 – 2023 (at current prices) Share (%) 2020 2021 chaNGe (%) 20221 20232 2020 2021 20221 20232 Compensation of employees 37.1 34.8 34.9 35.2 -3.0 2.2 11.0 6.9 Gross operating surplus 60.1 62.9 64.4 62.2 -6.9 14.0 13.5 2.4 Operating surplus 39.7 45.3 48.5 45.2 -4.6 24.5 18.4 -1.1 Mixed income 20.4 17.5 15.9 17.0 -10.7 -6.5 0.7 13.2 Taxes less subsidies 2.7 2.3 0.7 2.6 -30.4 -8.0 -64.8 276.4 100.0 100.0 100.0 100.0 -6.3 9.0 10.8 6.0 GDP at purchasers' prices Estimate Forecast Source: Department of Statistics and Ministry of Finance, Malaysia 1 2 table 2.7. Gross Domestic Product by Income in Selected Countries, 2019 – 2021 cOMpeNSatiON Of eMplOYeeS 2019 2020 2021 GrOSS OperatiNG SurpluS 2019 2020 2021 taXeS leSS SubSiDieS 2019 2020 2021 Share Of GDp (%) Malaysia Philippines Singapore Republic of Korea Australia Netherlands Canada United Kingdom Germany United States 35.9 34.4 39.9 47.5 47.2 47.8 50.8 48.7 53.4 53.4 37.1 34.8 42.8 48.2 48.2 50.9 52.5 52.6 54.7 55.0 34.8 36.7 39.4 47.9 47.7 49.0 50.7 51.6 53.8 54.2 60.5 57.9 53.1 43.0 42.8 41.1 38.2 39.6 36.8 40.0 60.1 58.6 56.5 41.9 44.7 41.4 40.1 41.1 37.1 41.4 62.9 55.7 55.7 41.9 46.5 41.9 40.3 39.5 38.2 41.0 3.7 7.7 6.9 9.6 10.0 11.0 11.0 11.8 9.8 6.6 2.7 6.6 0.7 9.9 7.1 7.7 7.4 5.9 8.1 3.7 2.3 7.6 4.9 10.2 5.8 9.0 9.0 8.8 7.9 4.8 Source: Department of Statistics, Malaysia External Sector Stellar performance persists Trade Performance Gross exports are projected to increase by 17.4% in 2022 attributed to strong external demand from major trading partners following the acceleration of global technology upcycle and digitalisation. Exports of manufactured goods are estimated to grow by 15% driven by higher demand for both E&E and non-E&E products by 26.9% and 6.1%, respectively. The increase in E&E exports is expected to continue strongly, supported by steady external demand amid global chip shortage. Products include semiconductor, telecommunication equipment parts as well as automatic data processing equipment, represented the highest share of E&E components. Meanwhile, exports of non-E&E products, particularly petroleum products and palm oilbased manufactured products are expected to grow in 2022 following robust external demand and high commodity prices. Similarly, exports of agriculture goods are estimated to grow by 26.2%, buoyed by demand for palm oil and palm oil-based agriculture products as well as natural rubber. Increasing demand particularly from China, Egypt, India and Saudi Arabia is expected to raise exports of palm oil by economic outlook Chapter 2.indd 79 2023 79 29/09/2022 12:48 PM
102. chapter 2 macroeconomic outlook 32 .8%. Rise in exports earnings is also partly due to the surge in palm oil prices following disruption in the supply of sunflower oil from Ukraine, which has increased the demand for other oil substitutes, particularly palm oil. Furthermore, exports of mining goods are projected to edge up by 39.8%, supported by increase in global demand for crude petroleum and LNG by 54.4% and 39.3%, respectively. Malaysia being a net commodity exporter, is benefitting from the surge in prices of crude oil, natural gas and palm oil. table 2.8. External Trade, 2021 – 2023 rM MilliON Total trade Gross Exports of which: Manufactured Agriculture Mining Gross Imports of which: Capital goods Intermediate goods Consumption goods Trade Balance chaNGe (%) 2021 2,228,366 1,241,022 20221 2,634,758 1,456,448 20232 2,669,392 1,488,859 2021 24.9 26.1 20221 18.2 17.4 20232 1,068,431 98,093 69,757 987,344 1,228,384 123,777 97,496 1,178,309 1,256,892 125,901 99,054 1,180,533 25.8 36.8 19.4 23.3 15.0 26.2 39.8 19.3 2.3 1.7 1.6 0.2 103,823 545,801 83,893 253,678 113,028 658,656 98,168 278,139 113,349 660,292 98,333 308,326 14.4 27.2 13.2 38.4 8.9 20.7 17.0 9.6 0.3 0.2 0.2 10.9 1.3 2.2 Estimate 2 Forecast Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia External Trade Development Corporation and Ministry of Finance, Malaysia 1 table 2.9. Gross Exports, January – August 2021 and 2022 rM MilliON 2021 chaNGe (%) 2022 2021 Share (%) 2022 2021 2022 673,357 853,293 25.8 26.7 86.5 84.1 Agriculture 58,127 81,972 32.1 41.0 7.5 8.1 Mining 44,035 74,610 6.8 69.4 5.7 7.4 Others 1 3,030 4,530 7.5 49.5 0.4 0.4 778,548 1,014,404 24.9 30.3 100.0 100.0 Manufactured Gross exports 1 Including gold scrap and waste; worn clothing; and special transaction not classified Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation Gross imports are projected to expand by 19.3% in 2022 supported mainly by intermediate and capital goods on the back of continued improvement in domestic economic activities with reopening of the economy. Likewise, imports of consumption goods are anticipated to increase with the surge in households demand following gradual improvement in employment 80 Chapter 2.indd 80 economic outlook and income prospects. Imports of intermediate goods which constitute the largest share of 55.9% are expected to increase by 20.7%, followed by growth of capital goods and consumption goods at 8.9% and 17%, respectively. Meanwhile, capital goods form a share of 9.6%, while consumption goods constitute 8.3% of the total imports. 2023 29/09/2022 12:48 PM
103. chapter 2 macroeconomic outlook table 2 .10. Exports of Manufactured Goods, January – August 2021 and 2022 rM MilliON 2021 282,738 390,618 59,982 44,699 35,873 31,359 29,652 19,965 50,574 15,508 17,335 10,089 10,122 10,335 10,326 6,786 3,493 5,421 1,574 27,525 673,357 E&E Non-E&E Petroleum products Chemicals & chemical products Manufactures of metal Machinery, equipment & parts Optical & scientific equipment Palm oil-based manufactured products Rubber products Processed food Iron & steel products Transport equipment Textiles, apparels & footwear Manufactures of plastics Wood products Non-metallic mineral products Jewellery Paper & pulp products Beverages & tobacco Other manufactures Exports of manufactured goods chaNGe (%) 2022 380,777 472,516 103,571 53,098 44,805 40,078 36,535 28,931 21,075 18,343 22,747 11,045 11,792 11,631 12,725 7,850 4,679 6,329 1,703 35,580 853,293 2021 18.8 31.5 37.2 36.4 55.9 23.6 11.6 44.1 110.6 12.7 10.3 -22.7 16.0 20.6 4.9 33.5 52.8 29.0 -3.3 10.3 25.8 Share (%) 2022 34.7 21.0 72.7 18.8 24.9 27.8 23.2 44.9 -58.3 18.3 31.2 9.5 16.5 12.5 23.2 15.7 34.0 16.7 8.2 29.3 26.7 2021 42.0 58.0 8.9 6.6 5.3 4.7 4.4 3.0 7.5 2.3 2.6 1.5 1.5 1.5 1.5 1.0 0.5 0.8 0.2 4.1 100.0 2022 44.6 55.4 12.1 6.2 5.3 4.7 4.3 3.4 2.5 2.1 2.7 1.3 1.4 1.4 1.5 0.9 0.5 0.7 0.2 4.2 100.0 Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation FIGURE 2.8. Top 10 Trading Partners, January – August 2022 (% share) Exports Imports 14.7% 21.1% 25.7% 30.5% 13.3% RM1,014.4 billion 3.4% 3.5% 3.6% 6.2% 3.6% 4.4% 6.1% 4.4% 10.6% SINGAPORE CHINA INDIA INDONESIA US JAPAN HONG KONG THAILAND RM858.8 billion 2.6% 2.8% 10.7% 8.1% 4.7% 5.9% 6.4% 7.5% CHINA SINGAPORE REPUBLIC OF KOREA THAILAND REPUBLIC OF KOREA TAIWAN AUSTRALIA TAIWAN US VIET NAM REST OF THE WORLD JAPAN REST OF THE WORLD INDONESIA Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation economic outlook Chapter 2.indd 81 2023 81 29/09/2022 12:48 PM
104. chapter 2 macroeconomic outlook table 2 .11. Gross Imports by End Use, January – August 2021 and 2022 rM MilliON 2021 Capital goods 2022 chaNGe (%) 2021 Share (%) 2022 2021 2022 66,781 77,423 10.8 15.9 10.6 9.0 63,054 69,003 0.8 9.4 10.0 8.0 3,727 8,420 -262.8 125.9 0.6 1.0 348,480 472,308 23.2 35.5 55.5 55.0 Food and beverages, primary and processed, mainly for industries 17,639 23,525 33.7 33.4 2.8 2.7 Fuel and lubricants, primary, processed and others 31,623 71,941 -2.5 127.5 5.0 8.4 Industrial supplies, primary, processed and n.e.s.1 176,419 213,016 35.9 20.7 28.1 24.8 Parts and accessories of capital goods and transport equipment 122,800 163,826 14.3 33.4 19.5 19.1 54,338 67,982 13.5 25.1 8.6 7.9 23,857 29,774 11.2 24.8 3.8 3.5 1,097 1,220 89.7 11.3 0.2 0.1 29,384 36,988 13.8 25.9 4.7 4.3 Durables 7,899 9,208 35.9 16.6 1.3 1.1 Semi-durables 8,379 11,458 4.2 36.7 1.3 1.3 Non-durables 13,106 16,321 9.6 24.5 2.1 1.9 15,668 27,707 21.6 76.8 2.5 3.2 Re-exports 143,189 213,411 21.3 49.0 22.8 24.8 Gross imports 628,456 858,832 20.4 36.7 100.0 100.0 Capital good (except transport equipment) Transport equipment (industrial) Intermediate goods Consumption goods Food and beverages, primary and processed, mainly for household Transport equipment (non-industrial) Other consumer goods Others Not elsewhere stated Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia 1 Balance of Payments The current account surplus of the balance of payments narrowed to RM7.4 billion or 0.9% of GNI in the first half of 2022. This is due to lower surplus in the goods account and higher deficit in the income account albeit smaller deficits in the services account. In the second half of the year, the current account surplus is projected to expand to RM43.4 billion or 5.3% of GNI following a wider surplus in the goods account despite a larger deficit in the services and income accounts. The performance is expected to 82 Chapter 2.indd 82 economic outlook continue until year end with narrowing current account surplus of RM50.8 billion or 3.1% of GNI. In 2022, the goods account is projected to register a higher surplus of RM195 billion underpinned by increasing exports of manufactured, agriculture and mining goods. Meanwhile, the services account is expected to record a smaller deficit of RM59.7 billion following surging receipts in the travel account albeit widening deficit in transport and other services accounts. The opening of international borders and transition towards the endemic 2023 29/09/2022 12:48 PM
105. chapter 2 phase have contributed to the increase in tourist arrivals , leading to a smaller deficit of RM10.8 billion in the travel account. In contrast, the transport account is projected to register a higher deficit of RM34.4 billion due to lower earnings gained by domestic companies from transactions involving airline passenger fares and freight charges as well as airport and port charges on activities such as aircraft landing and parking, ship docking and cargo handling. Similarly, the other services account is expected to register a wider deficit of RM14.5 billion following increasing payments for manufacturing services on physical inputs owned by others, insurance and pension services as well as personal, cultural and recreational services. macroeconomic outlook The primary income account is projected to register a higher deficit of RM69.5 billion in 2022 due to a wider deficit in investment income following higher income payments, partly due to repatriation of profits and dividends by foreign investors in Malaysia. The investment income payments are expected to reach RM133.7 billion. Correspondingly, compensation of employees is anticipated to record a higher deficit of RM7.9 billion attributed to an increase in the number of foreign professionals in Malaysia following the resumption of high impact projects. Earnings in the secondary income account in 2022 are anticipated to increase to RM24.7 billion following a one-off receipt table 2.12. Current Account of the Balance of Payments, 2021 – 2023 (RM million) 2021 20221 receiptS paYMeNtS Balance on goods and services Goods 1,063,817 receiptS paYMeNtS Net receiptS paYMeNtS Net 953,972 109,845 1,264,686 1,129,431 135,255 1,322,984 1,159,342 163,642 806,503 170,573 1,146,539 951,538 195,001 1,186,754 970,511 216,243 86,741 147,469 -60,728 118,147 177,893 -59,746 136,230 188,831 -52,601 15,455 47,907 -32,452 21,359 55,805 -34,446 24,815 58,728 -33,913 320 14,884 -14,563 13,362 24,138 -10,777 23,848 29,553 Other services 70,965 84,679 -13,713 83,426 97,949 -14,523 87,567 100,550 -12,983 Primary income 98,166 139,716 -41,551 78,930 148,433 -69,504 80,714 151,084 -70,370 Services Transport Travel Compensation of employees Investment income Secondary income 977,076 Net 20232 6,487 91,679 20,503 13,090 -6,603 6,840 126,627 -34,948 30,098 Balance on current account 1,182,486 1,123,786 -9,594 14,736 -7,896 6,936 72,089 133,697 -61,608 73,778 135,089 -61,311 24,675 39,586 -14,911 25,675 45,906 -20,231 58,700 1,368,290 1,317,449 % of GNI 3.9 15,995 -5,705 50,841 1,429,373 1,356,333 -9,059 73,040 3.1 4.2 Estimate Forecast Note: Total may not add up due to rounding Source: Department of Statistics and Ministry of Finance, Malaysia 1 2 and higher remittances by Malaysians working abroad. Payments in the secondary income account are expected to increase to RM39.6 billion, leading to a higher deficit of RM14.9 billion. The increase in payments is owing to larger remittances by foreign workers from Bangladesh, India, Indonesia, Nepal and the Philippines as economic activities normalise and the revision of minimum wage. economic outlook Chapter 2.indd 83 2023 83 29/09/2022 12:48 PM
106. chapter 2 MACROECONOMIC OUTLOOK FIGURE 2 .9. International Reserves RM billion 500 Months/Times 10 400 8 300 6 200 4 100 2 0 J A J O 2020 J A J O J 2021 A J 0 2022 INTERNATIONAL RESERVES MONTHS OF IMPORTS OF GOODS AND SERVICES TOTAL SHORT-TERM EXTERNAL DEBT RIGHT SCALE As at 30 August 2022, Malaysia's international reserves amounted to RM476.5 billion or USD108.2 billion adequate to finance 5.4 months of imports of goods and services and 1.1 times of the total short-term external debt (end-December 2021: RM486.8 billion; USD116.9 billion; 7.7 months; 1.2 times) In the first half of 2022, the financial account registered a net inflow of RM30.7 billion compared with RM13 billion in 2021 attributed to significantly higher net inflows in direct investment and other investment accounts, which more than offset net outflows in the portfolio and financial derivatives accounts. Similarly, FDI registered a higher net inflow of RM41.7 billion, channelled mainly to the manufacturing, financial and insurance/takaful activities as well as wholesale and retail trade sectors. Net outflow of direct investment abroad by Malaysian companies recorded an increase to RM18.3 billion. The outflows were mainly directed into financial and insurance/ takaful activities, wholesale and retail trade as well as transportation and storage sectors. Source: Bank Negara Malaysia (Quarterly Bulletin 4Q 2021) feature article 2.3 Malaysia’s Trade Performance: Pre-, During and Post-Pandemic (2017 – June 2022) Introduction Malaysia’s trade structure has been evolving significantly over recent decades, from agricultureand mining-based into robust manufacturing-led sectors and has since propelled itself to becoming a leading exporter, particularly in the electrical and electronic (E&E) products. Subsequently, Malaysia has also emerged as among the major exporters in other key non-E&E products since 2000, benefitting from diversification in exports market and greater focus on higher value-added downstream manufacturing activities. These include petroleum products, chemicals and chemical products as well as manufactures of metal. Currently, the manufacturing sector continues to contribute the highest share of more than 80% of the country’s overall exports. Trade Performance Pre-Pandemic The year 2020 witnessed an unprecedented turn of events on global economy, the worst downturn since the Great Depression in 1930s. This was primarily due to execution of strict lockdown to contain the spread of highly contagious COVID-19 virus worldwide, which had equally been impacting the global trade. However, Malaysia’s trade had been trending down even before the pandemic due to the US – China trade war that escalated starting July 2018, as shown in Figure 2.3.1. After moderating at 6.3% in 2018, Malaysia’s total trade subsequently contracted by 2.1% in 84 Chapter 2.indd 84 ecONOMic OutlOOK 2023 29/09/2022 12:48 PM
107. chapter 2 MACROECONOMIC OUTLOOK 2019 , while exports and imports declined by 0.8% and 3.5% (2018: 7.3% and 5.2%), respectively. This highlighted the adverse impact of the trade war to Malaysia’s trade performance, mainly because both China and the US have always been among Malaysia’s major trading partners. Almost 50% of Malaysia’s exports are incorporated into China’s final products, which China subsequently exports to the US (MOF, 2019). Being a highly open economy, in which trade is deeply integrated within the global supply chains, the US imposition of high tariffs and trade barriers on China had indirectly impacted Malaysia’s exports to China. Notwithstanding the trade war effects, Malaysia stood to benefit in the short run, arising from trade diversion when both the US and China substituted their demand for imports from each other to other emerging markets including Malaysia. In addition, Malaysia gained from the relocation of multinational corporations (MNCs) seeking to circumvent the high tariffs. This resulted in an increase in manufacturing investments as well as generating trade and investment spillovers into the country. FIGURE 2.3.1. Malaysia’s Trade Performance, 2017 – June 2022 RM Billion 800 700 The US-China trade war began in July 2018 600 Malaysia’s short-run benefit from the trade war Malaysia’s trade with the US and China grew by 2.4% in 2019 amid the trade war to record 26.2% shares combined • First MCO implementation in mid-March 2020 due to COVID-19 • Malaysia experienced trade deficit in April after 269 months of trade surplus since Nov 1997 Total trade posted an all-time high of more than RM2 trillion in 2021 500 400 E&E exports rose by 18% in 2021 attributed to digitalisation Rubber products soared by 71.4% following surged in global demand for PPE and rubber gloves 300 Russia-Ukraine conflict began in February 2022 200 100 Q1 Q2 Q3 Q4 Q1 2017 Q2 Q3 2018 Q4 PostPandemic During Pandemic Pre-Pandemic Q1 Q2 Q3 2019 Q4 Q1 Q2 Q3 2020 Q4 Q1 Q2 Q3 Q4 2021 Q1 Q2 2022 TOTAL TRADE GROSS EXPORTS GROSS IMPORTS Source: Ministry of Finance, Malaysia Regardless of the US-China trade conflict, Malaysia acknowledges the importance of strengthening relations with existing major trading partners as well as building alliance with other emerging markets, in the region and across the globe. In lieu of this, Malaysia continues to support a more liberalised, free and fair global trading environment by engaging in various international trade policies through bilateral, regional, multilateral and plurilateral trade agreements, as shown in Table 2.3.1. The involvement in free trade agreements (FTAs) is aimed not only to reduce and eliminate tariffs, but also to address issues relating to non-tariff barriers that would otherwise impede the flow of goods and services. Ultimately, Malaysia’s main trade policies aimed at improving market access for exports of commodities and manufactured goods as well as services, apart from developing and promoting exports of higher value-added manufactures. Additionally, expanding trade with major trading partners and diversifying trade with non-traditional markets, particularly developing countries, are always the cornerstone of the nation’s trade strategies, within ASEAN and around the globe. ecONOMic OutlOOK Chapter 2.indd 85 2023 85 29/09/2022 12:48 PM
108. chapter 2 macroeconomic outlook table 2 .3.1. Malaysia’s Free Trade Agreements BILATERAL FTAS DATE OF ENTRY INTO FORCE Malaysia-Japan Economic Partnership Agreement (MJEPA) 13 July 2006 REGIONAL FTAS (WITH ASEAN) ASEAN Free Trade Area (AFTA) DATE OF ENTRY INTO FORCE 1993 Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA) 1 January 2008 ASEAN-China Free Trade Agreement (ACFTA) 1 July 2003 Malaysia-New Zealand Free Trade Agreement (MNZFTA) 1 August 2010 ASEAN-Korea Free Trade Agreement (AKFTA) 1 July 2006 Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA) 1 July 2011 Malaysia-Chile Free Trade Agreement (MCFTA) ASEAN-Japan Comprehensive Economic Partnership (AJCEP) 1 February 2009 25 February 2012 ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) 1 January 2010 Malaysia-Australia Free Trade Agreement (MAFTA) 1 January 2013 ASEAN-India Free Trade Agreement (AIFTA) 1 January 2010 Malaysia-Turkey Free Trade Agreement (MTFTA) 1 August 2015 ASEAN-Hong Kong Free Trade Agreement (AHKFTA) Regional Comprehensive Economic Partnership (RCEP) MULTILATERAL FTA DATE OF ENTRY INTO FORCE World Trade Organisation (WTO) WTO (member since 1 January 1995), GATT (member since 24 October 1957) PLURILATERAL FTA Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) 13 October 2019 18 March 2022 DATE OF ENTRY INTO FORCE Malaysia is yet to ratify to the CPTPP Source: Ministry of International Trade and Industry, Malaysia Trade Performance During Pandemic The COVID-19 pandemic has implicated trade and the overall economy on an unprecedented scale, which required various urgent measures and policy responses to mitigate the crisis. Malaysia’s total trade contracted by 3.3% in 2020, with exports and imports declining by 1.1% and 5.8%, respectively. The country had been recording monthly trade surplus consecutively since November 1997, before registering a trade deficit of RM4.5 billion in April 2020. Total trade in April and May 2020 recorded double-digit deficits of 16.4% and 27.6%, respectively, as a consequence of a series of strict movement control orders (MCOs) since mid-March 2020. The onset of the pandemic had halted the operation of non-essential sector businesses, while the essential sectors, including healthcare, telecommunications and media, food and beverages, utilities as well as banking were only allowed to operate at 60% capacity. To revive the adversely affected manufacturing sector, Malaysia progressively reopened its economy. As a result, Malaysia’s external demand gradually recovered, particularly among major trading partners, with exports rebounded in the second half of 2020. The silver lining from the pandemic was advantageous to certain Malaysia’s exports, notably the E&E and rubber products, which benefitted from surging demands. The E&E products continued to contribute the highest share of Malaysia’s total exports in 2020 at 39.3% or RM386.3 billion, greater 86 Chapter 2.indd 86 economic outlook 2023 29/09/2022 12:48 PM
109. chapter 2 macroeconomic outlook than the levels recorded during pre-pandemic years . The increase in E&E exports, particularly semiconductors, automatic data processing equipment as well as telecommunication equipment parts, were largely due to the upward global trend for digitalisation and technology upcycle. This upward trend is subsequent to the measures of new norms, such as work-from-home, online-school and learning as well as a wider adoption to e-hailing services. The increase in global demand for personal protective equipment (PPE) was a boon to Malaysia’s rubber products, especially rubber gloves, due to COVID-19 healthcare-related procedures and massive vaccination programmes worldwide. Malaysia’s rubber gloves recorded an upsurge in exports starting April 2020, soaring from a double-digit to triple-digit growth beginning June 2020 until mid-2021, before contracting in September 2021 as the pandemic abated. Meanwhile, Malaysia’s exports recorded a mixed performance for the three main commodities, namely palm oil and palm oil-based agriculture products, liquefied natural gas (LNG) and crude petroleum. The country’s exports of palm oil and palm oil-based agriculture products accelerated by 18.4% to RM52.3 billion in 2020, benefitting from higher prices of crude palm oil especially in the second half of the year, despite lower palm oil production mainly due to labour shortage and movement restrictions. In contrast, exports of LNG and crude petroleum recorded a double-digit contraction of 29.7% and 28.5% to RM29.9 billion and RM18.8 billion, respectively, in 2020. The global lockdowns caused the price of crude oil to plunge to as low as USD17.32 per barrel on 21 April 2020, reflecting a significant drop in demand for fuel due to sudden decline in transportation, travel and tourism activities. Total imports slipped by 5.8% to RM800.5 billion in 2020, out of which intermediate goods recorded the highest share of 53.6%, followed by capital and consumption goods at 11.3% and 9.3%, respectively. As economic activities slowed down, imports of intermediate goods shrank by 8.1% as a result of lower imports of processed industrial supplies, particularly iron and steel. Capital goods also declined by 9.4%, mainly due to reduced imports of industrial transport equipment, primarily vehicles other than railway. Similarly, consumption goods contracted marginally by 0.03%, because of lower imports of semi-durables, especially apparels and footwear. Nonetheless, the imports of food and beverages, both for industrial and household consumptions, continued to record an increasing trend since the start of the pandemic. Green Shoots Emerging en route to Post-Pandemic Malaysia’s trade performance is poised to benefit from global economic rebound post-pandemic, despite the prevailing supply chain disruptions and global uncertainties. Swift, substantial and multi-pronged pandemic policy responses with various stimulus packages have been supporting the economy. In addition, the manufacturing sector which remained operative during the series of MCOs imposed in 2021, continues to underpin exports growth. Nonetheless, the pre-requisite to recover from the pandemic is to have an efficient and sound vaccination programme to contain the outbreak, before the economy can operate at full capacity. This is vital to ensure a sustainable balance between lives and livelihood. Against this backdrop, the Malaysian Government launched a full force nationwide implementation of the National COVID-19 Immunisation Programme (PICK) starting February 2021, which until June 2022, registered over 83% of country’s population to have received at least two doses of vaccination. The success of PICK resulted in easing of stringent measures and movement control with economic activities operating close to normalcy when country moved to Phase 4 of the National Recovery Plan that economic outlook Chapter 2.indd 87 2023 87 29/09/2022 12:48 PM
110. chapter 2 MACROECONOMIC OUTLOOK took effect from 3 January 2022 . Hence, Malaysia’s trade performance accelerated in the fourth quarter of 2021, with total trade surged by 29.5%, while exports and imports rose by 29.4% and 29.6%, respectively. Malaysia’s total trade in 2021 posted the highest growth since 1994 at 24.9%, surpassing RM2 trillion for the first time, with exports and imports recording an all-time high, as shown in Figure 2.3.2. Trade balance registered a surplus for 24 consecutive years since 1998, driven by robust external demand and higher commodity prices. Exports to major trading partners namely ASEAN, China, the US and the EU recorded strong double-digit growth. Additionally, significant export expansions were registered to emerging export markets such as Costa Rica, Egypt, Ghana, Iraq, Kenya and Nigeria. FIGURE 2.3.2. Malaysia’s Trade Performance, 2017 – H1 2022 RM Trillion 1.5 RM Trillion 2.5 1.2 2.0 0.9 0.6 1.5 0.3 0.0 2017 2018 2019 2020 2021 H1 2022 1.0 GROSS EXPORTS GROSS IMPORTS TRADE BALANCE TOTAL TRADE (RIGHT SCALE) Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation In terms of sectoral performance, exports of manufactured, agriculture and mining goods accelerated to double-digit growth, as depicted in Figure 2.3.3. Manufactured goods, making up 86.1% of total exports, performed strongly by reaching RM1 trillion mark for the first time, boosted by strong exports of E&E products, petroleum products, chemicals and chemical products as well as rubber products. Commodities also registered a resilient growth with double-digit expansion, particularly for palm oil and palm oil-based agriculture products, natural rubber and LNG, attributed to robust external demand. Likewise, imports recorded a turnaround at 23.3% to RM987.3 billion with overall double-digit increase in intermediate, capital and consumption goods which accounted for 74.3% of total imports in 2021, emanating from robust economic activities. Intermediate goods increased by 27.2% to RM545.8 billion following strong imports of processed industrial supplies, while capital goods grew by 14.4% amounted to RM103.8 billion resulting from higher imports of parts for machinery and mechanical appliances. Meanwhile, consumption goods edged up by 13.2% to RM83.9 billion attributed to growing imports of processed food and beverages. 88 Chapter 2.indd 88 ecONOMic OutlOOK 2023 29/09/2022 12:48 PM
111. chapter 2 MACROECONOMIC OUTLOOK FIGURE 2 .3.3. Performance of Gross Exports and Imports, 2017 – H1 2022 RM Trillion 1.5 2017 2018 2019 2020 2021 H1 2022 1.2 0.9 0.6 0.3 0.0 s os s Gr ort p Ex u an M d re tu c fa g in in M A re tu ul ic gr s te os s ia s Gr ort ed ood p m r G Im te In l n io s ta pi ds pt d m oo Ca oo u G G ns Co s er th O ts or p ex e- R Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation The growth trajectory was projected to resume in 2022 with semblance of post-pandemic normalcy, until the Russia-Ukraine conflict erupted in February which weakened the outlook for this year. This was then followed by China’s strict zero-COVID policy in March which started in Shanghai and extended to Beijing as well as other cities. Shanghai reopened in June after a longer-than-expected lockdown to curb the virus, with gradual reopening of Beijing and other cities. In spite of global uncertainties, Malaysia’s trade performance continued the upward trend in the first half of 2022 on account of strong external demand. This was also driven by Malaysia transitioning into the endemic phase and the reopening of international borders that have eased the flows of supply chain and human mobility which include business travellers and foreign workers. While exports of E&E and non-E&E accelerated, in contrast, exports of rubber products, specifically rubber gloves, declined significantly as demand for PPE subsided when economic activities continue to normalise. Rubber gloves registered a significant slowdown in exports starting July 2021 before contracting from September onwards. On the other hand, exports of Malaysia’s main commodities, namely palm oil and palm oil-based agriculture products, LNG and crude petroleum registered double-digit growth in the first half of 2022 mainly due to steady external demand. Imports of intermediate, capital and consumption goods recorded similar double-digit growth in the same period as the country’s economy remained buoyant. Clearly, Malaysia’s diversified economy and accommodative policies through the Government support interventions have cushioned the impacts from the external shocks of the reeling global growth due to 3Cs – COVID-19, Climate and Conflict (UNICEF, 2020). Apart from COVID-19, the impacts of climate change has been more damaging beyond economic factors, while the prolonged Russia-Ukraine crisis with stringent economic sanctions on Russia has led to fragile recovery and intense uncertainty (UNCTAD, 2022). More areas have been identified to be the country’s new sources of growth which include advanced E&E, aerospace, biomass, pharmaceuticals, digital economy as well as chemicals and chemical product industry (MITI, 2021). All these new sources of growth are expected to value-add the upstream and downstream activities to further diversify Malaysia’s exports and productive imports that will boost overall trade performance. ecONOMic OutlOOK Chapter 2.indd 89 2023 89 29/09/2022 12:48 PM
112. chapter 2 macroeconomic outlook The E &E industry, which has long been a significant contributor to Malaysia’s trade, will be valueadded to be more advanced with sound ecosystem to produce local talents and create high-end jobs. In addition, Malaysia has envisaged to become the aerospace hub in Southeast Asia by 2030. The Aerospace Industry Blueprint 2030 identified five key subsectors to be developed as an integral part of the global value chains, namely maintenance, repair and overhaul (MRO); aero manufacturing; system integration; engineering and design services; as well as education and training. Furthermore, in driving research, development, commercialisation and innovation (R&D&C&I), Malaysia will increase the utilisation of high value-added biomass products which will elevate local technology as well as lower greenhouse gas emissions. Subsequently, R&D&C&I will also be applied to the pharmaceutical industry in developing and producing a variety of drugs and medicines, thus lowering the dependency on foreign pharmaceutical products. Meanwhile, the fast-paced adoption of digitalisation, technologies and cyber security practices have strengthened the digital economy, which is expected to contribute over 23% to Malaysia’s GDP by 2025 (MOSTI, 2022). The digital economy enables small and medium enterprises (SMEs) to integrate into global markets through e-commerce and information technology, thus reducing costs associated with transport and border operations. Additionally, the chemicals and chemical product industry has a high potential to expand by producing new and emerging products, including speciality chemicals, green chemicals and specialised plastics. Conclusion Malaysia, as an open economy, is susceptible to any global crisis that may impact growth and trade. The COVID-19 crisis and Russia-Ukraine conflict have severely disrupted global supply chains and impeded overall economic activities. In a nutshell, Malaysia has managed to weather the storm stemming from its strong and diverse economic foundation and accommodative policies. The Government’s prompt measures and policy responses have reinforced the momentum of economic recovery as well as strengthened the economic resilience and reforms. Additionally, Malaysia continues to develop strong trading alliances, both with traditional major trading partners as well as other emerging export markets, while expanding to new sectors of growth that promote valueadded activities. Ultimately, this would foster the resilience of Malaysia’s economy to persevere in the currently fragile and challenging state of globalisation as well as to withstand any future crisis. Prices Rise of food inflation The Consumer Price Index (CPI) grew at 3.1% during January to August 2022, attributed to pressures on certain fresh food prices due to high input costs from rising non-energy commodity prices. Of the total CPI, food and non-alcoholic beverages (food) inflation registered 5.1% during the first eight months of 2022 compared with 1.4% recorded during the same period last year. Nevertheless, the increase in food inflation has been mitigated by the existing price controls and provision of subsidies for selected food items. 90 Chapter 2.indd 90 economic outlook For the second half of 2022, the higher retail price of standard chicken and eggs as well as the subsidy removal of bottled cooking oil starting July is expected to provide an upward pressure for food inflation. In addition, temporary spike in headline inflation is expected in the third quarter mainly due to the low base effect following the removal of electricity discount for domestic consumer, which was provided under the National People’s Well-Being and Economic Recovery Package (PEMULIH) from July to September 2021. For the whole year, inflation is anticipated to register at 3.3%. 2023 29/09/2022 12:48 PM
113. chapter 2 The Producer Price Index (PPI) by local production increased by 10.2% during the first seven months of 2022, attributed to higher global commodity prices, particularly crude oil and natural gas. By sector, the surge in PPI table 2.13. Consumer Price Index, January – August 2021 and 2022 (2010 = 100) was particularly contributed by a significant increase in mining (21.1%); agriculture, forestry and fishing (14.1%); as well as manufacturing (9.1%) sectors. The PPI is expected to remain stable throughout the year due to normalisation of growth in input costs. WeiGht 1 chaNGe (%) 2021 CPI macroeconomic outlook cONtributiON tO cpi GrOWth (perceNtaGe pOiNtS) 2022 2021 2022 100.0 2.3 3.1 2.30 3.10 29.5 1.4 5.1 0.41 1.50 Alcoholic beverages and tobacco 2.4 0.6 0.5 0.01 0.01 Clothing and footwear 3.2 -0.4 0.0 -0.01 0.00 23.8 1.0 1.7 0.24 0.40 4.1 1.3 3.3 0.05 0.14 Food and non-alcoholic beverages Housing, water, electricity, gas and other fuels Furnishings, household equipment and routine household maintenance 1.9 0.5 0.5 0.01 0.01 14.6 11.0 4.5 1.61 0.66 Communication 4.8 0.0 0.0 0.00 0.00 Recreation services and culture 4.8 0.5 1.8 0.02 0.09 Education 1.3 0.2 1.0 0.00 0.01 Restaurants and hotels 2.9 0.2 4.0 0.01 0.12 Miscellaneous goods and services 6.7 0.8 1.8 0.05 0.12 Health Transport 1 Based on Household Income and Expenditure Survey 2016 Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia table 2.14. Producer Price Index, January – July 2021 and 2022 (2010 = 100) WeiGht1 chaNGe (%) 2021 PPI cONtributiON tO ppi GrOWth (perceNtaGe pOiNtS) 2022 2021 2022 100.000 7.7 10.2 7.700 10.200 Agriculture, forestry and fishing 6.730 37.9 14.1 2.551 0.949 Mining 7.927 27.3 21.1 2.164 1.673 81.571 3.9 9.1 3.181 7.423 Electricity and gas supply 3.442 -0.8 0.3 -0.028 0.010 Water supply 0.330 1.0 1.5 0.003 0.005 100.000 7.7 10.2 7.700 10.200 Crude materials for further processing 16.410 29.1 15.8 4.775 2.593 Intermediate materials, supplies and components 56.119 5.2 12.4 2.918 6.959 Finished goods 27.471 -0.1 0.8 -0.027 0.220 Manufacturing Producer Price Index by stage of processing 1 Based on Economic Census 2016 Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia economic outlook Chapter 2.indd 91 2023 91 29/09/2022 12:48 PM
114. chapter 2 macroeconomic outlook FIGURE 2 .10. Consumer Price Index and Producer Price Index Trends (% change) Consumer Price Index % 6 % 30 % 100 12 5 20 4 3 10 2 1 0 0 -10 -1 -2 -20 -3 -4 Producer Price Index % 14 80 10 60 8 40 6 4 20 2 0 0 -20 -2 -40 -4 -60 -6 J A J 2020 O J A J 2021 O CPI TRANSPORT FOOD AND NON-ALCOHOLIC BEVERAGES HOUSING, WATER, ELECTRICITY, GAS AND OTHER FUELS J A J 2022 -30 RIGHT SCALE -8 J A J O 2020 J A J 2021 PPI AGRICULTURE, FORESTRY AND FISHING MINING MANUFACTURING O J A J 2022 -80 RIGHT SCALE Source: Department of Statistics, Malaysia feature article 2.4 Food Inflation in Malaysia Introduction Inflation in Malaysia has been rising in recent months from 2.2% in March 2022 to 4.7% in August 2022. The main factor of Malaysia’s higher inflation in this period is the food inflation, which resulted from higher prices of agricultural inputs and supply chain disruption due to the ongoing Russia-Ukraine conflict. In addition, the food inflation is also caused by the strengthening of other basket of currencies, particularly US dollar. The increase in food inflation has a greater impact on the low-income group compared to high-income group. Hence, the Government has undertaken a number of measures to mitigate the impact of food inflation, including the provision of additional consumption subsidies and cash assistance. The measures, in turn has resulted in Malaysia’s inflation maintained at manageable level compared to many advanced and regional countries. The Main Factor of Higher Inflation in Malaysia Malaysia’s headline inflation is measured by the annual rate of change in Consumer Price Index (CPI). As shown in Figure 2.4.1., the CPI is calculated based on a consumption basket of 12 main groups consisting of 552 items with respective fixed weights.1 Food and non-alcoholic beverages The consumption basket is classified according to the United Nations Classification of Individual Consumption According to Purpose (COICOP). Beginning January 2018, the weights used in the CPI calculation by the Department of Statistics Malaysia are based on the pattern of households’ spending obtained from the 2016 Household Expenditure Survey. 1 92 Chapter 2.indd 92 economic outlook 2023 29/09/2022 12:48 PM
115. chapter 2 MACROECONOMIC OUTLOOK (food) group form the largest weightage within the basket that would largely influence the movement of headline inflation in Malaysia. This is especially true during food-related crisis period when inflation is considerably influenced by food component. However, the implementation of price controls can only be done on certain items in the food group to curb the price increase as food items are too diverse (Ibrahim, 2015; Qayyum et al., 2018; Deconinck et al. 2020). Figure 2.4.2. shows the monthly headline and food inflation from January 2010 to August 2022. FIGURE 2.4.1. Consumer Price Index by 12 Main Groups (weightage, total=100.00) Food & non-alcoholic beverages (29.5) Transport (14.6) Alcoholic, beverages & tobacco (2.4) Communication (4.8) Clothing & footwear (3.2) Recreation services & culture (4.8) Housing, water, electricity, gas & other fuels (23.8) Education (1.3) Furnishings, household equipment & routine household maintenance (4.1) Restaurants & hotels (2.9) Health (1.9) Miscellaneous goods & services (6.7) Source: Department of Statistics, Malaysia FIGURE 2.4.2. Headline Inflation vs. Food Inflation (2010 = 100) % 8 6 4 3.1 2.1 2 0 HEADLINE FOOD A J O J'21 A J O J'20 A J O J'19 A J O J'18 A J O J'17 A J O J'16 A J O J'15 A J O Crude oil prices > USD100 per barrel J'14 A J O J'13 A J O J'12 A J O J'11 J'10 -4 Crude oil prices > USD100 per barrel A J O J'22 -2 A J LONG TERM AVERAGE FOR HEADLINE BEFORE PANDEMIC (2010-2019) LONG TERM AVERAGE FOR FOOD BEFORE PANDEMIC (2010-2019) Source: Department of Statistics and Ministry of Finance, Malaysia (estimates) ecONOMic OutlOOK Chapter 2.indd 93 2023 93 29/09/2022 12:48 PM
116. chapter 2 MACROECONOMIC OUTLOOK Impact of Crises on Food Inflation in Malaysia Food inflation in Malaysia increased sharply from 3 % in 2007 to 8.8% in 2008 following the steady increase in global commodity prices as well as the 40.4% adjustment to retail fuel prices in June 2008. It was moderated to 4.1% in 2009 due to weak global demand conditions, reflecting the pass-through of external factors onto the domestic food prices (BNM, 2008 and 2009). In the second half of 2010, global food prices increased sharply for the second time, attributed to the stronger demand following post-economic recovery from the 2009 Global Financial Crisis and adverse weather conditions affecting major wheat and corn producing countries (BNM, 2010 and 2011). These global developments coupled with upward adjustments to administered prices of RON95, diesel, LPG and sugar in July 2010 have also impacted food prices in Malaysia. The impact was reflected in food inflation from 2.4% in 2010 to 4.8% in 2011, as shown in Figure 2.4.3. In 2020, the COVID-19 pandemic had weakened global demand for goods and services and subsequently caused commodity prices, especially crude oil to fall significantly. This has resulted in lower retail fuel prices in Malaysia leading to negative headline inflation of 1.2% in 2020 from 0.7% in 2019. Meanwhile, food inflation recorded a lower rate of 1.3% in 2020 compared with 1.7% in 2019. In line with the easing of containment measures and movement restrictions globally, economic activities resumed and boost global demand leading to increase in commodity prices. Domestically, the low base in 2020 has resulted in a headline inflation rate of 2.5% in 2021 as RON95 and diesel pump prices were capped higher at RM2.05 and RM2.15 per litre starting from March 2021. Likewise, food inflation increased by 1.7% in 2021. FIGURE 2.4.3. The Impact of Crises on Food Inflation in 2008 - 2011 and 2020 - 2022 2008 (Global Commodity Crisis) Headline inflation: 5.4% (2007:2%) Food inflation: 8.8% (2007:3%) 2009 (Global Financial Crisis) Headline inflation: 0.6% Food inflation: 4.1% 2020 (COVID-19 Pandemic Crisis) Headline inflation: -1.2% (2019: 0.7%) Food inflation: 1.3% (2019:1.7%) 2010 (Recovery) Headline inflation: 1.7% Food inflation: 2.4% 2021 (Recovery) Headline inflation: 2.5% Food inflation: 1.7% 2011 (Climate Issue) Headline inflation: 3.2% Food inflation: 4.8% January - August 2022 (Russia-Ukraine Conflict) Headline inflation: 3.1% Food inflation: 5.1% Source: Bank Negara, Department of Statistics and Ministry of Finance, Malaysia Although RON95 and diesel pump prices remain capped, a higher headline inflation is estimated in 2022 due to global scenarios, particularly the ongoing Russia-Ukraine conflict which worsen the supply chain disruptions. Subsequently, the prices of certain food items and vegetables increased 94 Chapter 2.indd 94 ecONOMic OutlOOK 2023 29/09/2022 12:48 PM
117. chapter 2 MACROECONOMIC OUTLOOK due to the rising cost of agricultural inputs such as pesticides and fertilisers on a global scale (DOSM, 2022). According to the Food and Agriculture Organisation (FAO) Food Price Index (2022), global food prices index recorded an increase of 13.1% in March 2022 to 159.7 points from 141.2 points in February 2022, the highest month-on-month growth since 1990. If the external cost pressure remains, food prices in Malaysia are expected to be the main factor of inflationary pressure in 2022 as it is the biggest component of the CPI basket as shown in Figure 2.4.4. FIGURE 2.4.4. Percentage Contribution of Main Groups to Headline Inflation (%) 5 4 3.7 3 3.1 2.5 2 1.0 1 0.7 0 -1 -2 -3 -1.2 2017 2018 FOOD & NON-ALCOHOLIC BEVERAGES TRANSPORT HEADLINE INFLATION 2019 2020 2021 2022 (January - August) HOUSING, WATER, ELECTRICITY, GAS & OTHER FUELS OTHERS Source: Department of Statistics and Ministry of Finance, Malaysia (estimates) The strengthening of foreign currencies, particularly the US dollar or weakening of ringgit against foreign currencies also contributed to the increase in domestic prices of imported food items and agricultural inputs. Therefore, it is important to enhance domestic inputs for food production, particularly animal feed and fertilisers, thus reducing exposure to exchange rate risk. At the same time, the Government can manage global-to-domestic pass-through inflationary pressure due to global food and crude oil price increases by using fiscal policy tools. Impact of Food Inflation on the Low-income Group High food inflation affect the disposable income and savings of lower-income group rather than those in the higher-income groups (Meo et al. 2018). Hill & Webber (2022) suggested that during the cost-of-living crisis, low-income households need a stable social safety-net that provides sufficient financial assistance. In Malaysia, the composition of food consumption expenditure of bottom 40% household income group (B40) was higher (24.2%) as compared to middle 40% household income group (M40) (18%) and top 20% household income group (T20) (12.6%) as highlighted in Figure 2.4.5. (DOSM, 2020). This indicates that the B40 is most vulnerable to food inflation and in line with Hill & Webber (2022). ecONOMic OutlOOK Chapter 2.indd 95 2023 95 29/09/2022 12:48 PM
118. chapter 2 macroeconomic outlook FIGURE 2 .4.5. Percentage of Food Consumption Expenditure by Household Income Group (%) 30 25 24.2 20 18 15 12.6 10 5 0 B40 M40 T20 Source: Department of Statistics, Malaysia Short-term Measures by the Government to Mitigate the Impact of Food Inflation The Government is always concerned on the impact of the high global food prices, particularly on low-income group. Hence, the Government has implemented short-term measures which include price control, additional subsidies and cash assistance. The Government continues to implement consumption subsidies on RON95, diesel, LPG, cooking oil, flour, electricity, chicken and eggs. The projected consumption subsidies have increased from RM5.2 billion allocated under the Budget 2022 to reach RM52 billion. The Government also continues to provide various social assistance including cash assistance to target groups to ease the higher cost of living. As announced in the Budget 2022, the Bantuan Keluarga Malaysia (BKM) with an allocation of RM8 billion is expected to benefit 4million households, 1.2 million senior citizens and 3.4 million single individuals. In addition, the Government also announced additional cash assistance amounting to RM630 million beginning 27 June 2022 to cushion the impact of increase in basic food prices. The total amount of subsidies and social assistance in 2022 is estimated to be around RM80 billion which would be the largest in Malaysian history. Starting from 1 July 2022, the Government has set a new ceiling price for chicken in Peninsular Malaysia at RM9.40 per kilogram, while the new ceiling price for chicken eggs stood at 45 cents; 43 cents; and 41 cents for grades A; B; and C, respectively as a measure to curb food inflation. The measures are expected to increase subsidies payment to poultry farmers by RM370 million in 2022. Other measures introduced to address the chicken supply and prices issues include banning chicken export temporarily; establishing a chicken stockpile and optimising cold storage facilities; abolishing Approved Permit (AP) for the import of chicken; easing the process of subsidy claims by poultry farmers; and certifying more halal slaughterhouses abroad. Additionally, a Cabinet committee called Pasukan Khas Jihad Tangani Inflasi was established on 29 June 2022. The role of the committee is to formulate strategies and coordinate actions among relevant ministries and agencies in solving inflation-related issues, particularly measures to curb price increases in a more efficient and effective manner. 96 Chapter 2.indd 96 economic outlook 2023 29/09/2022 12:48 PM
119. chapter 2 macroeconomic outlook The Government continues to retain the pump prices of RON95 and diesel since March 2021 by providing subsidies , despite rising crude oil prices. Without the subsidies and price control mechanism, transportation cost would be significantly higher and lead to an increase in prices of other goods and services. Consequently, inflation in Malaysia was recorded at 4.7% in August 2022, which is lower than selected advanced and regional countries such as the UK (9.9%), the US (8.3%), Thailand (7.9%), Singapore (7.5%) and the Philippines (6.3%). However, the higher estimated consumption subsidies in 2022 would limit the Government’s ability to spend on enhancing the productive capacity of the nation such as developing public infrastructure, especially in the health and education sectors. Long-term Measures to Ensure Competitiveness and Affordability of Food Prices The Government is committed to undertake reforms to strengthen domestic food security in the long-run. With the recent geopolitical tensions and global food inflation, it is imperative to ensure food availability, accessibility and affordability by enhancing domestic production of food, particularly rice, fruits and vegetables, livestock, and fisheries. Efforts to increase productivity will be undertaken to ensure producers have the ability and competitiveness to produce their products in the local market while helping to stabilise supply to meet the higher future demand. In this regard, the Government will support the agrofood business in enhancing their productivity through the adoption of 4IR technologies such as precision farming, drones and smart algorithms. In addition, the Government will continue to improve food-related supply chain in an effort to promote food price stability. Concurrently, the Government is committed to mitigate the impact of global developments on the cost of living, particularly the low-income group. Upskilling and reskilling programmes will be enhanced to ensure a stable standard of living in the long-term, especially for the group. Conclusion The rising food prices, mainly due to supply chain disruptions following Russia-Ukraine conflict which led to higher inflation, has affected Malaysians, particularly the low-income group. The Government has undertaken a number of measures to mitigate the impact of food inflation, including the provision of additional consumption subsidies and cash assistance. The measures have cushioned the impact of inflation on the rakyat and maintained the inflation rate at manageable level. However, over-reliance on short-term policies could adversely affect fiscal sustainability. Moving forward, it is imperative for the Government and private sector to work together in enhancing national food productivity towards ensuring food security in the long-term. economic outlook Chapter 2.indd 97 2023 97 29/09/2022 12:48 PM
120. chapter 2 macroeconomic outlook Labour Market Encouraging improvement in the labour market Labour market recorded an encouraging recovery in the first half of 2022 attributed to effective employment intervention initiatives through Budget 2022 as well as assistances and stimulus packages . As the economy transitions towards endemicity, the vibrancy of business operations had stimulated aggregate labour demand thus creating more job opportunities in the market. Consequently, the labour force participation rate increased to 68.5%. Meanwhile, the labour force grew at 1.3% to register 15.9 million persons, whereas the total employment grew higher by 1.9% to record 15.2 million persons. These improvements resulted in a significant reduction in unemployed persons with the unemployment rate stood at 4.2% or 667,000 persons during the first half of the year. The services sector continued to be the major source of employment during the period at 66%, followed by manufacturing (16.9%) and agriculture (9.3%) sectors. The positive improvement in the labour market was also depicted from the declining retrenchment numbers which dropped significantly by 48% to record 18,076 persons as at end-June 2022. The trend has returned to the pre-pandemic level as industries retained workers to accommodate the increased business activities. Meanwhile, job vacancies doubled to over 508,000 positions in June 2022 compared to around 258,000 in the same period last year. However, job placements were still not encouraging despite the workers shortage issue faced by employers and incentives to increase hiring such as JaminKerja. Active job seekers, who are mostly with tertiary education, also declined by 57.5% to around 64,000 persons which may imply the nature of jobs, wages and benefits offered may not be attractive enough to job seekers. Labour market is anticipated to improve further in the second half of the year amid stronger demand for workers by businesses and industries in meeting domestic and external demand expansion. As a result, the unemployment rate is expected to continue its decreasing trend to record between 3.8% – 4% for the whole 2022. Total employment is projected to expand by 1.6% to 15.3 million persons, with the services sector being the major contributor to employment at 65.1%, mainly in the wholesale retail and trade subsector, as well as accommodation and food and beverages services. The manufacturing sector is expected to provide 16.6% of total employment, particularly in the E&E as well as food and beverages industries, while the agriculture sector accounts for 10.1%, especially in the oil palm industry. The reopening of the country’s borders beginning 1 April 2022 and finalisation of memorandum of understanding with the table 2.15. Labour Market Indicators (‘000) H11 20222 chaNGe (%) 20233 H11 20222 1.3 20233 0.9 1.3 Labour force 15,890.8 15,933.1 16,140.2 Employment 15,223.8 15,303.7 15,563.9 1.9 1.6 1.7 Unemployed 667.0 629.3 576.3 (4.2) (3.8 – 4.0) (3.5 – 3.7) January to June 2022 Estimate Forecast Note: Figures in parentheses refer to unemployment rate Source: Department of Statistics and Ministry of Finance, Malaysia 1 2 3 98 Chapter 2.indd 98 economic outlook 2023 29/09/2022 12:48 PM
121. chapter 2 macroeconomic outlook table 2 .16. Employed Persons by Sector (‘000) H12 Agriculture, forestry and fishing 1,422.8 20223 1,548.5 Share (%) 20234 H12 20223 9.3 1,560.8 20234 10.1 10.0 53.8 81.6 82.0 0.4 0.5 0.5 Manufacturing 2,578.2 2,538.9 2,578.3 16.9 16.6 16.6 Construction 1,128.5 1,168.2 1,176.9 7.4 7.6 7.6 Services 10,040.5 9,966.5 10,165.8 66.0 65.1 65.3 Total 15,223.8 15,303.7 15,563.9 100.0 100.0 100.0 Mining and quarrying 1 Total includes ‘Activities of extraterritorial organisations and bodies’ January to June 2022 Estimate 4 Forecast Source: Department of Statistics and Ministry of Finance, Malaysia 1 2 3 respective resource countries had eased hiring and mobility of migrant workers to the country. Hence, the number of registered low-skilled foreign workers increased by 12.5% reaching 1.2 million persons as at end-August 2022 as compared to 1.1 million persons in the same period last year. Currently, the foreign workers were sourced mainly from Bangladesh with a share of 33.6%, followed by Indonesia (28.5%) and Nepal (14.8%), and largely employed in the manufacturing (35.3%), construction (23.2%) and services (14.1%) sectors. Nevertheless, the hiring of low-skilled foreign workers remained low at 7.3% from total employment and is still within the allowable threshold of below 15% from total employment. Meanwhile, the number of expatriates increased by 5.5% to 86,023 persons as at end-June 2022 as compared to 81,539 in June last year. The majority of expatriates was from India (21.2%), China (16.5%) and Japan (8.4%), and mainly hired in the services (52.8%), information technology (38.4%) and construction (3.3%) sectors. Labour productivity, measured by value-added per worker, improved by 4.1% to RM92,893 in the first half of 2022, attributed to higher productivity in the services, particularly in tourism-related industries, and manufacturing sectors. Overall, labour productivity is expected to further expand by 3.5% to RM93,800 in 2022, following unwavering efforts to boost technological adoption and innovation in industries through digitalisation agenda. The services sector is projected to record the highest increase of 4.2%, followed by mining and quarrying (2.8%) and manufacturing (2.4%) sectors. Outlook for 2023 Global Outlook Modest growth prospect The global economy is projected to grow by 2.9% in 2023 albeit moderately, due to slower-than-expected growth in both advanced economies and EMDEs. Advanced economies’ growth is expected to moderate further to 1.4%. The US GDP growth is projected to register 1%, due to weak private consumption with inflation expected to remain above the Federal Reserve’s target of 2%. Likewise, growth in the euro area is expected to moderate to 1.2%, as limited energy supply will continue to be adversely affecting the economic activities. economic outlook Chapter 2.indd 99 2023 99 29/09/2022 12:48 PM
122. chapter 2 macroeconomic outlook The EMDEs ’ growth is forecast to be marginally higher by 3.9% in 2023 buoyed by elevated private consumption and exports. China’s economy is projected to grow by 4.6% attributed to strong domestic demand amid fiscal stimulus. Meanwhile, the economy of India is expected to grow by 6.1%, albeit a decline in private consumption and external demand. The ASEAN-5’s growth is forecast to increase by 5.1%, sustained by further improvements in domestic consumption and private investment. Global trade is anticipated to record 3.2% in 2023 amid weaker demand. Trade is expected to record a growth of 3.2% in advanced economies and 3.3% in EMDEs. In advanced economies, both exports and imports are expected to grow by 4.7% and 4.5%, respectively, owing to prolonged supply chain disruptions. Likewise, both exports and imports of the EMDEs are anticipated to grow to 3.6% and 4.8%, respectively. In 2023, global inflation is forecast at 5.7% backed by the anticipated fall in prices of commodities which include crude oil. The inflation rate in advanced economies is projected to record 3.3%, while EMDEs at 7.3%. Domestic Outlook Sectoral Services Sector Spearheading growth for resilient economy The services sector is anticipated to expand by 5% in 2023, benefitting from the sustained domestic demand in spite of a moderate global economic growth. The growth will continue to be mainly driven by wholesale and retail trade; real estate and business services; information and communication; transportation and storage; and food & beverages and accommodation subsectors. 100 Chapter 2.indd 100 economic outlook The wholesale and retail trade subsector is expected to remain the key contributor to the services sector with a growth rate of 3.4%, following the expansion in retail segment, particularly due to wider usage of e-commerce and rapid transition to digitalisation. The effort by the Government in creating a cashless society ecosystem throughout the country, especially in rural areas through Retail Sector Digitalisation Initiative Programme will provide additional impetus to the growth of the segment. The motor vehicles segment is also projected to support the subsector with the introduction of new models with attractive sales packages. In addition, the anticipated improvement in disposable income following better prospect in the labour market will spur growth of the subsector. The real estate and business services subsector is forecast to expand by 6.6% with business services segment leading the growth of the subsector. The segment is anticipated to increase, driven by higher demand for professional services particularly engineering, legal and accounting in line with expansionary of the economic activities especially in the services, manufacturing and construction sectors. Meanwhile, the real estate segment is projected to rise, backed by stronger housing market and rental activities following higher house ownerships and tenancies, which include among others, the Government’s initiatives under the Malaysia Premium Visa Programme and i-MILIKI. The information and communication subsector is expected to expand by 4.6%, mainly driven by the increasing digital adoption across all economic sectors. Phase 2 of the Jalinan Digital Negara ( JENDELA) is expected to boost the digital connectivity through the utilisation of Fixed Wireless Access and other fit-forpurpose technologies, thus enabling the country to further address the digital divide. In this regard, Digital National Berhad aims to extend the fifth-generation cellular network (5G) coverage to 80% of the nation’s populated areas by 2024. In addition, high quality 2023 29/09/2022 12:48 PM
123. chapter 2 investment in digital-related infrastructures such as data centres and cloud computing services as well as continued surge in the e-commerce and online entertainment activities will further boost the subsector . The transportation and storage subsector is anticipated to grow by 7%, supported by all segments due to the expansion in rail, highway, port and airport activities as well as sustained external demand. The land transport segment is projected to increase attributed to full operations of Mass Rapid Transit (MRT) Putrajaya Line and Sungai Besi-Ulu Kelang Elevated Expressway. Likewise, the air transport segment is forecast to rise in line with the increase in passenger traffic, following further improvement in tourism-related activities and more international flight services. Meanwhile, the water transport segment is expected to expand moderately as trade growth soften. The food & beverages and accommodation subsector is expected to grow by 7.8%, attributed to the significant increase in both segments following the implementation of the Tourism Recovery Framework 2.0 in June 2022. The framework focuses on strengthening recovery and restoring global competitiveness of tourism industry to be more resilient and sustainable. The finance and insurance subsector is projected to turn around by 3.1%, following further improvement in economic and investment activities. The implementation of the strategic thrusts in the Financial Sector Blueprint, 2022 – 2026, which include elevating the financial well-being of households and businesses as well as advancing digitalisation of the financial sector is expected to spur the growth of the finance segment. In addition, the insurance segment is projected to rebound, on account of higher premiums and return on investment amid lower claims. The utilities subsector is projected to grow by 2.4%, driven by strong demand in electricity; and water and sewerage segments, in tandem macroeconomic outlook with expected higher usage in industrial, commercial and residential segments. In addition, the ongoing implementation of rural electrification projects through extension of grid connection as well as alternative systems such as small hydro, solar hybrid and solar photovoltaic will further support the subsector. The other services subsector is projected to rise by 8.5%, driven by private health and education segments. The continuous commitment and active participation of Malaysia Healthcare Travel Council (MHTC) in international conferences and exhibitions to promote Malaysian healthcare services, are expected to boost the private health segment. In this regard, MHTC estimates healthcare tourism revenue to increase by 30% to RM1.3 billion in 2023. Meanwhile, the number of foreign students studying in Malaysia is expected to remain favourable attributed to the competitive education fees charged by private education institutions. Subsequently, the government services subsector is forecast to increase by 6.1% in 2023. Manufacturing Sector Sustaining growth momentum The manufacturing sector is forecast to grow by 3.9% in 2023 supported by expansion in all subsectors. Output in export-oriented industries is anticipated to increase despite a softening global trade, with the E&E segment continues to drive the industries. In addition, output of rubber-based products segment is projected to rise mainly attributed to the increase in production of tyres and tubes following buoyant global demand for motor vehicles. Similarly, production in domestic-oriented industries is expected to increase driven by the manufacture of food and food-related as well as construction-related segments. The growth in the food and food-related manufacturing segments are in line with stronger demand economic outlook Chapter 2.indd 101 2023 101 29/09/2022 12:48 PM
124. chapter 2 macroeconomic outlook for food and beverages following anticipation of an improvement in consumer sentiment and robust tourism activities . Meanwhile, the expansion in residential and non-residential construction activities as well as continuation of several infrastructure projects will boost the production in iron and steel and other construction-related segments. In addition, output of transport-related goods is expected to increase further attributed to strong demand from both the households and businesses following improvement in labour market and investment activities. In addition, the other agriculture and livestock subsectors are anticipated to grow further, backed by higher demand, particularly from households and food-related businesses. Various efforts to increase domestic production are anticipated to support the segment, among others, developing idle lands through fertigation technique and intensifying adoption of smart farming using top-notch technologies. Agriculture Sector In 2023, the mining sector is expected to expand by 1.1% on account of higher natural gas output as the completion of new pipeline projects in Sarawak, namely the Kasawari, Jerun and Timi, is anticipated to boost production especially during the second half of the year. In addition, higher demand from major trading partners particularly Japan as well as new demand from domestic industrial and petrochemical segment are anticipated to further increase the production of natural gas. Nevertheless, output of crude oil and condensates is projected to moderate due to decline in production rate from the existing fields in Peninsular Malaysia. Softening global economic growth is expected to dampen demand for energy, leading to a downward trend of world crude oil prices. Therefore, Brent crude oil price is expected to record a lower average of USD90 per barrel in 2023, in line with the Organization of the Petroleum Exporting Countries’ (OPEC) anticipation of a slowdown in the oil demand worldwide. Better labour market fortifies sectoral growth For 2023, the agriculture sector is forecast to increase by 2.3% attributed to an improvement in labour supply within the sector. The oil palm subsector is expected to expand on account of higher CPO output following increase in fresh fruit bunches production and better oil extraction rate. The establishment of Mechanisation and Automation Research Consortium of Oil Palm (MARCOP), a government–industry platform to promote further adoption of mechanisation and automation, is also expected to enhance efficiency, especially the harvesting process, thus increasing the productivity of the subsector. The CPO price is forecast to average at RM4,300 per tonne in 2023 compared with RM5,000 per tonne in 2022, higher than the last 10–year average of RM2,685 per tonne as supply of global edible oils and fats is anticipated to remain tight. The rubber subsector is projected to turn around in anticipation of an increase in rubber tapping activity in line with the sustained high price following stronger global demand from automotive industry, especially in China. Furthermore, the Government's initiative to promote the usage of RRIM Hydrobest technology among smallholders, is expected to increase the productivity of rubber subsector. The SMR20 rubber price is anticipated to average at RM6.50 per kilogramme (kg) in 2023 compared with RM7.00 per kg in 2022. 102 Chapter 2.indd 102 economic outlook Mining Sector The mining sector to expand further Construction Sector Continuing expansion towards stability The construction sector is forecast to expand by 4.7% in 2023 following a better performance in all subsectors. Civil engineering subsector is anticipated to rebound buoyed by implementation of new projects such as Mass Rapid Transit Line 3 (MRT3) Circle Line and acceleration of ongoing infrastructure projects which include, Rapid Transit System (RTS) Link, East Coast Rail Link (ECRL) and Light Rail Transit Line 3 (LRT3). 2023 29/09/2022 12:48 PM
125. chapter 2 In addition , the approved investment projects in the manufacturing sector are anticipated to come onstream and subsequently creating a greater demand for industrial buildings. Hence, the non-residential buildings subsector is projected to expand further. Meanwhile, the residential buildings subsector is expected to grow steadily supported by more construction of affordable houses, in line with the strategy under the 12MP. In addition, incentive offered by the Government to encourage home ownership through the i-MILIKI programme is expected to spur demand for residential buildings while addressing the property overhang issue. Domestic Demand Private sector remains the key driver The economy is expected to remain resilient with domestic demand continues to drive growth amid softening global environment. Private sector expenditure is forecast to grow at 5.8% in 2023 with the share to GDP at 76.2%, while public sector expenditure is projected to expand by 2% with the share to GDP at 17%. Hence, domestic demand is envisaged to further expand by 5.1%. Private consumption, which has been robust despite global uncertainties, is anticipated to grow by 6.3%. The growth forecast will be supported by continuous improvement in the labour market as well as robust economic and social activities particularly the tourism-related activities. The special financial assistance in January 2023 to civil servants and pensioners will support household disposable income and stimulate private spending. Private investment is projected to register a growth of 3.7% attributed to an increase in capital spending in technology-intensive manufacturing and services sectors, particularly ICT-related machinery and equipment. As the nation moves towards adoption of digital technologies in line with the National Fourth Industrial Revolution (4IR) Policy, investment in catalytic industries will continue to be enhanced to transform macroeconomic outlook Malaysia into a high-income nation. The industries include advanced E&E, aerospace and pharmaceuticals. Public sector capital outlays continue to complement the private sector in developing the country. Among major projects expected to commence in 2023 are MRT3, Sarawak-Sabah Link Road Phase 2 and Trans Borneo Highway. The continuation of large-scale transportrelated projects such as ECRL, LRT3 and RTS Link will also provide impetus to public investment. All these initiatives are expected to support public investment to increase by 2.1% in 2023. Public consumption is also projected to expand by 2% on account of higher spending on emoluments mainly due to special additional annual salary increment for civil servants. In line with the expansion in domestic economic activities, the national income in current prices is expected to increase by 6.2%. Meanwhile, the GNS is anticipated to expand by 0.4%, with total investment envisaged to contract by 5.4% to RM358.6 billion. The share of GNS is projected to remain significant at 24.7% of GNI. The savings-investment gap is expected to remain in surplus at RM73 billion or 4.2% of GNI. This provides ample liquidity in the financial system, which can be mobilised to finance long-term productive investments without sourcing external funds. Income The need for higher income for a more decent living A more robust economic recovery anticipated in 2023 will generate higher income prospects for workers. Continuous efforts to expedite digitalisation and high value-added production activities to improve productivity, reduce dependency on low-skilled workers as well as increase women participation in the labour market are expected to result in significant improvement of CE. Hence, the share of CE of GDP is projected to rise to 35.2% in 2023. However, the share is still relatively lower as against comparable peers and advanced economies. Thus, in ensuring a more equitable economic outlook Chapter 2.indd 103 2023 103 29/09/2022 12:48 PM
126. chapter 2 macroeconomic outlook sharing of the growth benefit between employees and capital owners , there is a need for a paradigm shift from the low-wage labour market structure towards a more decent wage standard. Otherwise, insufficient wage increase from the current level may deter the attainment of the long-term CE target of 40% of GDP in 2025 under the 12MP. The share of GOS of GDP is forecast to decline to 62.2% in 2023 with a sizeable percentage of GOS continued to be received by capital owners. Meanwhile, mixed-income for the self-employed or independent entrepreneurs is expected to grow significantly by 13.2% as strong economic performance and normalisation of flexible way of working will create more jobs and earning prospects for this group. Efforts to enhance social protection to all self-employed may also contribute to a larger growth of mixed-income. As a result, the share of mixed-income to GDP is projected to rise to 17%. In line with strong economic growth expectation supported by continued efforts to prevent revenue leakages and strategies to implement a wider tax base, income from indirect tax and non-tax revenue on production and imports is projected to expand by 7.5%. Meanwhile, with the expiration of the COVID-19 Fund assistance, subsidy expenditure is expected to decrease significantly by 50.2%. Thus, income from taxes less subsidies on production and imports is expected to record a larger increase in 2023. External Sector Moderate performance amid global uncertainties In 2023, gross exports are expected to moderate by 2.2% across all sectors, supported by modest external demand due to lacklustre growth following global uncertainties arising from prolonged geopolitical tensions, supply chain disruptions and volatility in global commodity prices. Exports of manufactured goods are anticipated to grow by 2.3% buoyed by steady demand for both E&E and nonE&E products, which form the share of 47% 104 Chapter 2.indd 104 economic outlook and 53%, respectively. Continuous demand for semiconductor arising from technological advancement, particularly electronic integrated circuit, processors and controllers is anticipated to drive E&E products to grow by 2%. Similarly, exports of non-E&E are expected to improve by 2.6% contributed by high demand for petroleum products, chemicals and chemical products as well as manufactures of metal. Exports of agriculture goods are forecast to expand by 1.7% in 2023, supported by higher demand for palm oil and palm oil-based agriculture products and natural rubber. Similarly, export earnings from mining goods are anticipated to increase by 1.6% contributed by higher demand from major markets for crude petroleum (1.6%) and LNG (1.2%), underpinned by favourable global energy prices. Gross imports are expected to increase marginally by 0.2% on account of high demand for capital, intermediate and consumption goods indicating sustained domestic demand and improvement in investment activities. Imports of intermediate goods are anticipated to grow by 0.2% attributed to the expansion in manufacturing and construction sectors. Likewise, imports of capital goods are projected to increase by 0.3% following the resumption of infrastructure projects. Subsequently, imports of consumption goods are estimated to grow by 0.2% driven by food and beverages, mainly for household product category as private spending continues to rise in tandem with an increase in consumers’ confidence. The current account balance is expected to record a surplus of RM73 billion or 4.2% of GNI in 2023, in line with continuous improvement in economic activities. The goods account is estimated to reach a wider surplus of RM216.2 billion, following higher receipts from major trading partners across all economic sectors despite moderate global growth. On the other hand, the services account is anticipated to register a narrower deficit of RM52.6 billion attributed to an increase in earnings in the transport, travel 2023 29/09/2022 12:48 PM
127. chapter 2 and other services accounts . Receipts from transport are anticipated to increase to RM24.8 billion supported by improvement in earnings from air travel and cargo handling services provided by domestic companies. Similarly, payments for transport are estimated to widen to RM58.7 billion in 2023 following continuous reliance on foreign transport services amid the expansion in trade activities. The travel account is expected to record a smaller deficit of RM5.7 billion in 2023 attributed to improvement in tourism activity. Receipts from travel account are projected to widen to RM23.8 billion contributed by an increase in tourist arrivals and per capita spending. Nonetheless, the receipts are anticipated to be small to offset payments amounting to RM29.6 billion, mainly due to a higher residents’ spending abroad as well as business, education and pilgrimage travelling activities. Meanwhile, a smaller deficit of RM13 billion is expected in the other services account backed by an increase in receipts albeit higher payments due to expansion in the services, manufacturing and construction sectors as high impact projects resume and economic activities remain steady. The primary income account is projected to record a larger deficit of RM70.4 billion on account of higher payments by foreign investors in line with the ongoing investment activities. Furthermore, the expected increase in compensation for foreign professionals following fast-paced adoption of digitalisation and automation will contribute to the widening deficit. Net outflows in the secondary income account are expected to widen to RM20.2 billion following a one-off payment and remittances by foreign workers. Prices Projected to remain manageable The inflation rate is forecast to range between 2.8% – 3.3% in 2023, following stable commodity prices as well as gradual move towards targeted subsidies mechanism in macroeconomic outlook ensuring a more equitable distribution of resources. In 2023, the PPI is expected to moderate on account of stable global input costs. Labour Market Sustained recovery momentum Labour market is projected to sustain the recovery momentum in tandem with better growth prospects anticipated in both the domestic and external front. Strategies to address structural issues in the labour market will also lead to higher labour demand. Hence, the unemployment rate is forecast to record in the range of 3.5% – 3.7% in 2023. The total employment is projected to expand by 1.7% to 15.6 million persons, with more than 80% of employment opportunities will be provided in the services and manufacturing sectors. The number of low-skilled foreign workers and expatriates is projected to increase to the pre-pandemic level in 2023. This is attributed to strategies in expediting business recovery in the labour-intensive industries as well as to resolve shortages of manpower in less appealing jobs among locals, particularly in manufacturing, construction and plantation sectors. Nevertheless, the Government will continue strengthening policies to encourage high-value added production through greater technology adoption and automation to reduce dependency on migrant workers, particularly the low-skilled foreign workers. Furthermore, increasing wages from the current level would encourage Malaysians to involve in less attractive jobs. Labour productivity is expected to increase by 2.4% to RM96,000 in 2023, spearheaded by robust tourism-related activities and revival of construction projects. Continuous upskilling and reskilling programmes and expansion of e-Shared Prosperity Organisation certification to employers practising higher wages based on the Productivity-Linked Wage System will further support labour productivity improvement. economic outlook Chapter 2.indd 105 2023 105 29/09/2022 12:48 PM
128. chapter 2 macroeconomic outlook Conclusion The global economy is projected to moderate in 2022 and 2023 due to inflationary pressure , tightening of financial conditions, supply strains and geopolitical fragmentation. These challenges are anticipated to continue owing to moderating growth in advanced economies and some EMDEs as well as negative spillover from the ongoing conflict in the Eastern Europe. Meanwhile, Malaysia’s economy is expected to continue its recovery momentum to achieve a GDP growth of 6.5% to 7% in 2022, in line 106 Chapter 2.indd 106 economic outlook with strong domestic demand, stellar exports performance and implementation of measures under the expansionary Budget 2022. Despite a softening world economic growth and trade activities, the economy is projected to grow between 4% and 5% in 2023, supported by steady domestic demand, a vibrant services sector, implementation of new and ongoing high multiplier infrastructure projects and sustained exports. The Government will continue to monitor global developments as well as implement appropriate policies and reform initiatives to strengthen the economy and fiscal position to withstand potential external shocks, improve people’s livelihoods and enhance business resilience. 2023 29/09/2022 12:48 PM
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132. chapter 2 macroeconomic outlook Mittal , A. (2009). The 2008 food price crisis: Rethinking food security policies. G-24 Discussion Paper Series. United Nations Conference on Trade and Development. Qayyum, A., & Sultana, B. (2018). Factors of food inflation: Evidence from time series of Pakistan. Journal of Banking and Finance Management, 1(2), 23-30. Musarat, M. A., Alaloul, W. S., Liew, M. S., Maqsoom, A., & Qureshi, A. H. (2020). Investigating the impact of inflation on building materials prices in construction industry.  Journal of Building Engineering,  32, 101485. Salahodjaev, R., & Mirziyoyeva, Z. (2021). The link between food security and life satisfaction: Panel data analysis. Sustainability, 13(5), 2918. https://doi. org/10.3390/su13052918 Najib, I. Z. M., Nordin, R. M., Ahnuar, E. M., & Sukor, K. M. (2019). Malaysian as the component of labour force for construction industry in Malaysia. MATEC Web of Conferences, 266(01007). https://doi. org/10.1051/matecconf/201926601007 National Bureau of Statistics of China. (2022, September 16). National economy continued to recover with major indicators generally improving in August. National Bureau of Statistics of China: http://www. stats.gov.cn/english/PressRelease/202209/ t20220916_1888308.html Nordin, I., Hassan, Z. & Mohd Razali, N.A. (2021, February 1). Malaysian palm oil sector performance in 2020 and market opportunities. Malaysian Palm Oil Council. https://mpoc.org. my/malaysian-palm-oil-sector-performance-in2020-and-market-opportunities/ Organisation for Economic Co-operation and Development (2022). OECD Economic Outlook, The Price of War. https://www.oecd-ilibrary.org/sites/62d0ca31en/1/3/2/47/index.html?itemId=/ content/publication/62d0ca31-en&_ csp_=0cf9a35c204747c5f82f56787b31b42b &itemIGO=oecd&itemContentType=book Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326. https://doi. org/10.1002/jae.616 110 Chapter 2.indd 110 economic outlook Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. Festschrift in honour of Peter Schmidt. Springer, 281-314. https://doi. org/10.1007/978-1-4899-8008-3_9 Siong, H. C. (2006). Putrajaya–administrative centre of Malaysia-planning concept and implementation. Sustainable Urban Development and Governance Conference, 16 November 2006, SungKyunKwan University, Seoul. 1-20. http://eprints.utm.my/ id/eprint/6622/ The Star. (2022, May 19). Malaysia’s digital economy to contribute 22.6% to GDP, create half a million jobs by 2025. https:// www.thestar.com.my/business/businessnews/2022/05/19/malaysia039s-digitaleconomy-to-contribute-226-to-gdp-createhalf-a-million-jobs-by-2025 United Nations Children’s Fund. (2020, September 25). Conflict, climate crisis and COVID-19 pose great threats to the health of women and children. https://www.unicef.org/ press-releases/conflict-climate-crisis-andcovid-19-pose-great-threats-health-womenand-children United Nations Conference on Trade and Development. (2022). Global crisis. https:// unctad.org/global-crisis United Nations Conference on Trade and Development. (2020). Impact of the pandemic on trade and development. https://unctad.org/ system/files/official-document/osg2020d1_ en.pdf 2023 29/09/2022 12:48 PM
133. chapter 2 macroeconomic outlook United Nations . (1990). Economic and social survey of Asia and the Pacific. https://doi. org/10.18356/46d40be1-en World Bank. (2022c, April 21). The World Bank in Malaysia. https://www.worldbank.org/en/ country/malaysia/overview#1 Walter, A., Finger, R., Huber, R., & Buchmann, N. (2017, June 13). Opinion: Smart farming is key to developing sustainable agriculture. Proceedings of the National Academy of Sciences, 114(24), 6148-6150. https://doi. org/10.1073/pnas.1707462114 World Bank Group. (2018). Malaysia’s Digital Economy: A New Driver of Development. World Bank. https://www.kkmm.gov.my/pdf/KPI/ Laporan%207.pdf Wong, J. H., Rashidi, A., & Arashpour, M. (2020). Evaluating the impact of building information modeling on the labor productivity of construction projects in Malaysia.  Buildings,  10(4), 66. https://doi. org/10.3390/buildings10040066 World Bank. (2022a). Commodity Markets Outlook, April 2022: The impact of the war in Ukraine on commodity markets. Commodity Markets Outlook. https://openknowledge. worldbank.org/handle/10986/37223 Zamani, S. H., Rahman, R. A., Fauzi, M. A., & Yusof, L. M. (2021). Effect of COVID-19 on building construction projects: Impact and response mechanisms. IOP Conference Series: Earth and Environmental Science, 682(1), 012049. http://dx.doi.org/10.1088/17551315/682/1/012049 Zhang, X., Azhar, S., Nadeem, A., & Khalfan, M. (2018). Using building information modelling to achieve lean principles by improving efficiency of work teams. International Journal of Construction Management, 18(4), 293-300. World Bank Group. (2022b). Global economic prospects: Global outlook: Stagflation risks rises amid sharp slowdown in growth. https://www.worldbank.org/en/publication/ global-economic-prospects economic outlook Chapter 2.indd 111 2023 111 29/09/2022 12:48 PM
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135. chap ter 3 Monetary and Financial Developments 115 ov e rv i e w 115 mone ta ry de v e lopme nts 116 pe r for m a nce of r i nggi t 117 ba nk i ng s ec tor pe r for m a nce 120 c a p i ta l m a r k et pe r for m a nce Information Box 3 .1 – Key Capital Market Measures 126 i s l a m ic ba nk i ng a nd c a p i ta l m a r k et pe r for m a nce 128 conclus ion 129 r e fe r e nce s Chapter 3.indd 113 29/09/2022 2:49 PM
136. Chapter 3 .indd 114 29/09/2022 2:49 PM
137. chapter 3 monetary and financial developments chapter 3 Monetary and Financial Developments Overview Financial market withstands external headwinds Domestic financial market remains orderly and financial intermediation continues to support the economic recovery despite external headwinds . The banking sector continues to be prudent given sufficient domestic liquidity and strong capital buffers. Likewise, monetary policy continues to remain accommodative and supportive of economic growth in an environment of price stability. Despite domestic financial markets continue to be subjected by episodes of volatility, spillovers to financial intermediation activities are expected to remain broadly contained, supported by Malaysia’s healthy external position and robust banking system. Nonetheless, persistent downside risks may affect overall financial market performance. The risks include ongoing geopolitical tensions particularly the RussiaUkraine conflict, expectation of weaker global growth, slower growth in China, continued disruption of the global supply chain and tightening global financial conditions. Monetary Developments Monetary policy adjustment in line with the strength of the economy The degree of monetary accommodation was reduced amid strong domestic growth prospects and the unprecedented conditions during the COVID-19 crisis that necessitated the extraordinary monetary policy support have since abated. This was reflected in the Overnight Policy Rate (OPR), being raised by a cumulative of 75 basis points (bps) for three consecutive times from May to September 2022. The OPR was increased by 25 bps for the first time on 11 May 2022 from its historical low of 1.75% held since 7 July 2020 to 2.00% followed by a second hike to 2.25% on 6 July 2022 and the third hike to 2.50% on 8 September 2022. Decisions regarding the OPR were made independently by the Monetary Policy Committee (MPC) of Bank Negara Malaysia (BNM) upon consideration that the Malaysian economy is on a firmer footing with the increase in the OPR conducted gradually to allow various sectors in the economy to adjust accordingly. Notwithstanding the adjustments to the OPR, the stance of monetary policy in 2022 remains accommodative and supportive of economic growth. The interest rates in the banking system were mostly stable for the first four months of 2022 before the rates were adjusted upwards in tandem with the increase in the OPR. As at end-July 2022, the commercial banks’ average lending rate (ALR) and weighted average base rate (BR) increased to 4.31% and 2.91%, respectively. Similarly, the saving deposit rate rose to 0.69%, while the average fixed deposits rates for the tenures of 1-month to 12-month increased within the range of 1.91% to 2.20%. With the objective of improving comparability and transparency for consumers, effective 1 August 2022, the BR was replaced by Standardised Base Rate (SBR) as the reference rate for all financial institutions for the pricing of new retail floating-rate loans and the refinancing of existing loans. In terms of liquidity, the reduction of the Statutory Reserve Requirement (SRR) ratio by 100 bps to 2.00% since March 2020 and the flexibility given to banking institutions to incorporate their holdings of the Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII) as part economic outlook Chapter 3.indd 115 2023 115 29/09/2022 2:49 PM
138. chapter 3 monetary and financial developments of SRR compliance have released approximately RM46 billion worth of liquidity into the banking system . Given the current economic recovery and transitioning to the endemic phase, the flexibility to use MGS and MGII as part of SRR compliance will end on 31 December 2022. FIGURE 3.1. Monetary Aggregates (% change) % 24 21 Monetary aggregates continued to expand during the first seven months of 2022. M1 or narrow money, grew by 9.3% to RM602.2 billion as at end-July 2022, mainly driven by higher demand deposits, which edged up by 8.9%. Meanwhile, M3, or broad money recorded a growth of 5.5% to RM2,222.1 billion, supported by higher net claims on the private sector mainly through loans and higher net claims on the Government. Nevertheless, the growth of M3 was moderated by the lower net foreign assets in the financial sector. Future monetary policy stance will continue to be guided by the MPC’s assessment of evolving conditions and their implications on the overall outlook to domestic inflation and growth. The MPC will continue to conduct monetary policy in Malaysia in order to achieve the goal of price stability and sustainable economic growth over a longer term. TABLE 3.1. Factors Affecting M3, January – July 2021 and 2022 CHANGE (RM BILLION) 2021 M3 50.3 9.5 29.3 31.2 37.5 Net claims on Government Claims on Government Less: Government deposits 21.7 8.2 Claims on private sector 30.1 64.6 28.8 73.8 Loans Securities Net foreign assets1 Bank Negara Malaysia 1.2 -9.2 35.9 -23.4 29.3 -6.2 6.7 -17.2 -10.1 -20.1 Banking system Other influences Includes exchange rate revaluation losses/gains Note: Total may not add up due to rounding Source: Bank Negara Malaysia 1 116 Chapter 3.indd 116 2022 65.4 economic outlook 18 15 12 9 6 3 0 M J S 2020 D M J S 2021 D M J J1 2022 M1 M3 End-July 2022 Source: Bank Negara Malaysia 1 Performance of Ringgit Pushed down by stronger greenback The ringgit traded at the 4.1000 level against the US dollar at the start of the year. During the first quarter of 2022, sentiments in the financial markets were dampened by developments surrounding the rise of the Omicron variant globally, and the prospect of sooner-than-expected rate hikes by the US Federal Reserve (Fed). The volatile movements of most major and regional currencies including the ringgit became more apparent, compounded by the onset of Russia-Ukraine conflict in February 2022 causing the ringgit to trade surpassing the 4.2000 level. Moreover, the interest rate hike by the Fed on 16 March 2022 for the first time since 2018 indicated a faster-than-expected tightening path for the year to address the rising US inflation. The imposition of strict lockdown measures in Shanghai following the COVID-19 outbreak 2023 29/09/2022 2:49 PM
139. chapter 3 in the same month had dampened hopes for a smooth global economic recovery . These developments resulted in higher investor risk aversion and led global portfolio managers to reallocate their investments into safe haven assets such as in the US. The confluence of these factors contributed to the ringgit depreciating by 0.7% against the US dollar as at end-March 2022. The pressure to hasten the tightening of policy rates by the Fed was triggered by the 40-year high inflation in the US in May 2022. This resulted in the ringgit sliding to the 4.4000 level on 19 May 2022. Moreover, the anticipation of more aggressive US interest rate hikes coupled with the weakening of the Chinese yuan had impacted the ringgit further. Thus, the first half of the year saw the ringgit depreciating by 5.2% against the US dollar. The downward trend continued in July and August 2022, as the ringgit was trading between 4.4000 to 4.5000 level, in line with the depreciation of other major and regional currencies, which reflected the broad-based strengthening of the US dollar. The strong US dollar was contributed by several factors such as the aggressive interest rate hikes by the Fed, heightened geopolitical tensions, and a slower-than-expected pace of global growth, particularly in China, which exacerbated international investors’ risk aversion. Thus, as at end-August 2022, the ringgit depreciated by 6.9% against the US dollar. Nonetheless, the ringgit appreciated against most major and regional currencies such as the Japanese yen (12.1%), pound sterling (7.4%), Korean won (5.5%), the euro (5.4%) and the Philippine peso (2.8%) within the same period. Moving forward, following uncertainties in the global economic and financial market outlook, the flexibility of the ringgit is a key mechanism to help the Malaysian economy adjust to the changing global economic and financial monetary and financial developments developments. Over the medium-term, ongoing efforts for structural reforms are expected to strengthen Malaysia’s economic fundamentals, and this would naturally support the ringgit. FIGURE 3.2. Performance of Ringgit against Selected Currencies (% change) End-2021 – End-August 2022 100 JAPANESE YEN POUND STERLING 100 KOREAN WON EURO 100 PHILIPPINE PESO 100 THAI BAHT CHINESE RENMINBI AUSTRALIAN DOLLAR 100 INDONESIAN RUPIAH SINGAPORE DOLLAR US DOLLAR -10 -5 0 5 10 15 Source: Bank Negara Malaysia Banking Sector Performance The banking sector remains on sound footing The banking system remains well-capitalised to support economic recovery amid heightened volatility in global financial markets. This was reflected by strong capital position of banks, which recorded RM129.6 billion of excess capital buffers1 and healthy capital ratios as at end-July 2022. The Common Equity Tier 1 Capital (CET1 Capital), Tier 1 Capital, and Total Capital ratios remained stable at 14.6%, 15.2% and 18.3%, respectively, exceeding the 1 Excess total capital buffer refers to the total capital above the banks’ regulatory minima, which also includes the capital conservation buffer (2.5% of risk-weighted assets) and bank-specific higher minimum requirements. economic outlook Chapter 3.indd 117 2023 117 29/09/2022 2:49 PM
140. chapter 3 MONETARY AND FINANCIAL DEVELOPMENTS Basel III minimum regulatory levels of 4 .5%, 6%, and 8%, respectively, of risk-weighted assets. These buffers safeguard banks against potential unexpected losses that may occur amid a challenging operating environment while supporting households’ and businesses’ financing needs. Furthermore, the Liquidity Coverage Ratio maintained its healthy position at 151% to support intermediation activities, which is well above the 100% minimum requirement. The ability of banks to withstand setbacks arising from the potential risks of loan impairments remain manageable, despite the end of most repayment assistance in December 2021. As at-end July 2022, banks’ asset quality continues to support the resilience of banks albeit slight increment of the overall gross and net impaired loan ratios to 1.85% and 1.2%, respectively. Banks continued to set aside total provisions including regulatory reserves of RM41.1 billion. The loan loss coverage ratio (including regulatory reserves) was also FIGURE 3.3. Banking System: Impaired Loans and Net Impaired Loans Ratio (End-period) RM billion % 45 4 40 35 3 30 25 2 20 15 1 10 5 0 M J S D M J S D M J S D M J S D M J J1 2018 2019 2020 2021 2022 IMPAIRED LOANS NET IMPAIRED LOANS RATIO (RIGHT SCALE) End-July 2022 Source: Bank Negara Malaysia 1 118 Chapter 3.indd 118 ecONOMIc OUtLOOK 0 maintained at a prudent level of 112.8%, with total provisions accounting for 1.8% of total loans within the same period. The banking system’s pre-tax profit improved to RM20.9 billion as at end-June 2022 amid moderation in credit cost due to the preemptive build-up of provisions in 2020 and 2021 as well as the gradual tapering of loan loss provisions as repayment activities picked up. The overall profitability of banks is expected to remain robust supported by improvements in loan growth as the country recovers from the prolonged effects of the COVID-19 pandemic. As at end-July 2022, total outstanding banking system loans expanded by 5.9% to RM1,974 billion, contributed by higher growth in business and household segments. Meanwhile, the demand for loans remained high as loan applications recorded an uptick by 20.1% to RM775.3 billion following the normalisation of economic activities. Similarly, loan approvals increased in tandem with loan applications by 27.8% to RM382 billion for the first seven months of 2022. Lending activities to businesses recorded an improvement as reflected in the outstanding business loans, which grew by 5.9% to RM696.5 billion, accounting for 35.3% of total loans outstanding as at end-July 2022. The bulk of the loans outstanding were mainly for small and medium enterprises (SMEs) financing, amounting to RM350.5 billion or 17.8% of total loans outstanding, particularly for working capital. The loan disbursements were mainly channelled to manufacturing (21.8%), followed by wholesale and retail trade, restaurants and hotels (17.7%), and finance, insurance and business activities (12.6%) sectors. Meanwhile, household borrowings remained strong, with outstanding household loans registering 6.1% growth, amounting to RM1,162.9 billion as at end-July 2022, reflecting higher growth across most purposes. Loan disbursements rose by 23.4% to RM236.9 billion, particularly for the purchase of 2023 29/09/2022 2:49 PM
141. chapter 3 residential properties and passenger cars . Loan repayments increased by 11.8% to RM229.6 billion amid the lapse in repayment assistance programmes. Overall, banks are observed to have gradually reversed the previous tightening of credit availability during the crisis, in view of improvements in the labour market and economic outlook. TABLE 3.3. Banking System: Loans Outstanding by Sector, End-July 2021 and 2022 RM BILLION 2021 Businesses Non-SMEs 2021 20221 CHANGE (%) 2021 2022 Primary agriculture Mining and quarrying Manufacturing3 Electricity, gas and water supply Loans applications 523.0 775.3 16.8 20.1 Loans approvals 215.4 382.0 16.1 27.8 Loans disbursements 803.4 1,319.5 22.3 15.5 Wholesale and retail trade, restaurants and hotels 807.9 1,322.1 23.5 14.1 Construction 1,862.8 1,974.0 3.1 5.9 Loans repayments Loans outstanding3,4 of which: Business Sector Loans applications 180.2 291.4 -10.3 14.6 78.3 158.6 -3.1 17.6 Loans disbursements 524.2 933.8 21.6 10.9 Loans repayments 523.5 944.5 20.9 11.6 Loans outstanding4 642.2 696.5 1.3 5.9 Loans approvals of which: SMEs Loans applications 99.2 162.3 -9.6 21.8 Loans approvals 37.8 82.7 10.4 21.7 Loans disbursements 170.9 310.9 24.7 27.8 Loans repayments 172.0 306.3 28.1 25.4 Loans outstanding4 292.4 350.5 3.8 4.9 Loans applications 380.7 461.9 32.4 21.3 Loans approvals 126.9 204.0 41.6 31.3 Loans disbursements 184.7 236.9 10.5 23.4 Loans repayments 194.0 229.6 17.1 11.8 1,094.9 1,162.9 4.2 6.1 Households Loans outstanding4 Statistical table related to loans/financing has been revised and expanded with a new format beginning July 2022 2 Includes foreign entities, other domestic entities, Government and others 3 Includes loans sold to Cagamas 4 As at end-period Note: Total may not add up due to rounding Source: Bank Negara Malaysia 20221 2021 2022 642.2 696.5 34.5 35.3 349.7 344.3 18.8 17.4 292.4 350.5 15.7 17.8 32.7 30.8 1.8 1.6 8.9 10.3 0.5 0.5 129.0 130.4 6.9 6.6 14.5 20.5 0.8 1.0 142.9 164.8 7.7 8.3 91.0 91.2 4.9 4.6 108.6 105.5 5.8 5.3 Transport, storage and communication 38.4 51.1 2.1 2.6 Finance, insurance and business activities 50.1 64.3 2.7 3.3 1,094.9 1,162.9 58.8 58.9 640.7 705.8 34.4 35.8 Purchase of non-residential properties 79.1 80.3 4.2 4.1 Purchase of passenger cars 151.8 161.9 8.1 8.2 Consumption credit 131.4 141.7 7.1 7.2 Credit cards 31.4 35.0 1.7 1.8 Personal use 100.0 106.7 5.4 5.4 68.8 72.1 3.7 3.7 Real estate Households of which: Purchase of residential properties of which: Purchase of securities Others Other sectors Total4 0.4 1.1 0.0 0.1 125.7 0.1 6.7 0.0 1,862.8 1,974.0 100.0 100.0 1 Statistical table related to loans/financing has been revised and expanded with a new format beginning July 2022 2 Non-SMEs refers to large corporations, including foreign entities, other domestic entities, Government and others 3 Including agro-based 4 Total = Businesses + Households + Other sectors Note: Total may not add up due to rounding Source: Bank Negara Malaysia economic outlook Chapter 3.indd 119 SHARE (%) Selected sectors Total2 1 2 SMEs TABLE 3.2. Banking System: Loan Indicators, January – July 2021 and 2022 RM BILLION monetary and financial developments 2023 119 29/09/2022 2:49 PM
142. chapter 3 monetary and financial developments Banking institutions continue to assist affected individuals and SME borrowers facing financial difficulties . The Financial Management and Resilience Programme (URUS), a collaborative initiative by the banking industry and the Credit Counselling and Debt Management Agency (AKPK) was introduced as a holistic debt management and financial planning solution in the longer term. URUS aims to provide appropriate support to eligible bottom 50% income group (B50) borrowers so that they could meet their loan obligations and return to a firmer financial footing. The application window for URUS, effective from 15 November 2021 to 31 March 2022 was extended until 31 July 2022 with a total of 7,302 approvals. However, the extension was applicable only for B50 customers who were affected by the major floods and had applied for the participating banks’ flood relief assistance programmes. As at end-June 2022, the total household debt2 was valued at RM1,409 billion. Growth in household debt during the first half of 2022 was mainly driven by various public and private home ownership incentives as well as Sales Tax and Service Tax (SST) exemption on vehicle purchases. However, the household debt-to-GDP ratio declined to 84.5% as at end-June 2022 (end-2021: 89.1%) following a solid economic growth during the first half of 2022. A significant proportion of the aggregate household debt was intended for fixed assets and wealth accumulation, such as the purchase of residential properties (59.4%), nonresidential properties (5.7%) and investment in securities (5.3%). Overall, households’ financial resilience remains supported by healthy debt servicing capacity and ample financial buffers. The debt service ratio (DSR) for outstanding loans remains prudent, underpinned by sound debt underwriting standards. Aggregate household financial assets3 worth RM2,901.9 billion continue to outpace household debt by 2.1 times, providing a significant financial buffer for households to weather adverse economic conditions. The healthy debt servicing capacity of households is expected to prevail amid an improving labour market condition, rising income and positive economic outlook in 2022. Capital Market Performance Modest fundraising activities During the first seven months of 2022, the gross funds raised in the capital market grew by 1.4% to RM165.2 billion. The moderate increase was contributed mainly by the public sector’s gross fundraising activities, which recorded an expansion of 5.7% to RM102.9 billion. In contrast, gross funds raised by the private sector declined by 5% to RM62.3 billion within the same period. For the public sector, the issuances of MGS and MGII increased by 9.3% and 2.1%, respectively, during the first seven months of 2022. The gross funds raised from MGS recorded RM53 billion, while MGII stood at RM49.9 billion. The funds were mainly utilised for development expenditures and commitments for the COVID-19 Fund as stipulated by the Act 830. Meanwhile, nonresident holdings of both outstanding MGS and MGII stood at 35.5% and 8.9%, respectively, as at end-July 2022. For the private sector, gross funds raised were primarily via new issuances of corporate bonds and sukuk composed mainly from mediumterm notes at RM59.4 billion, followed by Islamic bonds (RM453.1 million) and straight bonds (RM222.3 million). Most of the funds were raised by companies within the finance, insurance, real estate and business services (52.9%), followed by electricity, gas and water (15.9%), as well as manufacturing (8.5%) sectors. The funds were mainly used to finance infrastructure projects, new business activities and working capital. Meanwhile, gross funds raised via the domestic equity market recorded RM2.3 billion, exclusively contributed via Initial Public Offerings (IPOs) which expanded by 27.6%. The highest proportion of the overall IPOs proceeds came from the industrial products and services, as well as consumer products and services sectors in the Main Market. The IPOs of newly listed companies continue to receive substantial support from domestic investors. Extended by both banks and non-bank financial institutions such as hire purchase and leasing companies. Assets held by households including deposits, investments in unit trust funds and equities, insurance/takaful policies and Employees Provident Fund (EPF). 2 3 120 Chapter 3.indd 120 economic outlook 2023 29/09/2022 2:49 PM
143. chapter 3 TABLE 3 .4. Funds Raised in the Capital Market, January – July 2021 and 2022 monetary and financial developments TABLE 3.5. New Issuance of Corporate Bonds by Sector, January – July 2021 and 2022 RM MILLION 2021 RM MILLION 2022 Public Sector 2021 Government securities Malaysian Government Securities 48,482.7 53,010.8 Agriculture, forestry and fishing Malaysian Government Investment Issues 48,895.2 49,912.5 Construction New issues of debt securities Less: Redemptions Net funds raised by the public sector Manufacturing 97,377.9 102,923.3 39,000.0 47,478.8 58,377.9 55,444.5 Private Sector 1,775.9 2,265.7 Rights Issues - - Warrants - - 1,775.9 2,265.7 New issues of shares/warrants Debt securities2 Straight bonds Convertible bonds Islamic bonds 780.0 - 222.3 453.1 62,012.9 59,382.9 63,849.2 60,058.3 45,045.7 52,839.3 Net issues of debt securities 18,803.5 7,219.0 Net funds raised by the private sector 20,579.4 9,484.7 Total net funds raised in the capital market 78,957.2 64,929.3 New issues of debt securities Less: Redemptions Finance, insurance, real estate and business services Wholesale and retail trade, restaurant and hotels Mining and quarrying Total 2022 1 Excludes funds raised by the exercise of Employee Share Option Scheme, Transferable Subscription Rights, Warrants and Irredeemable Convertible Unsecured Loan Stocks 2 Excludes short-term papers in conventional and Islamic principles Note: Total may not add up due to rounding Source: Bank Negara Malaysia During the first seven months of 2022, the MGS and corporate bond yields generally trended upwards across all tenures. The higher yield environment was due to upward adjustment of the OPR by a cumulative of 50 bps, supported by encouraging domestic 2,119.6 3.0 3.5 8.5 45.0 5,102.0 0.1 5,490.7 4,428.6 8.6 7.4 13,505.4 9,520.3 21.2 15.9 1,400.0 2,100.0 2.2 3.5 35,605.0 31,747.3 55.8 52.9 5,195.0 4,270.5 8.1 7.1 668.9 270.0 1.0 0.4 0.0 500.0 0.0 0.8 63,849.2 60,058.3 100.0 100.0 Note: Includes corporate bonds issued by Cagamas and non-resident corporations Total may not add up due to rounding Source: Bank Negara Malaysia GDP growth and a favourable labour market condition. Moreover, the domestic yield movements were influenced by the global debt market response to external monetary developments, particularly concerning aggressive monetary policy tightening undertaken by central banks of advanced economies to curb persistently high inflationary pressures. Overall, government and corporate bond yields generally increased across all tenures from end-December 2021 to end-July 2022. The Government Securities yield rose steadily with the 1-year, 3-year, 5-year, and 10-year MGS yields increasing within the range of 32 bps to 114 bps. Meanwhile, the corporate bond yields on the 5-year AAA-rated, AA-rated and A-rated securities increased within the range of 74 bps to 78 bps during the same period. The yield trend in the corporate debt market reflects higher capital cost and a greater required rate of return amid rising interest rates. economic outlook Chapter 3.indd 121 2021 2022 - 1,056.2 Medium-term notes Transport, storage and communication Government and other services Shares1/Warrants Initial Public Offers Electricity, gas and water 1,939.2 SHARE (%) 2023 121 29/09/2022 2:49 PM
144. chapter 3 monetary and financial developments FIGURE 3 .4. Malaysian Government Securities Indicative Yields (End-period) FIGURE 3.6. 5-Year Corporate Bond Yields (End-period) % 12 % 5.0 10 4.5 4.0 8 3.5 3.0 6 2.5 4 2.0 1.5 M J S D M J S D M J S D M J S D M J J1 2018 2019 2020 2021 2022 10-YEAR 5-YEAR 3-YEAR 1-YEAR FIGURE 3.5. Share of Foreign Holdings in Total Malaysian Government Securities Outstanding (End-period) RM billion 550 % 65 492 58 434 51 376 44 318 37 J S D M J 2020 S D M 2021 J J1 30 2022 TOTAL MALAYSIAN GOVERNMENT SECURITIES OUTSTANDING SHARE OF FOREIGN HOLDINGS (RIGHT SCALE) End-July 2022 Source: Bank Negara Malaysia 1 122 Chapter 3.indd 122 S D M J 2018 S D M J 2019 S D M J 2020 S D M J J1 2021 2022 1 End-July 2022 Source: Bank Negara Malaysia End-July 2022 Source: Bank Negara Malaysia M M J BBB A AA AAA 1 260 2 economic outlook The global financial volatility has significantly increased since late December 2021. The heightened volatility is due to anxiety over tighter monetary conditions following persistently high inflation, slowing global growth momentum and heightened geopolitical risk, leading to cautious sentiment among equity investors especially in the emerging markets. These developments have led the FBM KLCI to start the year on a softer note by trading below 1,550 points and closed at 1,512.27 points as at end-January 2022 (endDecember 2021: 1,567.53 points). Heightened tensions in Eastern Europe and the military conflict which erupted on 24 February 2022 resulted in higher world oil prices due to supply disruption concerns and increased global financial market volatility. However, the spillover to domestic financial market and broader financial conditions were contained, reflecting positive investor sentiments, given Malaysia’s position as a net commodities exporter. The positive sentiment was also exhibited by the local equity market receiving 2023 29/09/2022 2:49 PM
145. chapter 3 a net foreign inflow of RM2 .8 billion coupled with the plantation sectors’ strong performance following high commodities prices. In addition, risk-off sentiment and sanctions on Russia have initiated assets relocation into commodity-producing countries, including Malaysia. This led to FBM KLCI entering into a bullish trend, breaching the 1,600 psychological level, closing at 1,608.28 points as at endFebruary 2022. FIGURE 3.7. Performance of Bursa Malaysia Billion The flow of capital into emerging market economies and its effects on the stock market performance, including Malaysia, are primarily influenced by the Fed Fund Rate decision and monetary policy of advanced economies. The 50 bps hike by the Fed on 4 May 2022 had prompted investors to continue investing in US dollar denominated assets. The FBM KLCI fell to 1,570.10 points alongside regional peers as at end-May 2022, despite Malaysia strong GDP growth in the first quarter of 2022. Global investors’ sentiment in equity markets were further dampened by a contraction in the US economic growth as well as another round of benchmark interest rate hike by the Fed in mid-June, the most aggressive hike since 1994. Tracking the Wall Street’s poor performance, the FBM KLCI plummeted to a 19-month low closing at 1,444.22 points as at end-June 2022. Points 2,200 800 2,000 600 1,800 400 1,600 In March, the Fed’s first interest rate hike by 25 bps to rein in inflation had affected global financial market sentiments. In addition, the escalating conflict in Ukraine compounded uncertainties in worldwide stock markets, prompted investors to relocate funds into safehaven investments as risk-off mode continued to prevail. Hence, the FBM KLCI registered 1,587.36 points as at end-March 2022. The transition towards endemicity and the reopening of Malaysia’s international borders on 1 April 2022 boosted economic activities and increased prospects of growth. This development accelerated private consumption against a backdrop of global geopolitical uncertainties and monetary policy tightening. Supported by improved prospects for the domestic economy, the FBM KLCI closed higher at 1,600.43 points as at-end April 2022. monetary and financial developments 200 0 1,400 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q31 2018 2019 2020 2021 2022 TOTAL TRANSACTION (UNITS) VALUE OF TRANSACTION (RM) COMPOSITE INDEX2 (RIGHT SCALE) July-August 2022 As at end-period Source: Bursa Malaysia 1 2 FIGURE 3.8. Performance of Selected Stock Markets (% change) End-2021 – End-August 2022 INDONESIA SINGAPORE INDIA THAILAND UK JAPAN MALAYSIA PHILIPPINES CHINA (SHANGHAI) US (DOW JONES) VIET NAM HONG KONG REPUBLIC OF KOREA US (NASDAQ) -30 -25 -20 -15 -10 -5 0 5 10 15 Source: Bloomberg economic outlook Chapter 3.indd 123 1,200 2023 123 29/09/2022 2:49 PM
146. chapter 3 monetary and financial developments Global equities staged a rebound in the middle of July 2022 coinciding with the earnings season in the US where investors reacted positively to the earnings reports . With the local market mirroring better Wall Street’s performance and the Fed increasing interest rate at a slower-than-expected pace, investors’ risk appetite improved, supporting the local bourse, which rose to 1,492.23 points as at-end July 2022. The FBM KLCI edged up to 1,506.19 points on 12 August 2022, following the release of Malaysia’s second quarter GDP expansion of 8.9%. Backed by strong domestic economic growth prospects, coupled with China’s move to spur growth via infrastructure spending, the local bourse increased further to 1,512.05 points as at end-August 2022. Moving forward, investors are expected to remain cautious following the Fed’s indication of further interest rate hikes to curb high inflation. The hawkish stance could undermine the local equity market’s performance. Nonetheless, this could be partly offset by continued inflows of foreign funds into Malaysia’s equity market coupled with initiatives under Budget 2023. As at end-August 2022, the market capitalisation declined by 6.9% to RM1,706.3 billion. However, the overall market remains steady, with market transacted value recording RM363.2 billion, while the total volume of shares traded was 489.4 billion units. The market velocity recorded 30.7%, while market volatility stood at 9.6%. Meanwhile, the foreign holdings based on market capitalisation in the local bourse stood at 20.1% during the same period. Overall, the domestic capital market remains robust, with the equity market recording net foreign inflows amounting to RM8.2 billion and purchase of shares by local retail investors worth RM1.8 billion from January – August 2022. Going forward, the continuous development of the local equity market will provide wider opportunities for alternative savings and investment instruments to the retail segment, encouraging greater public participation in the equity market. 124 Chapter 3.indd 124 economic outlook TABLE 3.6. Bursa Malaysia: Selected Indicators, End-August 2021 and 2022 2021 2022 FBM KLCI 1,601.38 1,512.05 FBM EMAS 11,627.87 10,697.65 FBM 100 11,342.91 10,449.43 FBM SCAP 15,945.83 14,380.26 7,244.90 4,910.44 1,101,881.45 489,373.45 660,303.45 363,183.71 Volume (million units) 6,843.98 3,020.82 Value (RM million) 4,101.26 2,241.87 1,832.10 1,706.31 Main Market 762 764 ACE Market 142 156 LEAP Market 41 46 36.0 21.3 31.2 34.1 Indices FBM ACE Total turnover1 Volume (million units) Value (RM million) Average daily turnover1 Market capitalisation (RM billion) Total number of listed companies Market liquidity Turnover value/market capitalisation (%) Market concentration 10 highest capitalised stocks/market capitalisation (%) 1 Based on market transactions and direct business transactions between January and August Source: Bursa Malaysia 2023 29/09/2022 2:50 PM
147. chapter 3 MONETARY AND FINANCIAL DEVELOPMENTS INFOrMatION BOX 3 .1 Key Capital Market Measures Several key capital market measures were undertaken by Securities Commission Malaysia and Bursa Malaysia in the first eight months of 2022 to enhance the liquidity and efficiency of Malaysia’s capital market. The measures are as follows: Resumption of Intraday Short Selling (IDSS) and Intraday Short Selling by Proprietary Day Traders (PDT Short Sale) with Enhanced Control Measures 1-Jan Ensures stable and orderly trading by permitting IDSS and PDT Short Sale as per the ‘at-tick rule’. PDT Short Sale will be allowed on Approved Securities in the Main Market if PDT has an existing agreement to borrow Day Trading Eligible Securities. Registration of Two Initial Exchange Offering (IEO) Operators 2-Mar Memorandum of Understanding (MoU) between Bursa Malaysia and Verra, Wo r l d ’s L e a d i n g G re e n h o u s e G a s Crediting Programme Manager 28-Mar 12-May 10-June Completion of First Physical Delivery of East Malaysia Crude Palm Oil Futures Contract (FEPO) in Sarawak by Bursa Malaysia Derivatives Berhad Provides an effective instrument via FEPO for physical players and participants in the East Malaysian palm oil market to manage price risk, particularly in a highly volatile environment. 30-June Addresses sustainability concerns such as climate change or social agenda, with features related to sukuk issuer’s sustainability performance commitments. Furthermore, it enables companies to transit into a low carbon or net-zero economy and meets the increasing global demand for sustainable financing. Bursa Malaysia Launches FTSE Bursa Malaysia Top 100 ESG Low Carbon Select Index (FBM100LC) and FTSE Bursa Malaysia Top 100 ESG Low Carbon Select Shariah Index (FBM100LS) Launching of Bursa Research Incentive Scheme (Bursa RISE) Complements and supports the PLCs’ transformation programme by improving participating PLCs’ trading velocity and corporate profile through research coverage and marketing activities. Enables the establishment of a Voluntary Carbon Market (VCM) that can be scaled up, serving a wide variety of market participants and allowing businesses to offset their carbon footprints via digitally standardised contracts of high-quality carbon credits in a transparent and orderly manner. The Launching of Sustainable and Responsible Investment linked (SRI – linked) Sukuk Framework to Facilitate Companies’ Transition to Net Zero Carbon Helps guide PLCs to improve their company’s practices, performance and value through information sharing (digital guidebooks), enhanced engagement and greater transparency. 23-Mar Promotes responsible innovation in the digital asset space by registering two IEO operators, namely Kapital DX and Pitch Platforms. These IEO operators will operate an electronic platform that hosts an initial exchange offering of digital tokens, providing an alternative avenue for eligible companies to raise funds via digital tokens in Malaysia. Launching of Public Listed Companies (PLCs) Transformation Programme by Bursa Malaysia 12-Jul 29-Aug Bursa Malaysia Derivatives Berhad Inks Strategic Partnership MoU with Shanghai Futures Exchange and Shanghai International Energy Exchange Enhances sharing of information and best practices regarding product development and market operations in areas of common interest. The partnership indirectly supports and contributes to the China-Malaysia economic trade, which will complement existing product offerings and meet the needs of increasingly sophisticated customers. Two new ESG themed indices under the FTSE Bursa Malaysia Index Series were launched to cater to the evolving investors’ demand for low carbon and climate risk index. ecONOMIc OUtLOOK Chapter 3.indd 125 2023 125 29/09/2022 2:50 PM
148. chapter 3 monetary and financial developments Islamic Banking and Capital Market Performance TABLE 3 .7. Islamic Banking: Key Indicators1, End-July 2021 and 2022 RM BILLION Islamic banking and capital market remain dynamic to support economic growth The introduction of the Malaysia Islamic Overnight Rate (MYOR-i) on 25 March 2022, a fully Shariah-compliant benchmark rate, is expected to boost the development of more innovative Shariah-compliant financial products. The MYOR-i will enhance transparency by enabling market players to negotiate and standardise their financial contracts, thus achieving efficient pricing across all financial instruments. The establishment of MYOR-i will help deepen the onshore Islamic financial market and enhance the role of Shariahcompliant financing for domestic economic activities. 2021 20222 Assets 935.7 995.1 8.9 6.3 Financing 691.1 774.1 6.3 12.0 16.6 16.2 -10.4 -2.6 4.7 3.0 9.7 -35.3 34.4 36.0 13.7 4.6 6.1 11.8 11.9 94.1 Wholesale and retail trade, restaurants and hotels 36.2 42.7 13.0 18.2 Construction 32.2 43.3 -8.7 34.3 Primary agriculture The Islamic banking industry remains resilient and dynamic supported by continuous innovation of Shariah-compliant products. As at-end July 2022, total Islamic banking assets grew by 5.7% to RM1,196.7 billion4, constituting 35.7% of total banking assets. Meanwhile, total Islamic financing expanded by 12% to RM774.1 billion. The growth was primarily contributed by household sector financing, which increased by 11.8% to RM491.3 billion as at end-July 2022, accounting for 63.5% share of the total Islamic financing. The financing was mainly for the purchase of residential properties (51.9%), and purchase of transport vehicles, particularly passenger cars (19.8%). CHANGE (%) Mining and quarrying Manufacturing 3 Electricity, gas and water supply 2021 2022 Real estate 31.3 31.8 -0.7 1.5 Transport, storage and communication 18.3 22.7 -8.8 24.3 Finance, insurance and business activities 38.2 46.4 13.0 21.5 Education, health and others 27.8 16.3 -17.6 -41.4 439.6 491.3 10.0 11.8 Households 5.7 12.4 -0.7 118.4 Liabilities 868.6 923.8 9.4 6.4 Deposits and Investment Account 799.3 869.3 9.5 8.8 Investment account 113.5 133.5 16.9 17.6 0.4 0.3 -22.2 -22.1 Savings 71.2 75.1 22.4 5.5 Demand 116.0 134.9 16.3 16.3 Others 498.2 525.5 5.0 5.5 Others Investment Excluding DFIs Statistical table related to loans/financing has been revised and expanded with a new format beginning July 2022 3 Including agro-based Note: Total may not add up due to rounding Source: Bank Negara Malaysia 1 2 The Islamic Capital Market (ICM) in Malaysia serves as an essential and attractive platform for the Government and corporate entities to raise funds for various economic, business and infrastructure development needs. However, the size of ICM declined marginally by 1.2% as at end-July 2022 due to a reduction in the 4 Includes Development Financial Institutions (DFIs). 126 Chapter 3.indd 126 total market capitalisation of Shariah-compliant securities. The size of ICM was valued at RM2,226.6 billion, representing 63.4% of Malaysia’s total capital market. economic outlook 2023 29/09/2022 2:50 PM
149. chapter 3 Bursa Malaysia being one of the leading exchanges in the emerging market , offers a wide range of Shariah-compliant securities products. As at end-July 2022, a total of 754 Public Listed Companies adhere to the Shariah principles. The Shariah-compliant securities were valued at RM1,080.9 billion, which accounts for 63.8% of the overall market capitalisation of listed companies on Bursa Malaysia. During the first seven months of 2022, Malaysia’s sukuk issuances amounted to RM151.9 billion or 65.9% of the total bond and sukuk issuances. Total corporate sukuk issuances reached RM46.9 billion during the same period, representing 76.3% of overall corporate bonds and sukuk issued in Malaysia. As at end-June 2022, Malaysia continued to record the largest share of global sukuk MONETARY AND FINANCIAL DEVELOPMENTS outstanding at 41.6%, notwithstanding a moderation in the overall domestic ICM performance. Meanwhile, Malaysia continues to issue Sustainable and Responsible Investment (SRI) sukuk to meet the financing requirements of projects which complies with the Sustainable Development Goals (SDGs). Recognising the importance of SDGs, the Securities Commission Malaysia launched the SRIlinked Sukuk Framework on 30 June 2022. The framework enables corporates to engage in fundraising activities which addresses sustainability concerns such as climate change or social agenda. The SRI-linked sukuk will also encourage and facilitate the transition of corporates into low-carbon economic activities. FIGURE 3.9. Global Sukuk Outstanding by Country (% share) 11.1% 10.9% 2.8% 3.2% 7.9% 8.0% 7.1% USD 676.2 billion End-2021 42.4% 28.4% 6.5% USD 727.7 billion End-June 2022 41.6% 30.1% MALAYSIA SAUDI ARABIA INDONESIA TURKIYE MALAYSIA SAUDI ARABIA INDONESIA UNITED ARAB EMIRATES OTHERS1 UNITED ARAB EMIRATES OTHERS1 TURKIYE Others include Bahrain, Bangladesh, Brunei, Gambia, Hong Kong, Ivory Coast, Jordan, Kuwait, Luxembourg, Maldives, Mauritius, Nigeria, Oman, Pakistan, Qatar, Senegal, Singapore, South Africa, UK and US 1 Note: Total may not add up due to rounding Source: Bank Negara Malaysia ecONOMIc OUtLOOK Chapter 3.indd 127 2023 127 29/09/2022 2:50 PM
150. chapter 3 monetary and financial developments Conclusion Monetary policy is anticipated to remain supportive and accommodative of growth in an environment of moderate inflationary pressures . Future monetary policy stance will continue to be guided by the MPC’s assessment of evolving conditions and their implications on the overall outlook to domestic inflation and growth. Financial institutions are expected to continue to be robust backed by prudent management, sufficient liquidity and strong capital buffers. Similarly, the capital market is expected to remain resilient, underpinned by sound macroeconomic fundamentals, ample domestic liquidity, and comprehensive capital market infrastructure. 128 Chapter 3.indd 128 economic outlook The transition towards endemicity, reopening of international borders, strong domestic growth momentum and ongoing strategic projects among others, will provide the impetus for better overall financial market performance in 2022. Nonetheless, weaker global growth prospects, aggressive pace of monetary policy tightening by the Fed, heightened volatility in global financial conditions, prolonged conflict in Ukraine and strict measures to curb COVID-19 in China pose as headwinds. In light of these challenges, the Capital Market Masterplan 3 (2021 – 2025) and Financial Sector Blueprint (2022 – 2026) will encourage greater diversity and increase dynamism in the financial market in tandem with the evolving economic and financial landscapes. Hence, the resilience of Malaysia’s financial market will be enhanced while safeguarding financial stability and integrity. 2023 29/09/2022 2:50 PM
151. chapter 3 monetary and financial developments References Bank Negara Malaysia . (2022a). BNM annual report 2021. https://www.bnm.gov.my/ar2021 Bank Negara Malaysia. (2022b). Economic and financial developments in the Malaysian economy in the second quarter of 2022. https://www.bnm.gov.my/-/qb22q2_en_pr Bank Negara Malaysia. (2022c). Economic and financial developments in the Malaysian economy in the first quarter of 2022. https:// www.bnm.gov.my/-/qb22q1_en_pr Bank Negara Malaysia. (2022d). Economic & monetary review 2021. https://www.bnm.gov. my/documents/20124/6458996/emr2021_en_ book.pdf Bank Negara Malaysia. (2022e). Financial sector blueprint 2022-2026. https://www.bnm.gov. my/documents/20124/5915429/fsb3_en_book. pdf Bank Negara Malaysia. (2022f). Financial stability review second half 2021. https://www. bnm.gov.my/documents/20124/6459002/ fsr21h2_en_book.pdf Bank Negara Malaysia. (2022g). Monthly highlights and statistics July 2022. https:// www.bnm.gov.my/-/monthly-highlightsstatistics-in-july-2022 Bank Negara Malaysia. (2022j). Monthly highlights and statistics April 2022. https:// www.bnm.gov.my/-/monthly-highlightsstatistics-in-april-2022 Bank Negara Malaysia. (2022k). Monthly highlights and statistics March 2022. https:// www.bnm.gov.my/-/monthly-highlightsstatistics-in-march-2022 Bank Negara Malaysia. (2022l). Monthly highlights and statistics February 2022. https:// www.bnm.gov.my/-/monthly-highlights-andstatistics-in-february-2022 Bank Negara Malaysia. (2022m). Monthly highlights and statistics January 2022. https:// www.bnm.gov.my/-/monthly-highlights-andstatistics-in-january-2022 Bursa Malaysia. (2022a, August 15). Bursa Malaysia to launch voluntary carbon market exchange by year-end. https://bit.ly/Bursa_ Carbon_Market_Exchange Bursa Malaysia. (2022b, July 17). Bursa Malaysia Derivatives inks strategic partnership MoU with Shanghai Futures Exchange and Shanghai International Energy Exchange. https://bit. ly/Bursa_Malaysia_Shanghai_Intl_Energy_ Exchange Bank Negara Malaysia. (2022h). Monthly highlights and statistics June 2022. https:// www.bnm.gov.my/-/monthly-highlightsstatistics-in-june-2022 Bursa Malaysia. (2022c, June 14). Bursa Malaysia Derivatives completes first physical delivery of East Malaysia crude palm oil futures in Sarawak. https://bit.ly/Bursa_Malaysia_ Derivatives_CPO Bank Negara Malaysia. (2022i). Monthly highlights and statistics May 2022. https:// www.bnm.gov.my/-/monthly-highlightsstatistics-in-may-2022 Bursa Malaysia. (2022d, May 30). Bursa Malaysia commits to further strengthening the voluntary carbon market ecosystem. https://bit. ly/Bursa_Malaysia_Carbon_Market_Ecosystem economic outlook Chapter 3.indd 129 2023 129 29/09/2022 2:50 PM
152. chapter 3 monetary and financial developments Bursa Malaysia . (2022e, March 28). Bursa Malaysia launches Bursa Research Incentive Scheme. https://bit.ly/Bursa_Research_ Incentive_Scheme Bursa Malaysia. (2022f, March 2). Bursa Malaysia launches PLC transformation programme. https://www.bursamalaysia. com/bm/about_bursa/media_centre/bursamalaysia-launches-plc-transformationprogramme Securities Commission Malaysia. (2022a, June 30). SC releases new sukuk framework to facilitate companies’ transition to net zero. https://www.sc.com.my/resources/media/ media-release/sc-releases-new-sukukframework-to-facilitate-companies-transitionto-net-zero 130 Chapter 3.indd 130 economic outlook Securities Commission Malaysia. (2022b, March 23). SC registers two initial exchange offering (IEO) operators. https://www.sc.com.my/ resources/media/media-release/sc-registerstwo-initial-exchange-offering-ieo-operators Securities Commission Malaysia. (2021, December 17). SC and Bursa Malaysia to lift IDSS and PDT short sale suspension on 1 January 2022. https://www.sc.com.my/ resources/media/media-release/sc-andbursa-malaysia-to-lift-idss-and-pdt-short-salesuspension-on-1-january-2022 2023 29/09/2022 2:50 PM
153. statistical tables Statistical Tables economic outlook Statistical Table Combine BI 2023 updated .indd 131 2023 131 29/09/2022 2:59 PM
154. Statistical Table Combine BI 2023 updated .indd 132 29/09/2022 2:59 PM
155. statistical tables LIST OF STATISTICAL TABLES Table No . I. Socioeconomic Indicators Selected Socioeconomic Statistics 1.1 II. International Economy Key Economic Data of Selected Countries 2.1 III. Macroeconomy National Accounts Gross Domestic Product by Kind of Economic Activity at Constant 2015 Prices Index of Services Industrial Production Index Gross National Income by Demand Aggregates Private Consumption Indicators Private Investment Indicators 3.1 3.2 3.3 3.4 3.5 3.6 External Sector Malaysia’s Trade with Major Trading Partners External Trade Indices Production, Exports Volume and Value of Major Primary Commodities Direction of Major Exports Exports of Manufactured Goods Source of Major Imports Balance of Payments 3.7 3.8 3.9 3.10 3.11 3.12 3.13 Prices Consumer Price Index by Region Consumer Price Index by Stratum Consumer Price Index by State Core Index Producer Price Index - Local Production 3.14 3.15 3.16 3.17 3.18 Labour Market Labour Force Employment by Industry Active Registrants Vacancies and Placements 3.19 3.20 3.21 3.22 IV. Financial and Capital Markets Interest Rates Broad Money (M3) Key Exchange Rates Commercial Banks: Loans Outstanding by Purpose and Sector Government and Corporate Bond Yields Bursa Malaysia: Selected Indicators Islamic Banks: Loans Outstanding by Purpose and Sector 4.1 4.2 4.3 4.4 4.5 4.6 4.7 V. Sustainable Development Goals Progress on Sustainable Development Goals by Indicator 5.1 economic outlook Statistical Table Combine BI 2023 updated.indd 133 2023 133 29/09/2022 2:59 PM
156. statistical tables STATISTICAL ANNOTATION The Statistics Appendix provides time series data on the key economic variables . Each table contains current selected economic data. Percentage changes are provided for important variables as an indication of economic trends. In addition, percentage of totals and footnotes are also provided where necessary. The sum of the component figures may not be tally with the subtotal or total due to rounding. In some series, historical figures have been revised. Estimates for 2022 are based on six to eight months data and forecasts for 2023 have been provided where appropriate. Unless otherwise stated, the source of data is from the Ministry of Finance, Malaysia. Population and Housing Census of Malaysia The Malaysian Population and Housing Census is carried out every ten years with the aim of obtaining a comprehensive and detailed population and housing stock and profile down to the smallest geographical level at a time as a benchmark for the population’s demographic and socio-economic characteristics. The latest census was carried out in 2020 and is the sixth census carried out since the establishment of Malaysia in 1963. Data from this Census will be used in measuring the achievements of policy implementation by the Government towards becoming a nation that achieves sustainable growth with fair and equitable distribution across income groups, ethnicities, regions and supply chains. The Census data also form the basis for monitoring population and housing trends to national development planning. Population Census Implementation Approach: In implementing the Population and Housing Census the De Jure approach is used. De Jure approach means that everyone is enumerated on the Census Day according to their living quarters of residence. Data Collection Methods The data collection of this Census used online and offline method as follows: 1. e-Census: Completion of questionnaires online by respondents. 2. Computer Assisted Telephone Interview (CATI): The enumerator conducts an interview over the phone and all respondent information will be entered into the CATI system. 3. Computer Assisted Personal Interview (CAPI): Information is collected through interviews with respondents and information is recorded online and offline using a tablet or smartphone. 4. Paper and Pen Interview (PAPI): Information is collected through face-to-face interviews and information is recorded in the questionnaire. 5. Drop-off & Pick-up (DOPU): The questionnaire is left (drop-off) at the respondent’s Living Quarters and picked up again (pick-up) after it has been completely filled out by the respondent. Acronyms and Abbreviations NPISHs Non-profit institutions serving households US United States ASEAN Association of Southeast Asian Nations IMF International Monetary Fund GDP Gross Domestic Product FBM-KLCI Financial Times Stock Exchange (FTSE) Bursa Malaysia Kuala Lumpur Composite Index MSIC Malaysia Standard Industrial Classification SITC Standard International Trade Classification PT3 Pentaksiran Tingkatan 3 PMR Penilaian Menengah Rendah SRP Sijil Rendah Pelajaran LCE Lower Certificate of Education SPM Sijil Pelajaran Malaysia MCE Malaysian Certificate of Education STPM Sijil Tinggi Pelajaran Malaysia MHSC Malaysian Higher School Certificate n.a. Not available cont’d Continued n.e.c. Not elsewhere classified etc. et cetera 134 economic outlook Statistical Table Combine BI 2023 updated.indd 134 2023 29/09/2022 2:59 PM
157. statistical tables 1 .1. selected SOCIOECONOMIC STATISTICS Malaysia Indicator 2018 2019 2020 202110 202211 Total 32,382 32,523 32,447 32,576 32,652 Male 16,721 16,765 16,966 17,001 17,000 Female 15,661 15,758 15,481 15,576 15,652 107 106 110 109 109 98 98 98 99 99 Total3 43.4 43.4 44.3 44.1 43.9 Young age4 34.1 33.7 34.6 34.0 33.4 9.3 9.7 9.7 10.1 10.5 Total 74.6 74.8 74.7 74.510 73.411 Male 72.3 72.5 72.5 72.310 71.311 Female 77.2 77.4 77.2 77.010 75.811 2017 2018 2019 2020 2021 Primary school enrolment rate6 (%) 97.9 97.9 98.1 98.2 98.3 Secondary school enrolment rate7 (%) 91.1 91.1 92.5 92.4 92.5 1,325,699 1,343,830 1,323,449 1,224,098 1,207,593 Primary schools 11.6 11.6 11.6 12.0 12.3 Secondary schools 12.0 12.0 11.0 11.0 11.5 95.9 95.9 96.0 96.3 96.4 Demographic Statistics Population1 (‘000) Sex ratio2 Population density (per square kilometre) Dependency ratio (%) Old age5 Life expectancy at birth1 Education Higher education institutions enrolment8 Pupil-teacher ratio Literacy rate 9 (%) 1 Year 2018 and 2019: Data refers to mid-year population estimates based on the adjusted 2010 Population and Housing Census of Malaysia For year 2020 to 2022: Data refers to mid-year population estimates based on the adjusted 2020 Population and Housing Census of Malaysia 2 The number of males per 100 females 3 The ratio of the number of persons aged 0–14 years and 65 years and above to the number of persons aged 15–64 years 4 The ratio of the number of persons aged 0–14 years to the number of persons aged 15–64 years 5 The ratio of the number of persons aged 65 years and above to the number of persons aged 15–64 years 6 Percentage of school aged children between 6+ and 11+ years at primary level in Government and private schools 7 Percentage of school aged children between 12+ and 16+ years at secondary level in Government and private schools 8 Includes public university, private higher education institutions, polytechnic and community college 9 Aged 15 years and above with formal education, excluding non-Malaysian citizens 10 Preliminary 11 Estimate economic outlook Statistical Table Combine BI 2023 updated.indd 135 2023 135 29/09/2022 2:59 PM
158. statistical tables 1 .1. selected SOCIOECONOMIC STATISTICS (cont’d) Malaysia Indicator 2017 2018 2019 2020 2021 Health Population per doctor 554 530 482 441 420 46,194 46,611 46,988 48,305 49,781 Mobile-cellular penetration rate per 100 inhabitants (%) 131.2 130.2 135.4 133.6 142.1 Mobile-broadband penetration rate per 100 inhabitants (%) 109.3 113.0 123.7 118.7 126.4 96.1 96.4 97.0 97.4 97.5 111.3 115.4 119.2 114.8 117.5 2009 2012 2014 2016 2019 Total 3.8 1.7 0.6 0.4 0.2 Urban 1.7 1.0 0.3 0.2 0.2 Rural 8.4 3.4 1.6 1.0 0.8 Total 19.3 19.2 15.6 15.9 16.9 Urban 17.9 17.9 13.7 11.1 12.8 Rural 13.1 15.1 14.4 33.0 33.2 Official beds strength in public sector12 Information Technology Infrastructure Rural electricity coverage (% of housing unit) Electricity index Poverty Structure13 Incidence of absolute poverty (% of households) Incidence of relative poverty (% of households) 12 Comprising Ministry of Health (MOH) hospitals (includes special medical institutions) and non-MOH Hospitals (university hospitals and military hospitals) 13 Based on 2019 Household Income and Basic Aminities Survey year Source: Department of Statistics, Malaysia; Malaysian Communications and Multimedia Commission; Ministry of Education; Ministry of Higher Education; Ministry of Health and Ministry of Rural Development 136 economic outlook Statistical Table Combine BI 2023 updated.indd 136 2023 29/09/2022 2:59 PM
159. statistical tables 2 .1. KEY  ECONOMIC  DATA  OF selected COUNTRIES Real GDP (% Growth) Gross Imports4 Exports3 Consumer Unemployment Current GDP Rate2 Account International (USD billion) (USD billion) Price Per Capita1 (%) Reserves (USD) Balance Index (USD billion) (USD billion) (%) Advanced Economies 2019 1.7 52,034.8 1.3 4.8 337.9 - 15,572.3 15,301.7 2020 -4.5 49,439.5 0.7 6.6 207.8 - 14,035.5 13,803.9 2021 5.2 51,931.9 3.1 5.6 379.3 - 17,015.2 16,671.6 5 2.5 53,482.1 6.6 4.7 -65.0 - 18,837.1 18,853.1 20236 1.4 54,593.4 3.3 4.7 23.4 - 19,999.1 19,884.7 2019 2.3 62,417.6 1.8 3.7 -472.1 128.9 1,643.2 2,567.4 2020 -3.4 59,803.4 1.2 8.1 -616.1 145.8 1,424.9 2,406.9 2021 5.7 63,017.8 4.7 5.4 -806.6 251.6 1,754.6 2,937.1 2022 United States 5 2.3 65,117.5 7.7 3.5 -877.8 - - - 20236 1.0 66,281.9 2.9 3.5 -855.4 - - - 2019 1.6 - 1.2 7.6 306.7 936.6 3,819.7 3,435.0 2020 -6.3 - 0.3 8.0 250.0 1,102.3 3,489.9 3,094.4 2021 5.4 - 2.6 7.7 345.2 1,220.8 4,156.6 3,699.6 5 2022 2.6 - 5.3 7.3 257.1 – – – 20236 1.2 - 2.7 7.1 344.1 – – – 2019 1.1 98,283.3 0.6 2.3 54.3 279.5 390.8 359.3 2020 -4.1 94,505.6 -0.2 3.0 58.1 362.3 362.5 329.8 2021 7.6 106,032.2 2.3 2.6 71.9 417.9 457.4 406.2 2022 Euro Area Singapore 5 2022 4.0 112,699.0 3.5 2.4 55.3 – – – 20236 2.9 116,829.3 2.0 2.4 57.2 – – – 2019 2.2 42,850.3 0.4 3.8 59.7 408.8 542.2 503.3 2020 -0.7 42,426.5 0.5 3.9 75.9 443.1 512.5 467.6 2021 4.1 44,217.9 2.5 3.7 88.3 463.1 644.4 615.1 Republic of Korea 5 2.3 45,438.2 4.0 3.6 39.3 – – – 20236 2.1 46,837.9 2.4 3.5 61.9 – – – 2019 -0.2 41,723.6 0.5 2.4 176.0 1,368.9 705.6 721.0 2020 -4.5 39,964.9 0.0 2.8 148.8 1,440.2 641.3 635.5 2021 1.7 40,723.2 -0.3 2.8 141.7 1,448.1 756.0 769.0 2022 Japan 5 2022 1.7 41,809.2 1.0 2.6 117.2 – – – 20236 1.7 42,965.9 0.8 2.4 142.2 – – – 2019 3.7 11,373.8 5.1 – 0.7 – 9,114.2 8,914.6 EMDEs 2020 -2.0 11,000.3 5.2 – 160.1 – 8,250.3 7,908.2 2021 6.8 11,648.5 5.9 – 365.3 – 10,695.2 10,071.1 20225 3.6 11,962.5 9.5 – 682.3 – 12,395.5 11,399.2 2023 3.9 12,351.4 7.3 – 420.7 – 12,720.1 11,971.6 6 economic outlook Statistical Table Combine BI 2023 updated.indd 137 2023 137 29/09/2022 2:59 PM
160. statistical tables 2 .1. KEY  ECONOMIC DATA OF SELECTED COUNTRIES (cont’d) Real GDP (% Growth) Gross GDP Consumer Unemployment Current Exports3 Imports4 Rate2 Per Capita1 Price Account International (USD billion) (USD billion) (%) Reserves (USD) Index Balance (%) (USD billion) (USD billion) China 2019 5.9 15,893.0 2.9 3.6 102.9 3,388.7 2,499.5 2,078.4 2020 2.2 16,226.1 2.4 4.2 248.8 3,536.0 2,590.0 2,066.0 2021 8.1 17,531.1 0.9 4.0 317.3 3,606.2 3,364.0 2,687.5 5 2022 3.3 18,298.5 2.1 3.7 213.4 – – – 20236 4.6 19,235.0 1.8 3.6 214.6 – – – 2019 3.7 6,683.5 4.8 – -24.5 461.8 324.3 486.1 2020 -6.6 6,192.8 6.2 – 24.0 588.4 276.4 373.2 2021 8.7 6,682.1 5.5 – -49.3 635.3 395.4 572.5 India 5 2022 7.4 7,158.9 6.1 – -102.0 – – – 20236 6.1 7,582.3 4.8 – -96.1 – – – 2019 4.8 12,795.8 2.1 – 29.7 – – – 2020 -3.4 12,215.0 1.4 – 57.7 – – – 2021 3.4 12,522.0 2.0 – -3.4 – – – ASEAN-57 5 2022 5.3 13,061.2 3.5 – 62.7 – – – 20236 5.1 13,699.6 3.2 – 30.2 – – – 2019 5.0 11,976.5 2.8 5.2 -30.3 129.2 167.7 171.3 2020 -2.1 11,586.2 2.0 7.1 -4.4 135.9 163.3 141.6 2021 3.7 11,923.7 1.6 6.5 3.3 144.9 229.9 196.0 Indonesia 5 2022 5.3 12,449.3 3.3 6.0 57.7 – – – 20236 5.2 13,074.0 3.3 5.6 6.6 – – – 2019 4.4 11,228.3 0.7 3.3 12.8 103.6 240.2 205.0 2020 -5.5 10,396.6 -1.2 4.5 14.1 107.6 234.6 190.7 2021 3.1 11,449.6 2.5 4.6 14.2 116.9 299.3 238.2 2022 6.5 – 7.0 12,207.9 3.3 4.0 – 5.0 12,904.6 2.8 – 3.3 Malaysia 5 2023 6 3.8 - 4.0 10 1.7 108.2 3.5 - 3.7 16.4 – 9 8 236.1 199.98 346.6 265.8 ¹ Expressed in current USD price except for Advanced Economies, EMDEs and ASEAN-5 (Purchasing Power Parity (PPP) dollars per person) ² Composites for the country groups are averages of national unemployment rates weighted by labour force in the respective countries ³ Expressed in Exports of Merchandise only except for Advanced Economies, EMDEs and ASEAN-5 (Exports of Merchandise and Services) 4 Expressed in Imports of Merchandise only except for Advanced Economies, EMDEs and ASEAN-5 (Exports of Merchandise and Services) 5 Estimate 6 Forecast 7 Indonesia, Malaysia, the Philippines, Thailand and Viet Nam 8 As at August 2022 9 As at 30 August 2022 10 As at 30 June 2022 Sources: International Monetary Fund (IMF), World Economic Outlook (April and July 2022); IMF Database; World Trade Organization Trade Statistics; Department of Statistics and Ministry of Finance Malaysia 138 economic outlook 2023
161. statistical tables 3 .1. GROSS domestic product by kind of Economic activity at constant 2015 prices, Malaysia RM million Kind of Economic Activity 2019 2020 20212 20223 20234 Agriculture 101,573 (1.9) 99,106 (-2.4) 98,898 (-0.2) 99,036 (0.1) 101,266 (2.3) Mining and quarrying 102,887 (-0.6) 92,879 (-9.7) 93,150 (0.3) 95,087 (2.1) 96,165 (1.1) Manufacturing 316,283 (3.8) 307,847 (-2.7) 337,219 (9.5) 358,615 (6.3) 372,458 (3.9) 66,453 (0.4) 53,616 (-19.3) 50,802 (-5.2) 51,948 (2.3) 54,407 (4.7) 820,576 (6.2) 776,361 (-5.4) 791,068 (1.9) 856,329 (8.2) 898,808 (5.0) 38,326 (6.1) 37,857 (-1.2) 38,837 (2.6) 40,164 (3.4) 41,140 (2.4) 242,704 (6.8) 228,260 (-6.0) 232,006 (1.6) 252,226 (8.7) 260,721 (3.4) Food & beverages and accommodation 49,821 (9.5) 36,527 (-26.7) 32,513 (-11.0) 42,105 (29.5) 45,396 (7.8) Transportation and storage 53,632 (6.8) 42,139 (-21.4) 42,671 (1.3) 54,456 (27.6) 58,295 (7.0) Information and communication 84,225 (6.5) 89,252 (6.0) 94,874 (6.3) 99,299 (4.7) 103,917 (4.6 ) Finance and insurance 93,358 (4.8) 96,105 (2.9) 105,713 (10.0) 105,101 (-0.6) 108,373 (3.1) Real estate and business services 68,763 (7.9) 58,399 (-15.1) 51,972 (-11.0) 61,433 (18.2) 65,490 (6.6) Other services 1 70,943 (5.6) 63,574 (-10.4) 61,465 (-3.3) 66,243 (7.8) 71,863 (8.5) 118,804 (3.4) 124,245 4.6 131,016 5.4 135,301 (3.3) 143,613 (6.1) 16,179 (-2.2) 15,335 (-5.2) 15,602 (1.7) 15,904 (1.9) 15,920 (0.1) 1,423,952 (4.4) 1,345,144 (-5.5) 1,386,738 (3.1) 1,476,919 (6.5 - 7.0) 1,539,026 (4.0 - 5.0) Construction Services Utilities Wholesale and retail trade Government services (+) Import duties GDP at purchasers’ prices 1 Owner occupied dwelling, community, social and personal services, private non-profit services to households and domestic services of households 2 Preliminary 3 Estimate 4 Forecast Note: Figures in parentheses are annual percentage changes Source: Department of Statistics and Ministry of Finance, Malaysia economic outlook Statistical Table Combine BI 2023 updated.indd 139 2023 139 29/09/2022 2:59 PM
162. statistical tables 3 .2. INDEX OF SERVICES 2015 = 100, Malaysia Weights (%) Services 2019 2020 2021 20221 Annual Change (%) 100.0 7.3 6.4 -8.0 1.6 11.7 45.2 7.8 6.6 -9.6 0.5 14.0 37.9 7.7 6.1 -6.1 2.3 11.3 Food and beverages 5.7 9.3 10.2 -20.4 -8.3 22.6 Accommodation 1.6 6.3 6.8 -49.8 -25.2 127.2 26.8 6.4 6.1 -4.0 2.6 5.1 16.0 5.3 4.6 2.6 9.9 -1.1 Professional, scientific & technical and administrative & support services 7.2 9.1 9.3 -10.3 -6.7 13.3 Real estate 3.6 5.1 5.2 -17.9 -12.8 24.1 21.9 7.3 6.5 -5.4 5.0 14.4 12.9 8.3 6.5 5.7 6.5 5.9 9.0 6.0 6.5 -22.5 1.8 33.3 6.1 6.7 6.4 -22.1 -9.3 15.9 Arts, entertainment & recreation and personal services & other activities 2.6 8.1 8.0 -42.1 -30.3 39.7 Private education 1.9 5.3 4.9 -7.5 -5.6 4.2 Private health 1.6 6.0 5.5 -6.7 7.6 10.7 Wholesale & retail trade, food & beverages and accommodation Wholesale and retail trade Business services and finance Finance and insurance Information & communication and transportation & storage Information and communication Transportation and storage Other services 1 2018 January to June 2022 Source: Department of Statistics, Malaysia 140 economic outlook Statistical Table Combine BI 2023 updated.indd 140 2023 29/09/2022 2:59 PM
163. statistical tables 3 .3. Industrial production index 2015 = 100, Malaysia Subsector 2018 2019 2020 20211 2022x Annual Change (%) 100.00 3.1 2.4 -4.1 7.2 6.6 25.14 -2.1 -1.3 -8.9 0.9 -0.8 6.61 3.7 3.3 -3.7 2.4 6.1 68.25 4.8 3.6 -2.7 9.5 8.8 45.82 4.5 2.9 -0.7 11.6 7.0 Manufacture of vegetable and animal oils and fats 3.71 -0.2 -1.4 -3.9 -8.4 -4.5 Manufacture of textiles 0.58 2.9 4.4 -13.2 13.3 6.0 Manufacture of wearing apparel 0.60 5.6 6.1 -11.4 1.6 5.7 Manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials 1.44 5.6 4.9 -12.1 9.2 13.7 Manufacture of coke and refined petroleum products 9.36 3.3 2.7 -10.6 11.6 4.6 Manufacture of chemicals and chemical products 6.37 4.4 1.8 -7.1 9.4 5.1 Manufacture of rubber products 2.22 5.2 6.8 48.9 23.2 -21.3 Manufacture of plastics products 2.26 4.1 2.9 2.1 12.1 5.2 13.89 6.8 2.9 2.5 15.6 17.7 Manufacture of electrical equipment 2.20 2.7 3.4 0.9 12.2 12.6 Manufacture of machinery and equipment n.e.c. 2.14 4.3 3.5 1.1 11.6 5.9 Manufacture of furniture 1.04 4.6 8.1 -7.0 -3.7 14.5 Domestic-oriented industries 22.44 5.3 5.0 -6.6 5.0 12.9 Manufacture of food products 3.68 6.9 6.8 4.9 10.1 9.8 Manufacture of beverages 0.65 3.1 2.8 -14.5 9.9 19.0 Manufacture of tobacco products 0.52 1.8 5.8 -16.0 -12.4 31.9 Manufacture of leather and related products 0.15 3.8 5.1 -17.9 11.5 18.7 Manufacture of paper and paper products 1.15 4.2 4.3 -2.9 14.9 9.4 Printing and reproduction of recorded media 0.93 3.9 4.2 -5.1 3.1 7.0 Manufacture of basic pharmaceuticals, medicinal chemical and botanical products 0.38 5.9 4.2 14.5 15.7 7.6 Manufacture of other non-metallic mineral products 2.97 5.5 4.5 -14.3 1.0 11.9 Manufacture of basic metals 2.35 4.2 4.0 -4.8 2.8 10.5 Manufacture of fabricated metal products, except machinery and equipment 3.79 4.9 3.7 -15.5 6.3 8.0 Manufacture of motor vehicles, trailers and semi-trailers 3.17 6.6 7.0 -1.7 0.8 27.2 Manufacture of other transport equipment 1.19 3.9 4.8 -13.2 2.8 7.8 Other manufacturing 0.74 5.2 5.3 -7.6 2.6 13.4 Repair and installation of machinery and equipment 0.76 7.2 3.9 -8.5 -0.1 11.5 Total Industrial Production Mining Electricity Manufacturing Export-oriented industries Manufacture of computer, electronics and optical products 1 Weights (%) January to July 2022 Source: Department of Statistics, Malaysia economic outlook Statistical Table Combine BI 2023 updated.indd 141 2023 141 29/09/2022 2:59 PM
164. statistical tables 3 .4. GROSS NATIONAL INCOME BY DEMAND AGGREGATES Malaysia RM million Type of Expenditure 2019 2020 20213 20224 20235 Public 176,281 185,388 196,472 199,122 203,961 Private 904,189 862,955 894,881 998,954 1,089,211 94,498 74,407 66,997 69,652 72,220 252,476 222,259 231,149 241,443 253,403 -28,569 -17,334 46,028 67,922 33,009 Current Prices A. B. Final consumption expenditure Gross fixed capital formation Public1 Private C. Changes in inventories and valuables D. Exports of goods and services 987,481 873,477 1,063,817 1,264,686 1,322,984 E. Imports of goods and services 873,618 783,152 953,972 1,129,431 1,159,342 F. Gross Domestic Product at purchasers’ prices (A+B+C+D-E) 1,512,738 1,418,000 1,545,372 1,712,348 1,815,445 -39,496 -28,520 -41,551 -69,504 -70,370 1,473,242 1,389,480 1,503,821 1,642,844 1,745,075 Public 172,659 181,228 190,813 192,781 196,584 Private 835,714 800,514 815,388 886,204 942,166 89,508 70,522 62,556 63,940 65,309 239,027 210,651 216,148 222,543 230,686 -13,883 -4,840 18,362 19,668 9,534 2 G. Balance of primary income H. Gross National Income (F+G) Constant 2015 Prices A. B. Final consumption expenditure Gross fixed capital formation Public1 Private C. Changes in inventories and valuables D. Exports of goods and services 907,877 830,157 958,334 1,042,535 1,059,219 E. Imports of goods and services 806,952 743,087 874,862 950,751 964,472 F. Gross Domestic Product at purchasers’ prices (A+B+C+D-E) 1,423,952 1,345,144 1,386,738 1,476,919 1,539,026 -21,856 -13,784 -19,031 -30,599 -30,449 1,402,096 1,331,361 1,367,707 1,446,321 1,508,577 2 G. Balance of primary income H. Gross National Income (F+G) Includes investment of public corporations 1 Includes statistical discrepancy arising from balancing Preliminary 2 3 Estimate 4 Forecast Source: Department of Statistics and Ministry of Finance, Malaysia 5 142 economic outlook Statistical Table Combine BI 2023 updated.indd 142 2023 29/09/2022 2:59 PM
165. statistical tables 3 .5. PRIVATE CONSUMPTION INDICATORS Malaysia Indicator 2018 2019 2020 2021 2022 73,031 74,155 74,134 83,893 67,9822 FBM–KLCI 1,690.58 1,588.76 1,627.21 1,567.53 1,512.053 Market capitalisation (RM billion) 1,700.37 1,711.84 1,817.29 1,789.20 1,706.313 Passenger cars 533,202 550,179 479,647 452,663 397,1002 Motorcycles 471,782 546,813 498,327 497,262 435,8382 Production of televisions (‘000 units) 12,609 9,935 12,229 15,072 11,0644 Outstanding balance of credit card (RM million, end-period) 39,920 41,192 36,056 35,968 37,5375 294,568 296,276 305,039 311,308 321,1465 Imports of consumption goods1 (RM million) Bursa Malaysia (end-period) Sales number (units) Banking system’s consumption credit (RM million, end-period) 1 Refers to imports by broad economic categories published by the Department of Statistics, Malaysia January to August 2022 2 End-August 2022 3 January to July 2022 4 End-July 2022 5 Source: Bank Negara Malaysia, Bursa Malaysia, Department of Statistics, Malaysia Malaysian Automotive Association and Motorcycle & Scooter Assemblers and Distributors Association of Malaysia economic outlook Statistical Table Combine BI 2023 updated.indd 143 2023 143 29/09/2022 2:59 PM
166. statistical tables 3 .6. PRIVATE investment INDICATORS Malaysia Indicator 2018 2019 2020 2021 2022 Capital goods1 112,453 100,179 90,733 103,823 77,4233 Intermediate goods1 462,212 467,211 429,190 545,801 472,3083 236,624 258,602 253,200 379,207 288,9024 89,885 90,046 77,782 110,071 82,5774 63,464 80,675 89,980 96,602 100,3105 562,665 604,847 647,883 689,226 715,0205 Cement roofing tiles ('000 units) 35,472 43,484 47,874 37,054 22,3254 Ready-mixed concrete ('000 cubic metres) 32,047 34,067 34,841 35,425 20,6694 Iron and steel bars and rods ('000 metric tonnes) 1,853 1,404 1,296 708 4444 65,512 54,108 48,543 56,248 50,1093 Imports (RM million) Loan disbursements by banking system (RM million) Manufacturing Construction Housing loans (RM million, end-period) Government2 Banking system Production of construction materials Sales of commercial vehicles (units) 1 Refers to imports by broad economic categories published by the Department of Statistics, Malaysia 2 Based on principal amount 3 January to August 2022 4 January to July 2022 5 End- July 2022 Source: Bank Negara Malaysia, Department of Statistics Malaysia, Malaysian Automotive Association and Public Sector Home Financing Board 144 economic outlook Statistical Table Combine BI 2023 updated.indd 144 2023 29/09/2022 2:59 PM
167. statistical tables 3 .7. malaysia’s trade with major trading partners RM million Total China Singapore India share (%) 100.0 1,873,236 100.0 55.7 1,014,404 54.2 Imports 879,804 849,411 800,481 987,344 44.3 858,832 45.8 Net 123,783 145,661 183,345 253,678 – 155,573 – Total Trade 314,564 316,598 331,440 421,491 100.0 316,724 100.0 Exports 139,147 140,931 159,223 192,475 45.7 135,364 42.7 57.3 Imports 175,417 175,667 172,217 229,016 54.3 181,360 Net -36,269 -34,735 -12,994 -36,541 – -45,996 – Total Trade 243,320 226,574 215,824 267,607 100.0 241,438 100.0 Exports 140,249 137,078 142,146 173,974 65.0 149,323 61.8 Imports 103,071 89,497 73,678 93,633 35.0 92,115 38.2 37,178 47,581 68,467 80,341 – 57,209 – 155,758 165,220 178,785 216,971 100.0 172,043 100.0 Exports 90,811 96,542 109,080 142,244 65.6 107,532 62.5 Imports 64,947 68,678 69,705 74,727 34.4 64,511 37.5 Net 25,864 27,863 39,376 67,517 – 43,021 – 134,242 129,592 124,142 149,759 100.0 118,060 100.0 Exports 70,385 65,998 62,561 75,816 50.6 62,956 53.3 Imports 63,858 63,594 61,581 73,942 49.4 55,103 46.7 6,527 2,403 981 1,874 – 7,853 – Total Trade 96,390 94,077 91,907 115,828 100.0 104,372 100.0 Exports 32,814 37,032 33,874 40,625 35.1 34,920 33.5 Imports 63,576 57,046 58,033 75,203 64.9 69,452 66.5 -30,762 -20,014 -24,160 -34,579 – -34,531 – Total Trade 72,397 70,226 66,283 95,307 100.0 87,014 100.0 Exports 31,907 31,328 29,589 39,180 41.1 36,605 42.1 Imports 40,490 38,898 36,694 56,127 58.9 50,409 57.9 Net -8,583 -7,570 -7,106 -16,947 – -13,805 – 105,685 100,595 79,640 97,546 100.0 82,842 100.0 Exports 57,061 56,318 45,339 52,162 53.5 44,836 54.1 Imports 48,624 44,277 34,300 45,383 46.5 38,006 45.9 8,437 12,042 11,039 6,779 – 6,830 – Total Trade 73,521 73,058 80,826 88,308 100.0 75,347 100.0 Exports 34,237 34,230 34,714 38,224 43.3 35,226 46.8 Imports 39,284 38,828 46,113 50,084 56.7 40,121 53.2 Net -5,047 -4,599 -11,399 -11,860 – -4,894 – Total Trade 89,972 80,688 82,363 94,343 100.0 74,087 100.0 Exports 74,831 66,624 68,167 76,706 81.3 61,423 82.9 Imports 15,141 14,064 14,196 17,637 18.7 12,664 17.1 Net Hong Kong RM million 983,827 1,241,022 Total Trade Republic of Korea 20221 share (%) 995,072 Net Thailand 2021 RM million 1,003,587 Net Indonesia RM million 1,883,391 1,844,483 1,784,308 2,228,366 Total Trade Taiwan 2020 RM million Total Trade Net Japan 2019 RM million Exports Total Trade United States 2018 Net 59,690 52,561 53,971 59,069 – 48,759 – Total Trade 62,840 62,872 55,334 69,734 100.0 59,211 100.0 Exports 36,343 38,587 30,404 45,203 64.8 37,004 62.5 Imports 26,497 24,285 24,930 24,531 35.2 22,207 37.5 9,846 14,303 5,473 20,672 – 14,797 – Net January to August 2022 1 Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation economic outlook Statistical Table Combine BI 2023 updated.indd 145 2023 145 29/09/2022 2:59 PM
168. statistical tables 3 .8. EXTERNAL TRADE INDICES 2010 = 100, Malaysia Commodity Section Weights1 (%) 2018 2019 2020 2021 20222 Annual Change (%) Export Unit Value Indices Total 100.0 1.6 0.8 -2.5 10.2 19.0 Food 3.5 3.2 2.5 3.4 3.8 3.4 Beverages and tobacco 0.6 6.6 7.5 3.5 3.5 4.3 Crude materials, inedible 2.7 -6.9 -0.7 -0.6 7.2 3.9 16.1 16.4 0.1 -24.9 34.2 68.1 Animal and vegetable oils and fats 6.0 -14.6 -9.7 22.5 48.1 40.7 Chemicals 7.8 3.9 -0.7 0.5 6.3 8.7 Manufactured goods 9.7 1.4 -2.8 -1.1 5.1 5.7 Machinery and transport equipment 42.3 -0.8 2.5 1.1 1.8 8.4 Miscellaneous manufactured articles 10.9 1.6 2.2 0.7 1.8 0.9 0.4 2.2 -5.1 -8.2 11.4 66.1 100.0 2.0 -0.3 -3.0 3.9 10.6 Food 6.8 2.6 2.5 2.3 2.3 2.7 Beverages and tobacco 0.6 2.6 2.7 1.7 1.6 1.1 Crude materials, inedible 3.3 -6.0 -0.3 0.4 10.7 1.5 12.9 21.7 -10.1 -27.0 25.8 69.7 1.1 -13.9 -12.0 15.1 48.5 59.9 Chemicals 10.5 2.4 0.3 -0.6 2.6 1.4 Manufactured goods 13.4 1.8 0.4 -0.3 4.6 3.1 Machinery and transport equipment 41.8 -0.7 1.7 -0.9 -1.3 3.0 Miscellaneous manufactured articles 7.6 -1.0 0.4 -0.1 0.2 2.0 Miscellaneous transactions and commodities 2.0 -6.3 10.2 23.6 2.6 9.5 Mineral fuels, lubricants, etc. Miscellaneous transactions and commodities Import Unit Value Indices Total Mineral fuels, lubricants, etc. Animal and vegetable oils and fats 1 Weights based on values of Malaysia imports and exports of merchandise during 2015 2 Annual changes was calculated based on monthly unit value indices of January to July 2022 Source: Department of Statistics, Malaysia 146 economic outlook Statistical Table Combine BI 2023 updated.indd 146 2023 29/09/2022 2:59 PM
169. statistical tables 3 .9. PRODUCTION, EXPORTS VOLUME AND VALUE OF MAJOR PRIMARY COMMODITIES Malaysia Major Commodities 2018 2019 2020 2021 20221 Production (‘000 tonnes) 19,516 19,858 19,141 18,117 11,570 Volume (‘000 tonnes) 15,364 17,429 16,214 14,835 9,369 Value (RM million) 38,655 39,128 45,647 64,615 56,927 Production (‘000 tonnes) 603 640 515 Volume (‘000 tonnes) 639 631 565 653 426 3,774 3,773 3,286 4,568 3,252 Volume (‘000 tonnes) 16,496 12,452 13,095 8,901 5,985 Value (RM million) 36,649 26,346 18,843 18,372 20,844 Volume (‘000 tonnes) 23,955 25,498 24,083 24,697 18,405 Value (RM million) 42,322 42,484 29,868 38,193 41,224 Palm oil Natural rubber Value (RM million) 470 2162 Crude petroleum Liquefied natural gas (LNG) 1 January to August 2022 2 January to July 2022 Source: Bank Negara Malaysia, Department of Statistics, Malaysia and Malaysia External Trade Development Corporation economic outlook Statistical Table Combine BI 2023 updated.indd 147 2023 147 29/09/2022 2:59 PM
170. statistical tables 3 .10. DIRECTION  OF  MAJOR  EXPORTS Malaysia 2018 Exports ‘000 tonnes RM million 2019 share (%) ‘000 tonnes RM million share (%) Electrical and Electronics (E&E) Total 381,545 100.0 373,118 100.0 Singapore 64,135 16.8 60,424 16.2 United States 47,277 12.4 51,060 13.7 China 55,473 14.5 49,651 13.3 Hong Kong 58,579 15.4 54,786 14.7 European Union 46,912 12.3 46,866 12.6 Non-E&E Total 455,527 100.0 467,468 100.0 Singapore 64,373 14.1 65,625 14.0 China 60,301 13.2 66,421 14.2 United States 40,195 8.8 42,753 9.1 European Union 42,660 9.4 41,783 8.9 Indonesia 25,092 5.5 26,175 5.6 Palm oil Total 15,364 38,655 100.0 17,429 39,128 100.0 India 2,183 5,104 13.2 4,244 8,915 22.8 European Union 1,829 4,723 12.2 1,990 4,525 11.6 China 1,695 3,932 10.2 2,368 5,057 12.9 Turkiye 617 1,567 4.1 695 1,588 4.1 Kenya 252 627 1.6 224 475 1.2 639 3,774 100.0 631 3,773 100.0 China 312 1,796 47.6 309 1,812 48.0 European Union United Arab Emirates United States 159 11 17 966 65 105 25.6 1.7 2.8 143 11 25 880 66 150 23.3 1.7 4.0 11 66 1.8 18 100 2.6 Natural rubber Total India Crude petroleum Total 16,496 36,649 100.0 12,452 26,346 100.0 Australia 5,034 11,397 31.1 3,266 6,890 26.2 Thailand 2,750 6,105 16.7 2,559 5,535 21.0 India 3,607 7,960 21.7 3,177 6,604 25.1 Japan 546 1,189 3.2 509 1,071 4.1 6 14 0.0 7 15 0.1 Brunei Liquefied natural gas (LNG) Total 23,955 42,322 100.0 25,498 42,484 100.0 Japan 11,207 20,781 49.1 9,352 16,804 39.6 China 5,789 8,874 21.0 7,130 10,265 24.2 Republic of Korea 3,345 5,780 13.7 4,805 7,767 18.3 541 806 1.9 1,251 2,194 5.2 2,811 5,627 13.3 2,431 4,869 11.5 Thailand Taiwan 1 January to August 2022 Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation 148 economic outlook Statistical Table Combine BI 2023 updated.indd 148 2023 29/09/2022 2:59 PM
171. statistical tables 2020 ‘000 tonnes RM million 2021 share (%) ‘000 tonnes RM million 20221 share (%) ‘000 tonnes RM million share (%) 386,292 100.0 455,953 100.0 380,777 100.0 69,832 18.1 85,869 18.8 73,846 19.4 52,857 13.7 66,494 14.6 59,649 15.7 53,901 14.0 59,671 13.1 51,689 13.6 57,537 14.9 65,774 14.4 50,886 13.4 38,324 9.9 41,882 9.2 34,234 9.0 463,206 100.0 612,478 100.0 472,516 100.0 64,350 13.9 79,258 12.9 68,187 14.4 82,859 17.9 101,825 16.6 59,570 12.6 53,562 11.6 72,825 11.9 46,077 9.8 36,752 7.9 49,598 8.1 39,712 8.4 25,015 5.4 34,722 5.7 32,958 7.0 16,214 45,647 100.0 14,835 64,615 100.0 9,369 56,927 100.0 2,602 7,149 15.7 3,440 15,285 23.7 1,913 11,343 19.9 1,827 5,224 11.4 1,421 6,181 9.6 829 4,951 8.7 2,600 6,961 15.2 1,769 7,029 10.9 715 4,343 7.6 619 1,779 3.9 688 3,048 4.7 570 3,368 5.9 514 1,448 3.2 835 3,450 5.3 491 2,929 5.1 565 3,286 100.0 653 4,568 100.0 426 3,252 100.0 293 1,640 49.9 316 2,132 46.7 186 1,400 43.1 108 27 19 655 156 113 19.9 4.7 3.4 124 37 39 919 247 284 20.1 5.4 6.2 81 35 28 647 259 208 19.9 8.0 6.4 13 73 2.2 23 156 3.4 17 124 3.8 13,095 18,843 100.0 8,901 18,372 100.0 5,985 20,844 100.0 3,219 5,060 26.9 2,823 5,796 31.5 1,555 5,518 26.5 2,030 2,911 15.4 1,725 3,572 19.4 1,538 5,168 24.8 2,780 3,832 20.3 1,369 2,723 14.8 1,130 3,846 18.4 1,318 1,981 10.5 1,158 2,494 13.6 753 2,505 12.0 282 334 1.8 744 1,629 8.9 593 2,234 10.7 24,083 29,868 100.0 24,697 38,193 100.0 18,405 41,224 100.0 10,638 14,070 47.1 10,277 16,413 43.0 8,042 18,666 45.3 6,003 6,812 22.8 8,433 12,929 33.9 5,077 10,947 26.6 5,107 6,207 20.8 4,186 6,150 16.1 3,346 7,011 17.0 1,130 1,434 4.8 1,086 1,648 4.3 1,401 3,095 7.5 664 932 3.1 372 529 1.4 249 608 1.5 economic outlook Statistical Table Combine BI 2023 updated.indd 149 2023 149 29/09/2022 2:59 PM
172. statistical tables 3 .11. EXPORTS  OF  MANUFACTURED  GOODS Malaysia RM million 2018 2019 2020 2021 20222 share (%) 381,545 373,118 386,292 455,953 380,777 44.6 Petroleum products 76,161 71,511 61,889 96,206 103,571 12.1 Chemicals and chemical products 57,715 57,477 50,736 70,683 53,098 6.2 Manufactures of metal 44,664 41,490 36,830 61,557 44,805 5.3 Machinery, equipment and parts 40,668 41,599 39,446 49,922 40,078 4.7 Optical and scientific equipment 36,563 39,905 42,220 46,928 36,535 4.3 Palm oil-based manufactured products 22,783 23,338 21,006 32,704 28,931 3.4 Iron and steel products 15,504 21,961 23,552 29,409 22,747 2.7 Rubber products 26,491 25,841 44,302 64,615 21,075 2.5 Processed food 19,414 21,773 21,283 24,600 18,343 2.1 Wood products 15,944 15,777 16,084 16,555 12,725 1.5 Textiles, apparels and footwear 14,901 15,531 13,951 15,827 11,792 1.4 Manufactures of plastics 14,538 14,978 13,187 15,971 11,631 1.4 Transport equipment 18,033 19,143 18,460 15,914 11,045 1.3 Non-metallic mineral products 7,273 9,079 8,346 10,572 7,850 0.9 Paper and pulp products 4,950 6,405 6,363 8,516 6,329 0.7 Jewellery 6,656 6,974 4,157 5,804 4,679 0.5 Beverages and tobacco 3,435 3,452 2,593 2,495 1,703 0.2 29,835 31,233 38,801 44,201 35,580 4.2 837,071 840,586 849,498 1,068,431 853,293 100.0 Electrical and electronics products Other manufactures1 Total 1 Includes animal feed, printed matter, miscellaneous manufactured articles, etc 2 January to August 2022 Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia 150 economic outlook Statistical Table Combine BI 2023 updated.indd 150 2023 29/09/2022 2:59 PM
173. statistical tables 3 .12. source of major imports Malaysia RM million Imports 2018 2019 2020 2021 20221 share (%) share (%) share (%) share (%) share (%) 100.0 245,538 100.0 253,000 100.0 314,546 100.0 257,699 100.0 Electrical and Electronic E&E Total 262,623 China 65,688 25.0 64,090 26.1 68,025 26.9 91,244 29.0 71,342 27.7 Taiwan 45,907 17.5 40,497 16.5 42,649 16.9 51,815 16.5 48,451 18.8 United States 29,549 11.3 27,180 11.1 30,413 12.0 32,658 10.4 26,779 10.4 82,934 100.0 81,589 100.0 74,296 100.0 96,551 100.0 79,016 100.0 China 14,268 17.2 13,976 17.1 13,882 18.7 21,718 22.5 19,112 24.2 European Union 10,588 12.8 11,094 13.6 9,540 12.8 12,175 12.6 8,710 11.0 8,934 10.8 7,695 9.4 6,705 9.0 8,971 9.3 6,744 8.5 86,015 100.0 77,480 100.0 60,007 100.0 89,546 100.0 101,997 100.0 38,252 44.5 29,334 37.9 17,453 29.1 26,759 29.9 34,465 33.8 Republic of Korea 6,106 7.1 7,284 9.4 6,157 10.3 11,181 12.5 12,208 12.0 China 7,414 8.6 10,506 13.6 7,643 12.7 12,400 13.8 11,986 11.8 73,778 100.0 69,638 100.0 60,129 100.0 68,638 100.0 57,067 100.0 China 20,306 27.5 19,964 28.7 19,126 31.8 23,944 34.9 19,701 34.5 European Union 13,236 17.9 13,307 19.1 9,435 15.7 9,102 13.3 6,885 12.1 8,918 12.1 7,816 11.2 7,031 11.7 7,972 11.6 6,422 11.3 46,148 100.0 47,132 100.0 47,024 100.0 54,216 100.0 42,565 100.0 China 12,542 27.2 11,763 25.0 9,881 21.0 14,271 26.3 11,099 26.1 Japan 5,292 11.5 4,866 10.3 5,197 11.1 7,260 13.4 5,100 12.0 United States 2,935 6.4 3,861 8.2 4,491 9.5 6,177 11.4 4,806 11.3 Chemicals and chemical products Total Singapore Petroleum products Total Singapore Machinery, equipment and parts Total Japan Manufactures of metal Total 1 January to August 2022 Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation economic outlook Statistical Table Combine BI 2023 updated.indd 151 2023 151 29/09/2022 2:59 PM
174. statistical tables 3 .13. BALANCE  OF  PAYMENTS Malaysia RM million 2018 Components 2019 Credits (+) Debits (-) Net Credits (+) Debits (-) Net 992,511 895,405 97,106 987,481 873,618 113,863 Goods 830,137 715,516 114,621 817,260 692,522 124,738 Services 162,375 179,889 -17,515 170,221 181,096 -10,875 Transport 20,524 48,212 -27,688 21,707 47,632 -25,925 Travel 79,178 48,961 30,218 82,143 51,309 30,833 Other services 62,672 82,717 -20,045 66,371 82,155 -15,783 60,414 105,496 -45,082 65,344 104,840 -39,496 6,793 14,450 -7,657 6,614 15,843 -9,229 53,621 91,046 -37,426 58,730 88,997 -30,267 15,602 35,330 -19,729 16,905 38,355 -21,450 1,068,527 1,036,232 32,295 1,069,731 1,016,813 52,918 Balance on goods and services Primary income Compensation of employees Investment income Secondary income Balance on current account % of Gross National Income 2.3 3.6 Capital account -89 371 11,430 -38,024 10,103 6,555 -23,431 -31,154 33,535 37,709 Portfolio investment -49,396 -32,403 Financial derivatives 981 -478 49,742 -11,697 11,341 -37,653 -35,878 -6,849 7,758 8,416 Financial account Direct investment Assets Liabilities Other investment Balance on capital and financial accounts Net errors and omissions Overall balance 1 January to June 2022 Note: Total may not add up due to rounding Source: Department of Statistics, Malaysia 152 economic outlook Statistical Table Combine BI 2023 updated.indd 152 2023 29/09/2022 2:59 PM
175. statistical tables 2020 2021 Credits (+) Debits (-) Net 873,477 783,152 780,511 20221 Credits (+) Debits (-) Net Credits (+) Debits (-) Net 90,325 1,063,817 953,972 109,845 620,276 572,952 47,324 643,024 137,486 977,076 806,503 170,573 564,710 490,134 74,576 92,967 140,128 -47,161 86,741 147,469 -60,728 55,566 82,818 -27,253 13,786 41,213 -27,427 15,455 47,907 -32,452 10,102 28,623 -18,521 12,503 20,071 -7,569 320 14,884 -14,563 5,786 10,362 -4,576 66,678 78,844 -12,165 70,965 84,679 -13,713 39,678 43,834 -4,156 53,124 81,645 -28,520 98,166 139,716 -41,551 40,601 75,477 -34,876 5,991 14,052 -8,061 6,487 13,090 -6,603 3,568 7,121 -3,552 47,133 67,592 -20,459 91,679 126,627 -34,948 37,033 68,356 -31,323 27,185 29,899 -2,714 20,503 30,098 -9,594 11,034 16,080 -5,047 953,787 894,696 59,091 1,182,486 1,123,786 58,700 671,911 664,510 7,401 4.3 3.9 0.9 -419 -571 -177 -77,396 13,021 30,696 3,111 28,466 23,365 -13,808 -48,897 -7,955 16,919 77,362 31,320 -49,584 18,769 -24,774 407 -2,250 -30 -31,330 -31,963 32,135 -77,816 12,451 30,519 -572 -25,465 -20,257 -19,297 45,686 17,663 economic outlook Statistical Table Combine BI 2023 updated.indd 153 2023 153 29/09/2022 2:59 PM
176. statistical tables 3 .14. CONSUMER PRICE INDEX BY REGION 2010 = 100, Malaysia Weights1 (%) Groups 2018 2019 2020 2021 20222 Annual Change (%)   Malaysia         100.0 1.0 0.7 -1.2 2.5 3.1 29.5 1.6 1.7 1.3 1.7 5.1 Alcoholic beverages and tobacco 2.4 -0.1 1.5 0.3 0.5 0.5 Clothing and footwear 3.2 -2.0 -2.0 -0.8 -0.4 0.0 23.8 2.0 1.9 -1.7 1.5 1.7 Furnishings, household equipment and routine household maintenance 4.1 0.3 1.4 0.3 1.6 3.3 Health 1.9 0.8 0.7 1.1 0.4 0.5 14.6 1.6 -3.1 -10.0 11.0 4.5 Communication 4.8 -1.7 0.4 1.1 0.0 0.0 Recreation services and culture 4.8 -0.4 0.7 0.4 0.4 1.8 Education 1.3 1.1 1.4 1.0 0.2 1.0 Restaurants and hotels 2.9 1.6 1.2 0.5 0.4 4.0 Miscellaneous goods and services 6.7 -1.4 0.4 2.7 0.5 1.8 100.0 1.0 0.7 -1.1 2.6 3.1 29.0 1.7 1.8 1.4 1.9 5.3 Alcoholic beverages and tobacco 2.4 0.1 1.6 0.4 0.5 0.5 Clothing and footwear 3.3 -2.0 -2.0 -0.7 -0.5 0.1 23.6 2.2 2.0 -1.7 1.9 1.7 Furnishings, household equipment and routine household maintenance 4.2 0.5 1.6 0.3 1.7 3.5 Health 1.9 0.7 0.7 1.1 0.4 0.5 14.7 1.5 -3.1 -9.6 10.6 4.5 Communication 4.9 -1.8 0.4 1.2 0.0 0.0 Recreation services and culture 4.9 -0.4 0.7 0.6 0.4 1.7 Education 1.4 1.2 1.5 0.9 0.2 0.9 Restaurants and hotels 3.0 1.5 1.2 0.5 0.4 3.9 Miscellaneous goods and services 6.7 -1.3 0.4 2.7 0.5 1.8 Total Food and non-alcoholic beverages Housing, water, electricity, gas and other fuels Transport Peninsular Malaysia Total Food and non-alcoholic beverages Housing, water, electricity, gas and other fuels Transport 1 Weights based on Household Expenditure Survey 2016 2 January to August 2022 Source: Department of Statistics, Malaysia 154 economic outlook Statistical Table Combine BI 2023 updated.indd 154 2023 29/09/2022 2:59 PM
177. statistical tables 3 .14. CONSUMER PRICE INDEX BY REGION (cont’d) 2010 = 100, Malaysia Groups Weights1 (%) Sarawak 2018 2019 2020 2021 20222 Annual Change (%)         100.0 0.6 0.1 -1.8 2.1 2.6 33.5 1.6 1.0 0.6 1.1 4.3 Alcoholic beverages and tobacco 2.7 -1.9 0.6 0.2 0.3 0.1 Clothing and footwear 2.8 -2.2 -2.5 -0.9 -0.4 -0.3 21.9 0.8 0.9 -1.8 -0.5 0.8 Furnishings, household equipment and routine household maintenance 3.8 -0.9 0.7 -0.2 0.9 1.7 Health 1.5 2.1 1.3 1.4 0.2 -0.8 14.0 1.8 -4.1 -13.6 15.7 4.2 Communication 4.6 -1.6 0.4 0.6 0.0 0.0 Recreation services and culture 4.8 -0.1 0.3 -0.5 -1.5 4.1 Education 0.9 1.2 0.5 2.8 -0.7 1.2 Restaurants and hotels 2.4 1.6 2.1 0.5 0.6 3.9 Miscellaneous goods and services 7.1 -1.8 -0.4 2.5 0.5 0.8 100.0 0.7 0.2 -1.9 1.6 2.3 31.3 1.6 0.5 0.2 0.6 3.6 Alcoholic beverages and tobacco 2.1 -0.5 1.2 0.1 0.2 0.1 Clothing and footwear 2.9 -2.3 -1.9 -1.0 -0.4 -0.2 28.1 1.1 1.2 -2.2 -1.1 1.0 Furnishings, household equipment and routine household maintenance 3.6 -0.1 0.4 -0.4 0.8 1.0 Health 1.1 1.1 0.7 1.1 0.3 1.2 13.7 1.6 -3.2 -10.9 12.7 6.1 Communication 4.6 -1.0 0.1 0.4 0.0 -0.3 Recreation services and culture 3.7 -0.8 0.5 -0.1 2.5 0.5 Education 0.8 1.2 0.9 0.4 -0.4 0.5 Restaurants and hotels 2.0 1.5 1.2 0.1 0.3 3.5 Miscellaneous goods and services 6.1 -2.4 0.3 1.5 0.9 0.7 Total Food and non-alcoholic beverages Housing, water, electricity, gas and other fuels Transport Sabah and Federal Territory of Labuan Total Food and non-alcoholic beverages Housing, water, electricity, gas and other fuels Transport 1 2 Weights based on Household Expenditure Survey 2016 January to August 2022 Source: Department of Statistics, Malaysia economic outlook Statistical Table Combine BI 2023 updated.indd 155 2023 155 29/09/2022 2:59 PM
178. statistical tables 3 .15. CONSUMER PRICE INDEX BY stratum 2010 = 100, Malaysia Weights1 (%) Groups Rural   2018 2019 2020 2021 20221 Annual Change (%)         100.0 0.8 0.3 -1.5 2.6 2.4 35.6 1.0 0.9 0.9 1.6 3.9 Alcoholic beverages and tobacco 3.0 -0.1 1.6 0.1 0.2 0.2 Clothing and footwear 3.6 -0.9 -0.5 -0.5 0.0 0.4 19.9 1.4 1.8 -2.5 1.3 1.5 Furnishings, household equipment and routine household maintenance 3.7 0.2 0.7 0.1 0.6 1.8 Health 2.0 0.6 0.6 1.7 0.5 0.5 14.6 1.5 -3.6 -11.2 12.1 2.9 Communication 4.4 -0.9 0.5 1.0 0.1 0.0 Recreation services and culture 3.6 -0.4 1.0 0.8 0.3 1.4 Education 0.9 0.5 0.5 0.5 0.2 0.2 Restaurants and hotels 2.4 1.1 1.0 0.7 0.2 2.5 Miscellaneous goods and services 6.3 -1.2 0.8 2.2 0.6 1.3 100.0 1.0 0.7 -1.1 2.4 3.2 28.4 1.8 1.8 1.4 1.8 5.4 Alcoholic beverages and tobacco 2.3 -0.1 1.5 0.4 0.6 0.5 Clothing and footwear 3.2 -2.4 -2.2 -0.9 -0.5 -0.1 24.5 2.0 1.8 -1.6 1.6 1.7 Furnishings, household equipment and routine household maintenance 4.2 0.3 1.6 0.3 1.8 3.5 Health 1.8 0.8 0.7 1.1 0.4 0.5 14.6 1.5 -3.1 -9.8 10.9 4.7 Communication 4.9 -1.9 0.4 1.1 0.0 0.0 Recreation services and culture 5.0 -0.4 0.6 0.4 0.5 1.9 Education 1.4 1.2 1.5 1.1 0.2 1.0 Restaurants and hotels 3.0 1.5 1.3 0.4 0.4 4.2 Miscellaneous goods and services 6.7 -1.5 0.4 2.7 0.4 1.8 Total Food and non-alcoholic beverages Housing, water, electricity, gas and other fuels Transport Urban Total Food and non-alcoholic beverages Housing, water, electricity, gas and other fuels Transport 1 2 Weights based on Household Expenditure Survey 2016 January to August 2022 Source: Department of Statistics, Malaysia 156 economic outlook Statistical Table Combine BI 2023 updated.indd 156 2023 29/09/2022 2:59 PM
179. statistical tables 3 .16. CONSUMER PRICE INDEX BY STATE 2010 = 100, Malaysia States 2018 2019 2020 2021 20221 Annual Change (%) Total Malaysia 1.0 0.7 -1.2 2.5 3.1 Kedah and Perlis 0.3 0.2 -1.8 2.7 2.8 Pulau Pinang 0.9 1.1 -0.8 2.1 2.9 Perak 0.7 0.6 -1.3 2.7 3.0 Selangor and Federal Territory of Putrajaya 1.1 0.9 -0.6 2.7 5.4 Federal Territory of Kuala Lumpur 1.4 1.2 -0.6 2.0 2.6 Melaka 0.8 0.1 -1.9 2.4 2.5 Negeri Sembilan 1.2 0.7 -1.6 2.6 2.5 Johor 1.1 0.6 -1.4 2.5 3.0 Pahang 0.6 0.3 -1.2 3.0 2.6 Kelantan 0.7 0.4 -1.5 3.1 2.7 Terengganu 0.4 0.1 -1.3 3.4 2.9 Sabah and Federal Territory of Labuan 0.7 0.2 -1.9 1.6 2.6 Sarawak 0.6 0.1 -1.8 2.1 2.6 1.6 1.7 1.3 1.7 5.1 Kedah and Perlis 0.4 1.0 0.7 1.2 4.2 Pulau Pinang 1.7 1.8 1.3 1.1 5.4 Perak 1.1 1.5 1.6 1.8 4.9 Selangor and Federal Territory of Putrajaya 1.6 1.9 2.0 2.4 7.2 Federal Territory of Kuala Lumpur 4.0 3.5 0.7 1.3 4.3 Melaka 1.4 1.3 0.7 1.4 4.2 Negeri Sembilan 1.6 1.5 1.2 1.6 4.3 Johor 1.7 1.9 1.5 1.8 5.6 Pahang 1.1 0.9 1.4 2.3 4.3 Kelantan 1.0 1.0 0.9 2.1 4.2 Terengganu 1.1 1.2 1.4 2.2 4.5 Sabah and Federal Territory of Labuan 1.6 0.5 0.2 0.6 3.6 Sarawak 1.6 1.0 0.6 1.1 4.3 Food and Non-Alcoholic Beverages Malaysia 1 January to August 2022 Source: Department of Statistics, Malaysia economic outlook Statistical Table Combine BI 2023 updated.indd 157 2023 157 29/09/2022 2:59 PM
180. statistical tables 3 .17. core index 2010 = 100, Malaysia Weights1 (%) Groups Total 2020 2021 20222 Annual Change (%) 1.0 1.1 1.1 0.7 2.5 26.5 1.8 2.1 1.2 1.3 4.7 – – – – – 4.5 -2.0 -2.0 -0.8 -0.4 0.0 26.5 2.4 2.1 1.3 0.6 1.2 Furnishings, household equipment and routine household maintenance 5.5 0.3 1.4 0.3 1.6 3.3 Health 2.6 0.8 0.7 1.1 0.4 0.5 Transport 6.5 -0.8 -3.1 0.1 0.7 4.7 Communication 6.5 -1.7 0.4 1.1 0.0 0.0 Recreation services and culture 6.6 -0.4 0.7 0.4 0.4 1.8 Education 1.8 1.1 1.4 1.0 0.2 1.0 Restaurants and hotels 3.9 1.6 1.2 0.5 0.4 4.0 Miscellaneous goods and services 9.1 -1.4 0.4 2.7 0.5 1.8 Alcoholic beverages and tobacco Clothing and footwear Housing, water, electricity, gas and other fuels 2 2019 100.0 Food and non-alcoholic beverages 1 2018 Weights based on Household Expenditure Survey 2016 January to August 2022 Source: Department of Statistics, Malaysia 158 economic outlook Statistical Table Combine BI 2023 updated.indd 158 2023 29/09/2022 2:59 PM
181. statistical tables 3 .18. producer price index - LOCAL PRODUCTION 2010 = 100, Malaysia Sectors and Stage of Processing Weights1 (%) 2018 2019 2020 2021 20222 Annual Change (%) Sector (MSIC 2008) Total 100.0 -1.1 -1.4 -2.7 9.5 10.2 Agriculture, forestry and fishing 6.7 -13.9 -4.0 15.7 30.2 14.1 Mining 7.9 17.5 -3.7 -36.3 41.2 21.0 81.6 -1.8 -0.9 -0.4 5.5 9.1 Electricity and gas supply 3.4 1.1 1.5 -0.4 -0.4 0.3 Water supply 0.3 0.3 -2.2 -0.2 0.5 1.5 100.0 -1.1 -1.4 -2.7 9.5 10.2 Crude materials for further processing 16.4 2.6 -3.9 -12.3 30.3 15.8 Intermediate materials, supplies and components 56.1 -1.9 -1.4 -0.5 7.7 12.4 Finished goods 27.5 -2.4 0.6 -0.1 -0.2 0.8 Manufacturing Producer Price Index by Stage of processing Total 1 Weights based on Economic Census 2016 2 January to July 2022 Source:  Department of Statistics, Malaysia economic outlook Statistical Table Combine BI 2023 updated.indd 159 2023 159 29/09/2022 2:59 PM
182. statistical tables 3 .19. labour force Malaysia 2018 2019 2020 2021 20224 15,280.3 15,581.6 15,667.7 15,797.2 15,890.8 14,776.0 15,073.4 14,956.7 15,064.2 15,223.8 504.3 508.2 711.0 733.0 667.0 3.3 3.3 4.5 4.6 4.2 Total 68.3 68.7 68.4 68.6 68.5 Male 80.4 80.8 80.6 80.9 81.0 Female 55.2 55.6 55.3 55.5 55.1 294 298 187 154 160 2.4 2.2 -5.3 1.8 4.1 -0.1 0.3 -2.0 -0.6 -0.4 Mining and quarrying 4.0 -0.3 -7.6 -1.4 -2.9 Manufacturing 2.4 1.7 -2.6 6.8 3.4 Construction 3.4 3.6 -15.6 -4.3 -1.5 Services 3.5 2.9 -5.8 0.5 5.5 2,015.8 1,999.6 1,483.4 1,171.9   Labour force (‘000) Employment (‘000) Unemployment (‘000) Unemployment rate (%) Labour force participation rate1 (%) Number of collective agreements signed in the current year2 Labour productivity3 Agriculture Foreign workers (‘000) 1,244.45 1 The ratio of the labour force to the working age population (15-64 years), expressed as percentage 2 Based on the information in the Collective Agreement and the feedback from the employer for which has been given cognisance by the Industrial Court for the year 3 Annual change (%) 4 For the first half of 2022 As at end-August 2022 Source: Department of Statistics, Ministry of Home Affairs and Ministry of Human Resources Malaysia 5 160 economic outlook Statistical Table Combine BI 2023 updated.indd 160 2023 29/09/2022 2:59 PM
183. statistical tables 3 .20. Employment by Industry ‘000 persons, Malaysia Industry1 2018 2019 2020 2021 20224 share (%) share (%) 14,776.0 15,073.4 14,956.7 15,064.2 100.0 15,223.8 100.0 1,570.3 1,541.1 1,566.0 1,550.0 10.3 1,422.8 9.3 90.8 91.0 82.2 81.9 0.5 53.8 0.4 Manufacturing 2,499.9 2,681.5 2,498.0 2,501.4 16.6 2,578.2 16.9 Construction 1,257.8 1,276.4 1,173.4 1,159.6 7.7 1,128.5 7.4 Services 9,355.2 9,481.5 9,637.1 9,771.0 64.9 10,040.5 66.0 Electricity, gas, steam and air conditioning supply 68.8 71.4 76.4 77.7 0.5 99.1 0.7 Water supply; sewerage, waste management and remediation activities 88.6 88.8 83.7 85.5 0.6 82.0 0.5 2,544.6 2,594.5 2,765.6 2,826.5 18.8 2,807.5 18.4 697.9 667.6 689.2 704.5 4.7 676.1 4.4 1,473.4 1,549.7 1,540.0 1,535.5 10.2 1,357.1 8.9 Information and communication 216.4 213.9 223.4 235.1 1.6 324.8 2.1 Financial and insurance/takaful activities 338.6 335.1 372.1 386.5 2.6 409.8 2.7 97.2 92.1 82.1 83.4 0.6 80.8 0.5 Professional, scientific and technical activities 367.7 385.7 379.3 358.9 2.4 444.6 2.9 Administrative and support service activities 747.6 806.2 801.9 846.0 5.6 723.1 4.7 Public administration and defence; compulsory social security 720.2 737.1 734.9 725.1 4.8 921.5 6.1 Education 988.7 962.3 937.6 924.3 6.1 1,037.6 6.8 Human health and social work activities 551.2 527.7 559.6 582.2 3.9 719.0 4.7 85.6 79.0 58.2 60.5 0.4 74.0 0.5 Others service activities 264.8 266.1 267.0 274.7 1.8 210.6 1.4 Activities of households as employers3 103.9 104.3 66.1 64.6 0.4 72.7 0.5 Total employment2 Agriculture, forestry and fishing Mining and quarrying Wholesale and retail trade; repair of motor vehicles and motorcycles Transportation and storage Accommodation and food and beverage service activities Real estate activities Arts, entertainment and recreation 1 Industry is classified according to the ‘Malaysia Standard Industrial Classification (MSIC) 2008 Ver. 1.0’ 2 Total includes ‘Activities of extraterritorial organisations and bodies Labour Force Survey does not classify the subsistence goods-and services-producing activities of households as persons who are economically active. Therefore, the classification of industry by MSIC 2008 for ‘Activities of households as employers; undifferentiated goods-and services-producing activities of household for own use’ only accounted for ‘Activities of household as employers’ 3 4 For the first half of 2022 Source: Department of Statistics, Malaysia economic outlook Statistical Table Combine BI 2023 updated.indd 161 2023 161 29/09/2022 2:59 PM
184. statistical tables 3 .21. ACTIVE REGISTRANTS Malaysia 2018 2019 2020 2021 20222 share (%) Total Active Registrants (end-period) share (%) 154,850 299,648 56,930 879,601 100.0 275,910 100.0 20,959 36,966 3,702 43,168 4.9 23,364 8.5 20 – 24 104,868 199,476 18,729 269,464 30.6 95,720 34.7 25 – 29 22,039 49,080 13,261 248,847 28.3 69,580 25.2 6,984 14,126 21,238 318,122 36.2 87,246 31.6 Male 54,979 109,227 28,477 418,457 47.6 132,361 48.0 Female 99,871 190,421 28,453 461,144 52.4 143,549 52.0 402 924 1,025 11,791 1.3 2,813 1.0 PT3/PMR/SRP/LCE 1,438 2,516 1,849 20,750 2.4 5,415 2.0 SPM/MCE 7,557 14,754 17,357 281,365 32.0 62,536 22.7 Skills Certificate1 2,248 8,663 – – – 143,205 272,791 17,398 281,953 32.1 76,592 27.8 71,852 137,712 16,782 – – – – Age 19 and below 30 and above Gender Educational Level Less than PT3/PMR/SRP/LCE MHSC/STPM, Matriculation, Diploma and Degree – – Employment Status Unemployed 1 Malaysian Skills Certificate (SKM), other skills certificate and non-technical skills certificate 2 January to June 2022 Note: Covers job seekers registered with Labour Department through JobsMalaysia and within valid registration period for data prior 2020. Beginning 2020, data are provided by Social Security Organisation obtained via MyFutureJobs portal. The figures for certain variables for Active Registrants may not add up to total actual active registrants. As of now, some variables are not mandatory to be filled-up by Job Seekers hence may not add up to the overall total Source: Ministry of Human Resources and Social Security Organisation, Malaysia 162 economic outlook Statistical Table Combine BI 2023 updated.indd 162 2023 29/09/2022 2:59 PM
185. statistical tables 3 .22. vacancies and placements Malaysia 2018 2019 2020 2021 20223 share (%) Number of Vacancies by Occupational 1,095,020 Category1 745,304 2,480,577 100.0 2,766,476 100.0 4,762 8,563 35,964 98,813 4.0 107,392 3.9 Professionals 21,334 31,900 110,175 462,024 18.6 200,135 7.2 Technician and associate professionals 19,466 34,429 89,954 301,750 12.2 176,354 6.4 7,690 11,554 55,985 182,056 7.3 120,339 4.3 34,926 42,462 135,058 398,567 16.1 268,667 9.7 Skilled agricultural, forestry and fishery workers 5,633 2,089 3,846 8,347 0.3 27,890 1.0 Craft and related trade workers 25,063 31,982 49,426 176,813 7.1 184,112 6.7 Plant and machine operators and assemblers 127,391 147,321 81,418 221,789 8.9 245,139 8.9 Elementary occupation 848,755 664,312 183,478 630,418 25.4 1,436,448 51.9 1,095,020 974,612 745,304 2,480,577 100.0 2,766,476 100.0 240,470 204,324 18,547 75,676 3.1 134,434 4.9 3,108 3,435 1,325 9,226 0.4 5,897 0.2 Manufacturing 421,582 351,942 190,278 603,216 24.3 1,137,078 41.1 Construction 191,045 141,783 55,590 164,651 Services 238,815 273,128 14,138 – 160,554 320,864 100.0 92,455 100.0 1,326 – 2,982 3,815 1.2 694 0.8 16 – 422 736 0.2 108 0.1 8,557 – 33,899 57,388 17.9 20,947 22.7 538 – 7,689 16,510 5.1 2,180 2.4 3,701 – 115,562 227,377 70.9 62,447 67.5 Managers Clerical support workers Service and sales workers Number of Vacancies by Sector Agriculture, forestry and fishing Mining and quarrying Number of Placements by Sector2 Agriculture, forestry and fishing Mining and quarrying Manufacturing Construction Services 1 974,612 share (%) 479,564 1,627,808 362,366 13.1 65.6 1,126,701 40.7 6.6 Classification of occupational groups is based on the Malaysia Standard Classification of Occupations (MASCO) 2013 2 Data for 2018 covers period from January to Jun 2018. Data was not available for 2019 3 January to June 2022 Note: Definition of vacancies refers to job vacancy listings by employers in public (selected only) and private sector on JobsMalaysia. The job listing includes nonsubstantive vacancies such as sales person, promoter, insurance agent and part-time workers as well as foreign workers. Prior 2020, data was obtained from Labour Department through JobsMalaysia portal. Beginning 2020, data are provided by Social Security Organisation obtained via MyFutureJobs portal. The figures for certain variables for number of placements by sectors may not add up to total actual placements. As of now, some variables are not mandatory to be filled-up by employers, hence may not add up to the overall total Source: Ministry of Human Resources and Social Security Organisation, Malaysia economic outlook Statistical Table Combine BI 2023 updated.indd 163 2023 163 29/09/2022 2:59 PM
186. statistical tables 4 .1. INTEREST  RATES Malaysia Average rates during the period (%) Average rates during the period in 2022 (%) 2018 2019 2020 2021 Jan. Feb. Mar. Apr. May Jun. Jul. Overnight interbank 3.19 3.05 2.10 1.74 1.75 1.74 1.74 1.74 1.93 1.99 2.19 1-week interbank 3.26 3.12 2.14 1.77 1.77 1.77 1.77 1.77 1.95 2.02 2.22 3-month interbank 3.66 3.46 2.39 1.92 1.96 1.94 1.93 1.95 2.11 2.29 2.70 3-month 3.14 2.98 1.95 1.56 1.55 1.55 1.56 1.56 1.77 1.79 2.01 12-month 3.31 3.17 2.13 1.72 1.71 1.71 1.71 1.71 1.95 1.95 2.20 Savings deposit 1.04 1.01 0.61 0.54 0.56 0.57 0.57 0.57 0.63 0.63 0.69 Weighted Base Rate1 (BR) 3.88 3.76 2.76 2.43 2.43 2.43 2.43 2.43 2.68 2.68 2.62 Base lending rate (BLR) 6.89 6.78 5.83 5.49 5.49 5.49 5.49 5.49 5.73 5.73 5.97 Commercial banks Fixed deposits 1 Effective from 2 January 2015, the BR replaced the BLR as the main reference rate for new retail floating rate loans and financing facilities Source: Bank Negara Malaysia 164 economic outlook Statistical Table Combine BI 2023 updated.indd 164 2023 29/09/2022 2:59 PM
187. statistical tables 4 .2. Broad Money (M3) Malaysia RM million End-period 2018 2019 2020 2021 20224 1,894,517 1,961,554 2,040,994 2,171,799 2,222,147 425,722 450,471 517,571 574,091 598,362 94,297 100,159 117,687 136,521 145,106 331,425 350,312 399,884 437,570 453,256 Broad quasi-money 1,468,796 1,511,083 1,523,423 1,597,708 1,623,785 Savings deposits 157,387 169,975 212,341 243,373 242,890 Fixed deposits 920,662 952,127 922,462 932,182 946,826 11,547 12,671 7,448 1,689 1,185 Broad money (M3)1 Transaction balances Currency in circulation2 Demand deposits Negotiable instruments of deposits (NIDs) Repurchase agreements (Repos) – – – – – Foreign currency deposits 151,496 156,727 159,902 192,667 214,970 Other deposits 227,704 219,583 221,270 227,797 217,912 1,894,517 1,961,554 2,040,994 2,171,799 2,222,147 183,634 194,584 252,804 282,940 312,213 65,550 61,854 70,806 80,102 88,327 1,892,470 1,976,463 2,046,172 2,123,706 2,188,275 1,645,784 1,715,637 1,769,764 1,849,369 1,923,141 246,686 260,825 276,408 274,338 265,134 522,402 521,814 525,605 575,222 551,814 Bank Negara Malaysia 411,768 423,781 424,524 458,641 452,460 Banking system 110,634 98,033 101,081 116,581 99,354 -703,989 -731,307 -783,587 -810,069 -830,155 Factors Affecting M3 Net claims on Government Claims on Government Less: Government deposits Claims on private sector Loans Securities Net foreign assets 3 Other influences 1 Exclude interplacements among banking institutions 2 Exclude holdings by the banking system 3 Includes exchange rate revaluation losses/gains 4 End-July 2022 Note: Data based on BNM Monthly Statistical Bulletin ( July 2022). Total may not add up due to rounding Source: Bank Negara Malaysia economic outlook Statistical Table Combine BI 2023 updated.indd 165 2023 165 29/09/2022 2:59 PM
188. statistical tables 4 .3. key exchange rates Malaysia  RM to one unit of foreign currency1 2018 2019 2020 2021 End-December 2022 Change (%) 2018 2019 2020 2021 20222 End-August Special Drawing Rights (SDR) 5.7558 5.6592 5.7798 5.8447 5.8386 0.3 1.7 -2.1 -1.1 0.1 US dollar 4.1385 4.0925 4.0130 4.1760 4.4845 -1.8 1.1 2.0 -3.9 -6.9 Singapore dollar 3.0322 3.0387 3.0354 3.0896 3.2107 0.2 -0.2 0.1 -1.8 -3.8 100 Japanese yen 3.7475 3.7655 3.8891 3.6286 3.2359 -3.9 -0.5 -3.2 7.2 12.1 Pound sterling 5.2532 5.3722 5.4653 5.6361 5.2475 4.1 -2.2 -1.7 -3.0 7.4 Euro 4.7340 4.5852 4.9324 4.7256 4.4834 2.5 3.2 -7.0 4.4 5.4 100 Thai baht 12.7006 13.6827 13.3990 12.5011 12.3040 -2.1 -7.2 2.1 7.2 1.6 100 Indonesian rupiah 0.0286 0.0295 0.0286 0.0293 0.0301 4.8 -3.1 3.1 -2.2 -2.8 100 Korean won 0.3721 0.3540 0.3698 0.3507 0.3325 2.1 5.1 -4.3 5.4 5.5 100 Philippine peso 7.8739 8.0720 8.3569 8.1902 7.9654 3.2 -2.5 -3.4 2.0 2.8 Chinese renminbi 0.6017 0.5866 0.6143 0.6552 0.6483 3.5 2.6 -4.5 -6.2 1.1 US dollar (USD) rates are the average of buying and selling rates at noon in the Kuala Lumpur Interbank Foreign Exchange Market. Rates for foreign currencies other than USD are cross rates derived from rates of these currencies against the USD and the RM/USD rate 1 2 End-December 2021 – End-August 2022 Source: Bank Negara Malaysia 166 economic outlook Statistical Table Combine BI 2023 updated.indd 166 2023 29/09/2022 2:59 PM
189. statistical tables 4 .4. Commercial Banks: Loans outstanding by purpose and sector Malaysia 2018 2019 2020 2021 December December December December RM million share RM share (%) million (%) RM million share (%) RM million 20224 share (%) July RM million share (%) Purpose Purchase of securities 34,092 3.0 30,854 2.7 30,019 2.6 29,987 2.5 29,266 2.4 Purchase of transport vehicles 93,847 8.3 89,343 7.7 89,277 7.7 84,731 7.1 86,178 7.1 87,221 7.7 82,901 7.2 82,676 7.1 78,314 6.6 79,329 6.5 of which: Purchase of passenger cars Purchase of residential property 403,993 35.6 422,262 36.6 440,600 37.9 455,934 38.3 463,290 38.2 Purchase of non-residential property 172,369 15.2 173,313 15.0 172,214 14.8 170,480 14.3 171,004 14.1 7,415 0.7 8,945 0.8 9,186 0.8 8,383 0.7 94,804 7.8 Personal use 35,546 3.1 36,628 3.2 37,359 3.2 35,351 3.0 36,011 3.0 Credit card 36,240 3.2 37,098 3.2 32,277 2.8 31,941 2.7 37,537 3.1 84 0.0 73 0.0 65 0.0 55 0.0 52 0.0 38,668 3.4 40,607 3.5 41,877 3.6 42,290 3.6 40,757 3.4 Purchase of fixed assets other than land and building Purchase of consumer durables Construction Working capital Other purpose 46,591 4.1 264,855 23.0 49,621 4.3 261,781 22.5 48,137 4.1 281,179 23.6 50,909 4.3 295,530 24.4 44,539 3.7 1,134,973 100.0 1,153,597 100.0 1,162,792 100.0 1,191,240 100.0 1,212,736 100.0 Total Loans 1 Sector 266,129 23.4 2 Primary agriculture 20,167 1.8 18,763 1.6 17,570 1.5 18,802 1.6 18,238 1.5 6,202 0.5 7,542 0.7 7,034 0.6 6,306 0.5 7,509 0.6 Manufacturing (including agrobased) 87,060 7.7 94,548 8.2 90,824 7.8 96,880 8.1 96,490 8.0 Electricity, gas and water supply 11,140 1.0 11,246 1.0 9,691 0.8 11,050 0.9 11,777 1.0 Wholesale and retail, restaurants and hotels 99,387 8.8 101,281 8.8 104,790 9.0 115,169 9.7 101,585 8.4 Construction 56,131 4.9 57,140 5.0 60,561 5.2 57,445 4.8 57,815 4.8 Real estate 87,171 7.7 83,669 7.3 82,817 7.1 80,640 6.8 75,171 6.2 Transport, storage and communication 21,616 1.9 20,875 1.8 21,310 1.8 23,053 1.9 28,844 2.4 Finance, insurance and business services 81,821 7.2 82,491 7.2 79,401 6.8 81,884 6.9 87,175 7.2 Education, health and others 18,815 1.7 20,924 1.8 21,821 1.9 26,302 2.2 27,668 2.3 Mining and quarrying Household sector Other sector 3 636,842 56.1 8,621 0.8 648,438 56.2 6,680 0.6 659,476 56.7 7,495 0.6 664,999 55.8 8,709 1 Includes loans sold to Cagamas 2 Definitions of economic sectors/industries are based on Malaysia Standard Industrial Classification 2000 3 Includes loans to individual businesses 4 Statistical table related to loans/financing has been revised and expanded with a new format beginning July 2022 0.7 671,180 55.3 10,022 0.8 Note: Data based on BNM Monthly Statistical Bulletin (July 2022). Total may not add up due to rounding Source: Bank Negara Malaysia economic outlook Statistical Table Combine BI 2023 updated.indd 167 2023 167 29/09/2022 2:59 PM
190. statistical tables 4 .5. GOVERNMENT AND CORPORATE BOND YIELDS Malaysia 2018 2019 2020 2021 2022 Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Malaysian Government Securities market indicative yield (%) 1-year 3.45 2.96 1.73 1.85 1.99 2.01 2.08 2.46 2.61 2.94 3.00 2.93 3-year 3.63 3.01 1.88 2.80 2.84 2.71 3.18 3.56 3.46 3.49 3.50 3.34 5-year 3.78 3.18 2.12 3.15 3.28 3.29 3.43 3.91 3.73 3.94 3.72 3.73 10-year 4.08 3.31 2.65 3.58 3.67 3.67 3.87 4.38 4.19 4.24 3.90 3.99 5-year corporate bond yields (%) AAA 4.39 3.63 2.76 3.57 3.65 3.70 3.81 4.09 4.33 4.43 4.35 4.32 AA 4.69 3.95 3.08 3.86 3.91 3.94 4.04 4.34 4.59 4.66 4.61 4.58 A 6.37 5.27 4.49 4.89 4.98 4.93 4.99 5.28 5.62 5.67 5.62 5.60 BBB 9.66 7.65 6.12 6.31 6.51 6.41 6.46 6.61 6.88 6.82 6.77 6.70 Source: Bank Negara Malaysia 168 economic outlook Statistical Table Combine BI 2023 updated.indd 168 2023 29/09/2022 2:59 PM
191. statistical tables 4 .6. bursa malaysia: SELECTED INDICATORS 2018 2019 2020 2021 20223 Indices1 Composite 1,690.58 1,588.76 1,627.21 1,567.53 1,512.05 FBM EMAS 11,527.51 11,323.49 11,761.93 11,308.79 10,697.65 4,317.49 5,226.59 10,734.69 6,419.60 4,910.44 643,208.1 653,085.5 1,855,808.5 1,433,358.5 489,373.4 Main Market 420,153.9 453,037.4 1,072,204.6 902,137.2 323,759.3 ACE Market 104,049.2 103,750.4 638,349.2 446,341.2 107,512.1 80.6 332.8 187.7 209.5 149.3 2,646.9 2,676.6 7,483.1 5,850.4 3,020.8 625,496.4 525,225.9 1,068,009.6 897,043.9 363,183.7 Main Market 579,691.7 483,252.3 855,623.4 745,509.4 323,591.5 ACE Market 19,781.8 21,404.7 176,370.0 139,017.6 29,959.3 5.1 33.2 37.8 44.5 30.0 2,574.1 2,152.6 4,306.5 3,661.4 2,241.9 915 929 936 949 966 Main Market 783 772 767 764 764 ACE Market 119 129 135 141 156 LEAP Market 13 28 34 44 46 1,700.4 1,711.8 1,817.3 1,789.2 1,706.3 1,680.3 1,682.5 1,765.0 1,743.4 1,660.6 12.1 18.8 35.6 29.4 28.0 0.9 2.4 3.1 4.7 5.2 124.7 120.2 135.1 129.0 – FBM ACE Trading volume2 (million units) LEAP Market Daily Average Trading value2 (RM million) LEAP Market Daily Average Number of listed companies Market capitalisation1 (RM billion) Main Market ACE Market LEAP Market Market capitalisation/GDP (%) 1 End-period 2 Based on market transactions and direct business transactions 3 End-August 2022 Source: Bursa Malaysia economic outlook Statistical Table Combine BI 2023 updated.indd 169 2023 169 29/09/2022 2:59 PM
192. statistical tables 4 .7. islamic Banks: LOANS outstanding by purpose and sector Malaysia 2018 2019 2020 2021 December December December December RM million share RM share (%) million (%) RM million share (%) RM million 20224 share (%) July RM million share (%) Purpose 7.4 47,995 7.9 51,032 7.7 54,310 7.6 56,674 7.5 Purchase of securities 41,622 Purchase of transport vehicles 75,161 13.3 77,821 12.7 86,262 13.1 92,809 13.0 99,637 13.2 72,875 12.9 75,613 12.4 84,752 12.8 91,058 12.7 97,356 12.9 158,613 28.1 182,522 29.9 207,208 31.4 235,648 33.0 251,649 33.4 of which: Purchase of passenger cars Purchase of residential property Purchase of non-residential property Purchase of fixed assets other than land and building Personal use Credit card Purchase of consumer durables Construction 52,026 8.5 56,493 8.5 60,202 8.4 3,041 0.5 3,563 0.6 3,733 0.6 4,990 0.7 58,881 10.4 59,831 9.8 64,098 9.7 66,870 9.4 70,900 9.4 3,680 0.7 4,094 0.7 3,779 0.6 3,871 0.5 4,120 0.5 24 0.0 21 0.0 14 0.0 13 0.0 35 0.0 17,457 3.1 17,907 2.9 17,330 2.6 16,875 2.4 17,905 2.4 32,757 Other purpose Sector 8.2 126,750 22.5 Working capital Total Financing 46,114 5.8 564,099 100.0 1 133,398 21.8 31,891 5.2 611,068 100.0 138,342 20.9 32,541 4.9 660,831 100.0 147,439 20.6 31,798 4.4 714,825 100.0 63,828 8.5 105,487 14.0 150,678 20.0 32,664 4.3 753,906 100.0 2 15,842 Primary agriculture 2.8 17,175 2.8 16,445 2.5 14,932 2.1 15,919 2.1 5,271 0.9 3,376 0.6 3,547 0.5 4,045 0.6 2,476 0.3 24,292 4.3 27,555 4.5 30,185 4.6 35,233 4.9 34,253 4.5 2,919 0.5 4,516 0.7 4,758 0.7 6,466 0.9 7,822 1.0 Wholesale and retail, restaurants and hotels 25,869 4.6 30,401 5.0 33,141 5.0 38,321 5.4 39,397 5.2 Construction 35,189 6.2 34,533 5.7 33,767 5.1 31,225 4.4 42,785 5.7 Real estate 27,846 4.9 30,163 4.9 31,360 4.7 31,718 4.4 31,299 4.2 Transport, storage and communication 16,506 2.9 18,567 3.0 17,520 2.7 21,197 3.0 21,034 2.8 Finance, insurance and business services 30,004 5.3 32,068 5.2 34,200 5.2 38,282 5.4 39,159 5.2 Education, health and others 29,140 5.2 27,781 4.5 30,472 4.6 28,903 4.0 16,115 2.1 Mining and quarrying Manufacturing (including agro-based) Electricity, gas and water supply 344,264 61.0 Household sector 6,958 Other sectors3 378,754 62.0 1.2 6,181 1.0 419,215 63.4 6,222 0.9 459,694 64.3 4,810 1 Includes loans sold to Cagamas 2 Definitions of economic sectors/industries are based on MSIC 2000 3 Includes loans to individual businesses 4 Statistical table related to loans/financing has been revised and expanded with a new format beginning July 2022 0.7 487,595 64.7 12,356 1.6 Note: Data based on BNM Monthly Statistical Bulletin (July 2022). Total may not add up due to rounding Source: Bank Negara Malaysia 170 economic outlook Statistical Table Combine BI 2023 updated.indd 170 2023 29/09/2022 2:59 PM
193. statistical tables 5 .1. Progress of Sustainable Development Goals by Indicator Malaysia No. Available Indicator Unit Year Value SDG 1: No Poverty 1. Households below the international poverty line % 2. Households below the national poverty line % 3. Multidimensional Poverty Index Index 4. Number of recipients of assistance (‘000) 5. Population using safely managed drinking water services 6. a. Number of deaths attributed to disasters per 100,000 population per 100,000 population b. Number of affected people with damaged homes attributed to disasters per 100,000 population per 100,000 population % 2019 0.01 2020 .... 2019 5.6 2020 .... 2019 0.011 2020 .... 2019 547.1 2020 612.2 2019 95.7 2020 ... 2019 0.0 2020 0.0 2019 266 2020 149 2019 14.1 2020 .... 2019 21.8 2020 .... 2019 9.7 2020 .... 2019 5.6 2020 .... 2019 29.9 2020 .... 2019 23,490 2020 24,259 2019 655 2020 529 2019 99.9 2020 99.9 SDG 2: Zero Hunger 1. Prevalence of underweight among children under 5 years of age % 2. Prevalence of stunting among children under 5 years of age % 3. Prevalence of wasting of children under 5 years of age % 4. Prevalence of overweight among children under 5 years of age % 5. Prevalence of anaemia (women aged 15-49 years) % 6. a. Number of semen (animal genetic resources) Number b. Number of local live purebred cattle (animal genetic resources) Number 7. Local breeds at risk of extinction % economic outlook Statistical Table Combine BI 2023 updated.indd 171 2023 171 29/09/2022 2:59 PM
194. statistical tables No . Available Indicator Unit Year Value SDG 3: Good Health and Well-Being 2019 21.1 2020 24.9 2019 99.6 2020 99.6 per 100,000 live births 2019 7.7 2020 6.9 Neonatal mortality rate per 1,000 live births per 100,000 live births 2019 4.1 2020 3.9 5. Number of new HIV infections per 1,000 uninfected population per 100,000 live births 2019 0.2 2020 0.2 6. Tuberculosis incidence per 100,000 population per 100,000 live births 2019 80.9 2020 72.6 7. Malaria incidence per 1,000 population per 100,000 live births 2019 0.1 2020 0.1 8. Hepatitis B notification rate per 100,000 population per 100,000 live births 2019 15.7 2020 12.6 9. Mass Drug Administration coverage among targeted population in filarial endemic 2019r 96.3 1. Maternal mortality ratio per 100,000 live births 2. Births attended by skilled health personnel 3. Under-five mortality rate per 1,000 live births 4. per 100,000 live births % % 2020 91.3 a. Premature mortality rate attributed to cardiovascular disease per 100,000 population 30-69 years 2019 130.8 2020 139.4 b. Premature mortality rate attributed to cancer per 100,000 population 30-69 years 2019 70.0 2020 73.2 c. Premature mortality rate attributed to diabetes per 100,000 population 30-69 years 2019 7.2 2020 8.2 d. Premature mortality rate attributed to chronic respiratory disease per 100,000 population 30-69 years 2019 18 2020 17.3 11. Suicide mortality rate per 100,000 population per 100,000 population 2019 0.0 2020 0.0 12. a. Coverage of treatment interventions for Opioids % 2019 26.1 2020 28.3 b. Coverage of treatment interventions for Amfetamine Type Stimulant (ATS) % 2019 14.9 2020 18.6 Prevalence of Heavy Episodic Drinking (HED) among 18 years old and above % 2019 1.0 2020 .... 10. 13. 172 economic outlook Statistical Table Combine BI 2023 updated.indd 172 2023 29/09/2022 2:59 PM
195. statistical tables No . Available Indicator 14. Death rate of road traffic injuries per 100,000 population 15. Married women who use modern methods for family planning 16. 17. Unit Year per 100,000 population % Value 2019r 17.7 2020 13.2 2014 47.7 2020 .... a. Adolescent birth rate (aged 10-14 years) per 1,000 women per 1,000 women aged 10-14 years 2019 0.1 2020 0.1 b. Adolescent birth rate (aged 15-19 years) per 1,000 women per 1,000 women aged 15-19 years 2019 8.2 2020 7.6 2016 2.0 2020 .... 2016 0.2 2020 .... a. Household expenditures on health (10%) % b. Household expenditures on health (25%) % 18. Mortality rate attributed to unsafe water, unsafe sanitation and lack of hygiene per 100,000 population (reported by MOH facilities) per 100,000 population 2019 0.7 2020 .... 19. Mortality rate due to the accidental poisoning by and exposure to noxious substance per 100,000 population (reported by MOH facilities only) per 100,000 population 2019r 0.3 2020 0.3 20. Age-standardised prevalence of current tobacco use among persons aged 15 years and older 2019 20.7 2020 .... 21. a. Proportion of the target population covered by DTP (3rd dose) % 2019 98.4 p 2020 97.7 b. Proportion of the target population covered by MMR (2nd dose) % 2019r 97.7 2020 97.4 c. Proportion of the target population covered by HPV (last dose in the schedule) % 2019 84.4 2020 82.6 22. a. Density and distribution of doctors per 1,000 population per 1,000 population 2019 2.1 2020 2.3 b. Density and distribution of dentist per 1,000 population per 1,000 population 2019 0.3 2020 0.4 c. Density and distribution of pharmacist per 1,000 population per 1,000 population 2018 0.4 2019 0.6 d. Density and distribution of registered nurse per 1,000 population per 1,000 population 2018 3.3 2019 3.3 e. Density and distribution of midwifery personnel per 1,000 population per 1,000 population 2018 1.7 2019 1.7 economic outlook Statistical Table Combine BI 2023 updated.indd 173 2023 173 29/09/2022 2:59 PM
196. statistical tables No . Available Indicator Unit 23. Capacity and health emergency preparedness % 24. Bloodstream infections due to selected antimicrobial resistant organisms % Year Value 2019r 95.0 2020 .... 2019 3.0 2020 3.8 2018 98 2020 .... 2018 98.6 2020 .... 2019 95 2020 .... 2019 83.1 SDG 4: Quality Education a. Proportion of children people in grades 2/3 achieving at least a minimum proficiency level in reading % b. Proportion of children people in grades 2/3 achieving at least a minimum proficiency level in mathematics % c. Proportion of children the end of primary achieving at least a minimum proficiency level in reading % d. Proportion of children at the end of primary achieving at least a minimum proficiency level in mathematics % e. Proportion of young people at the end of lower secondary achieving at least a minimum proficiency level in reading % f. Proportion of young people at the end of lower secondary achieving at least a minimum proficiency level in mathematics % 2. Proportion of children aged 24-59 months who are developmentally on track in health % 3. Participation rate in preschool 4. Participation rate in education and formal training in the previous 12 months 5. Adults with information and communication technology (ICT) skills in using copying and pasting techniques to duplicate or transfer information within document 6. Gender parity index for participation rate in preschool (female/male) 7. Achieving proficiency in literacy skil (15 years and above) % 8. Basic services for electricity offered by schools % 1. 9. 174 Teachers with minimum organized teacher training for preschool economic outlook Statistical Table Combine BI 2023 updated.indd 174 % % 2020 2019 82.2 2020 .... 2019 56.4 2020 .... 2016 97.2 2020 .... 2019 89.7 2020 87.5 2019 9.9 2020 10.5 2019 81.8 2020 87.7 2019 1.02 2020 1.02 2019 95.0 2020 95.5 2019 100 2020 99.9 r 2019 99.8 2020 100 2023 29/09/2022 2:59 PM
197. statistical tables No . Available Indicator Unit Year Value SDG 5: Gender Equality 1. Number of non-muslim women aged 20-24 years old who were married before 18 years 2. a. Seats held by women in Senate % b. Seats held by Parliament of Malaysia women in House of Representatives % Number c. Seats held by women as Cabinet Ministers % d. Seats held by Parliament of Malaysia women as Deputy Ministers % 3. Women in managerial positions % 4. Women aged 15-49 who use contraceptive use % 5. Mobile phone ownership by individuals % 2019 2,392 2020 2,293 2019 18.0 2020 13.8 2019r 14.4 2020 14.4 2019 r 14.3 2020 16.1 2019r 19.2 2020 10.5 2019 23.3 2020 24.8 2014 89.3 2020 .... 2019 95.7 2020 96.4 2019 95.7 2020 .... 2019 99.7 2020 .... 2019 93.1 2020 95.1 2019 2.0 2020 2.0 2019 99.9 2020 .... 2019 3.4 2020 .... 2019 69.2 2020 .... SDG 6: Clean Water Sanitation 1 Safely managed drinking water services % 2 Safely managed sanitation services % 3 Proportion of bodies of water with good ambient water quality % 4 Proportion of transboundary basin area with an operational arrangement for water cooperation % SDG 7: Affordable and Clean Energy 1. Access to electricity % 2. Renewable energy share in the total primary energy supplied % 3 Energy intensity (toe/ GDP at constant price 2015 (RM Million)) economic outlook Statistical Table Combine BI 2023 updated.indd 175 2023 175 29/09/2022 2:59 PM
198. statistical tables No . Available Indicator Unit Year Value SDG 8: Decent Work and Economic Growth 1. Annual growth rate of real GDP per capita % 2. Annual growth rate of real GDP per employed person % 3. Share of employment in the informal sector % 4. Mean monthly salaries & wages of employees 5. Unemployment rate % 6. Proportion of youth not in education, employment or training % 7. a. Incidence rates of fatal occupational injuries per 100,000 workers Ratio b. Incidence rates of non-fatal occupational injunes per 100,000 workers Ratio RM 4.0 2020p -5.8 2019 2.3 2020 p -5.5 2019 9.3 2020 .... 2019 3,224 2020 2,933 2019 3.3 2020 4.5 2019 11.6 2020 13.6 2019 3.83 2020 2.09 2019 267 2020 216 2019 7.9 2020 -72.0 8. Growth rate of tourism to GDP 9. a. Number of commercial bank branches per 100,000 adults per 100,000 adults 2019 10.1 2020 9.0 b. Number of automated teller machines (ATMs) per 100,000 adults per 100,000 adults 2019r 56.1 2020 55.6 2019 96.0 2020 95.9 2019 283.3 2020 137.4 2019 109.4 2020 26.8 2019 5,973 2020 4,551 2019 942.6 2020 789.1 10. Adults with an account at a financial institution % 2019 % SDG 9: Industry Innovation and Infrastructure 1. 176 a. Number of passengers by rails million b. Number of passengers at airport million c. Freight volumes and containers handled by KTMB (‘000 tonnes) d. Cargo handled by airport (‘000 tonnes) economic outlook Statistical Table Combine BI 2023 updated.indd 176 2023 29/09/2022 2:59 PM
199. statistical tables No . Available Indicator e. Cargo throughput by port Unit (‘000 000 tonnes) 2. Manufacturing value added per capita RM 3. Manufacturing employment as 2017 a proportion of total employment % 4. Share manufacturing value added of Small and Medium Enterprise (SMEs) to GDP % 5. Proportion of SMEs with a loan or line of credit % 6. Research and development expenditure as a proportion of GDP % 7. Number of researchers per million inhabitants 8. Medium and high-tech industry value added ratio in total manufacturing value added (at constant prices) % 9. Population covered by a mobile network % Year Value 2019 595.5 2020 564.3 2019 e 9,725 2020p 9,429 2019 17.3 2020 16.7 2019e 34.6 2020 p 34.5 2015 53.8 2020 .... 2018 1.0 2020 .... 2018 2,127 2020 .... 2019e 45.7 2020 47.1 2018 96.7 2020 96.7 2019 3.4 2020 .... 2019 16.9 2020e 16.2 2019e 35.9 2020p 37.2 2019 2.4 2020 2.5 p SDG 10: Reduced Inequalities 1. Compounded annual growth rate among Bottom 40 (B40) % 2. Households below 50 per cent of median income % 3. Compensation of employees by kind of economic activity at current prices % 4. Remittance costs as a proportion of the amount remitted % SDG 11: Sustainable Cities and Communities 1. 2. a. Number of deaths attributed to disasters per 100,000 population per 100,000 population 2019 0.0 2020 0.0 b. Number of affected people with damaged homes attributed to disasters per 100,000 population per 100,000 population 2019 266 2020 149 2018 32 2020 22 Annual mean levels of fine particulate matter in cities (PM10) (µg/m3) economic outlook Statistical Table Combine BI 2023 updated.indd 177 2023 177 29/09/2022 2:59 PM
200. statistical tables No . Available Indicator Unit Year Value SDG 12: Responsible Consumption and Production 1. Number of participations in international multilateral environmental agreements 2. a. Quantity of clinical wastes handled (tonnes ‘000) b. Quantity of Scheduled waste managed (tonnes ‘000) 2018 13 2020 .... 2019 33.8 2020 40.0 2019 4,013.2 2020 7,185.2 SDG 13: Climate Action 1. 2. a. Number of deaths attributed to disasters per 100,000 population per 100,000 population 2019 0.0 2020 0.0 b. Number of affected people with damaged homes attributed to disasters per 100,000 population per 100,000 population 2019 266 2020 149 2016 316.8 2020 .... a. Malaysia Marine Water Quality Index in coastal area with excellent status (number of station) 2019 37 2020 55 b. Malaysia Marine Water Quality Index in estuary area with excellent status (number of station) 2019 3 2020 3 c. Malaysia Marine Water Quality Index in island area with excellent status (number of station) 2019 34 2020 46 2020 5.4 2021 5.3 2017 55.6 2018 55.3 2017 9.9 2018 10.0 2019 1,041 2020 1,060 (tonnes (million)) CO2 eq emissions SDG 14: Life Below Water 1 2. Coverage of protected areas in relation to marine areas % SDG 15: Life on Land 1. Forest area as a proportion of total land area % 2. Important sites for terrestrial and freshwater biodiversity that are covered % 3. Number of wildlife crime cases for possession/ own use category 178 economic outlook Statistical Table Combine BI 2023 updated.indd 178 2023 29/09/2022 2:59 PM
201. statistical tables No . Available Indicator Unit Year Value SDG 16: Peace, Justice and Strong Institutions 1. Number of reported violent crime by state and type of crime (Murder) Number Number of reported violent crime by state and type of crime (Injury) Number 2. Children aged 1-5 years who experienced any physical punishment and/or psychological aggression by caregivers in the past month 3. Unsentenced detainees as of prisoner (%) % 4. Federal Government expenditures as a proportion of original approved budget % 5. Number of complaints on public services 6. Civil servant with disabilities in public service % 2019 310 2019 253 2019 4,712 2020 4,118 2016 70.8 2020 .... 2019 27.5 2020 40.5 2019 100.9 2020 92.9 2019 6,165 2020 3,649 2019 0.3 2020 0.3 2019r 17.5 2020 15.9 2019r 56.9 2020 55.9 2019 8.9 2020 .... 2019 84.2 2020 89.6 2019 11,720.6 2020 778.1 2017 3.8 2020 3.9 2019 1.3 2020 1.3 2019 55.2 2020 62.4 SDG 17: Partnerships for the Goals 1. Share government revenue as a proportion of GDP % 2. Share of Federal Government tax revenue and expenditure % 3. Fixed-broadband penetration rate per 100 inhabitants 4. Individuals using the Internet 5. Value of financial and technical assistance committed to developing countries 6. Worldwide weighted World Trade tariff-average % 7. Share of global exports % 8. Statistical indicators for 2018 50.9 2019 Sustainable Development Goals monitoring % e Estimate r Preliminary r Revised Ratio % RM ‘000 Note: .... indicates data not available Source: Sustainable Development Goals (SDG) Indicator, 2020 economic outlook Statistical Table Combine BI 2023 updated.indd 179 2023 179 29/09/2022 2:59 PM
202. Statistical Table Combine BI 2023 updated .indd 180 29/09/2022 2:59 PM
203. ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA MINISTER OF FINANCE YB Senator Tengku Datuk Seri Utama Zafrul bin Tengku Abdul Aziz DEPUTY MINISTER OF FINANCE I YB Dato ' Indera Mohd Shahar bin Abdullah DEPUTY MINISTER OF FINANCE II YB Tuan Haji Yamani Hafez bin Musa DEPARTMENTS UNDER THE MINISTRY OF FINANCE TREASURY OF MALAYSIA Secretary General of Treasury Datuk Seri Asri bin Hamidin @ Hamidon ROYAL MALAYSIAN CUSTOMS DEPARTMENT Director General of Customs Dato' Haji Zazuli bin Johan ACCOUNTANT GENERAL’S DEPARTMENT OF MALAYSIA Accountant General of Malaysia Datuk Dr. Yacob bin Mustafa VALUATION AND PROPERTY SERVICES DEPARTMENT Director General of Valuation and Property Services Sr Abdul Razak bin Yusak LANGKAWI DEVELOPMENT AUTHORITY Chief Executive Officer En. Nasaruddin bin Abdul Muttalib AGENCIES UNDER THE MINISTRY OF FINANCE BANK SIMPANAN NASIONAL Chief Executive En. Jay Khairil Jeremy Abdullah BANK NEGARA MALAYSIA Governor Tan Sri Datuk Nor Shamsiah binti Mohd Yunus YAYASAN TUN RAZAK Chairman Tun Mohammed Hanif bin Omar PERBADANAN INSURANS DEPOSIT MALAYSIA Chief Executive Officer En. Rafiz Azuan bin Abdullah BURSA MALAYSIA BERHAD Chief Executive Officer Datuk Muhamad Umar Swift INLAND REVENUE BOARD OF MALAYSIA Chief Executive Officer Datuk Dr. Mohd Nizom bin Sairi EMPLOYEES PROVIDENT FUND Chief Executive Officer Datuk Seri Amir Hamzah Azizan SECURITIES COMMISSION MALAYSIA Chairman Dato' Seri Dr. Awang Adek Hussin LABUAN FINANCIAL SERVICES AUTHORITY Director General En. Nik Mohamed Din bin Nik Musa MALAYSIA TOTALISATOR BOARD Acting Chief Executive Officer Pn. Nor Hashimah Hashim RETIREMENT FUND (INCORPORATED) Chief Executive Officer Pn. Nik Amlizan binti Mohamed PUBLIC SECTOR HOME FINANCING BOARD Chief Executive Officer En. Mohd Farid bin Dato’ Hj Nawawi ECONOMIC OUTLOOK ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA NEW.indd 181 2023 181 29/09/2022 3:00 PM
204. organisation of the ministry of finance malaysia TREASURY OF MA L AYS I A MINISTER OF FINANCE YB Senator Tengku Datuk Seri Utama Zafrul bin Tengku Abdul Aziz DEPUTY MINISTER OF FINANCE I YB Dato ' Indera Mohd Shahar bin Abdullah DEPUTY MINISTER OF FINANCE II YB Tuan Haji Yamani Hafez bin Musa SECRETARY GENERAL OF TREASURY Datuk Seri Asri bin Hamidin @ Hamidon DEPUTY SECRETARY GENERAL OF TREASURY (POLICY) Datuk Johan Mahmood Merican DEPUTY SECRETARY GENERAL OF TREASURY (MANAGEMENT) Datin Rashidah binti Mohd Sies DEPUTY SECRETARY GENERAL OF TREASURY (INVESTMENT) Pn. Anis Rizana binti Mohd Zainudin NATIONAL BUDGET OFFICE Dato' Shahrol Anuwar bin Sarman GOVERNMENT PROCUREMENT DIVISION En. Ab. Rahim bin Ab. Rahman GOVERNMENT INVESTMENT COMPANIES DIVISION Dato' Shamsul Azri bin Abu Bakar STRATEGIC FINANCIAL CONTROL AND CORPORATE En. Mohd Sakeri bin Abdul Kadir STRATEGIC INVESTMENT DIVISION Dato’ Zainal Abidin bin Mat Nor TAX DIVISION Dato’ Che Nazli binti Jaapar FISCAL AND ECONOMICS DIVISION Dr Mastura binti Abdul Karim INTERNATIONAL DIVISION En. Abu Bakar @ Salleh bin Jambol REMUNERATION POLICY AND MANAGEMENT DIVISION Tn. Hj. Zairi bin Hj. Mat Ali REGISTRAR OFFICE OF CREDIT REPORTING AGENCIES En. Salsuriya bin Selamat INFORMATION TECHNOLOGY DIVISION En. Mohd Sori bin Husain STATUTORY BODY STRATEGIC MANAGEMENT DIVISION Dato’ Mohd Zafir bin Ibrahim PUBLIC ASSET MANAGEMENT DIVISION Dato’ Ahmad Suhaimi bin Endut SABAH FEDERAL TREASURY Pn. Rafidah binti Datu Derin SARAWAK FEDERAL TREASURY En. Leonard Wilfred Yussin OFFICE OF THE SPECIAL COMMISSIONERS OF INCOME TAX Dato' Othman bin Yusof LEGAL DIVISION Pn. Rafidah binti Omar CUSTOMS APPEAL TRIBUNAL Tn. Haji Yaacub bin Haji Chik TREASURY INTERNAL AUDIT UNIT En. Abd Ghani bin Sulaiman NATIONAL INTER AGENCY UNIT FOR ECONOMIC STIMULUS IMPLEMENTATION AND COORDINATION INTEGRITY UNIT Dato’ Zainul bin Darus 182 economic outlook 2023 ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA NEW.indd 182 29/09/2022 3:00 PM
206. BUDGET