AR2009briefing Sessions

8/3/2019 AR2009briefing Sessions

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1

TaklimatLaporan Tahunan 2009 dan

Laporan Kestabilan Kewangan& Sistem Pembayaran 2009

Gabenor Bank Negara Malaysia

24 Mac 2010

Embargo

Not for publication or broadcast

before 1800 hours on Wednesday,

24 March 2010


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2 Please check against delivery

Uneven global economic recovery in 2010

The global economy is on a recovery path:The advanced economies to record modest growth,

supported by stimulus measuresThe emerging economies, particularly Asia, to lead theglobal growth

Global financial conditions have stabilisedBut lending activity in the advanced economies remains

constrained


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Modest growth in the advancedeconomies due to:

Persistent high unemployment

Restricted access to credit

Sluggish housing market

Continued de-leveraging by the

private sector

Fiscal consolidation plans

Global Growth Projection for 2010

Better growth prospects in the emergingeconomies:

Stronger domestic demand

Robust financial sector

Growing intra-regional trade

Emerging economies leading the recovery

Source: IMF World Economic Outlook (WEO) (January 2010 Update), National

authorities, BNM estimates

2008 2009e 2010f

Annual change (%)

World GDP 3.0 -0.8 3.9

World Trade 2.8 -12.3 5.8

US 0.4 -2.4 2.7

Euro area 0.6 -4.1 1.0

Japan -1.2 -5.2 1.7

East Asia 6.9 5.1 7.7~7.9

Asian NIEs 1.7 -0.9 4.6~4.9

China 9.6 8.7 10.0ASEAN-4 4.6 1.1 4.4~5.2

India 7.4 6.5 7.7


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Financial conditions have improved but lendingactivities in the advanced economies yet to resume

-10

-5

0

5

10

15

20

25

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

yoy, %

Source: National authorities & Haver

1

Lending to non-financial corporations

Credit growth to private sector

UK1

Euroarea

US

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Jan-2007

Apr-2007

Jul-2007

Oct-2007

Jan-2008

Apr-2008

Jul-2008

Oct-2008

Jan-2009

Apr-2009

Jul-2009

Oct-2009

Jan-2010

LIBOR-OIS

TED spread

basis points

Source: Bloomberg

Interbank market spreads

Spreads have narrowed But credit growth remains negative


5/45


0

300

600

900

1200

1500

Prior 3Q

07

4Q

07

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

USD bn

0

50

100

150

200

250

300

350

400

450USD bn

Advanced economies losses

Advanced economies capital

Advanced economies cumulative losses (LHS)

Advanced economies cumulative capital (LHS)

Slow progress in financial sector resolution

Cumulative bank losses for

advanced economies expected toreach USD2.6 trillion1

As at end-2009, realised

losses

have reached USD1.7 trillion2

(65%

of expected losses)

Continued deleveraging

process

Banks remain cautious in view of the

ongoing financial reforms

Advanced economies refer to US and EuropeSource: Bloomberg and BNM calculations

1

Based on IMF estimate (October 2009 GFSR)

2

BNM calculations based on Bloomberg data

Cumulative bank losses exceeding capital raised


6/45


Source: IMF and national authorities

Unprecedented stimulus

measures during the crisis

have led to rising fiscal deficit

in many countries

Growing sovereign debt

problems and fiscalconsolidation may affect

strength of growth

Fiscal balance as % of GDP

Large fiscal deficits and rising public debt levels inseveral advanced economies

-15

-13

-11

-9

-7

-5

-3

-1

G

reece

US Ire

land

UK Sp

ain

Ja

pan

Portugal

2008 2009e


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3Q 09 4Q 09 2009 2010f

Annual change (%)

Region1 5.5 8.6 5.1 7.7 ~ 7.9

PR China 9.1 10.7 8.7 10.0

India 7.9 6.0 6.5 7.7

Indonesia 4.2 5.4 4.5 5.5 ~ 6.0

Singapore 0.6 4.0 -2.0 4.5 ~ 6.5

Malaysia -1.2 4.5 -1.7 4.5 ~ 5.5

Chinese Taipei -1.0 9.2 -1.9 4.7

Korea 0.9 6.0 0.2 4.6

Hong Kong SAR -2.2 2.3 -2.7 4.0 ~ 5.0

Thailand -2.7 5.8 -2.3 3.5 ~ 4.5

Philippines 0.4 1.8 0.9 2.6 ~ 3.6

f

forecast 1 excluding IndiaSource: National authorities, IMF

Regional economies to lead global growth

Asian Region: Growth Outlook for 2010


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Modest inflation in 2010

-6

-4

-2

0

2

4

6

8

10

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Indonesia Thailand Philippines

Singapore Malaysia China

yoy,%

Regional inflation rates rising moderately

Global inflation is expected to

rise, albeit moderately in 2010 :

Improving demand conditions

Upward trend in commodity

prices

But, underlying inflation is

expected to remain contained


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Uneven recovery to lead to differences in thrust of policy

0

2

4

6

8

10

2008 2009 2010

China

Thailand

Indonesia

Korea

%

Philippines

Malaysia

0

1

2

3

4

5

6

2008 2009 2010

%

US

Euro

area

UK

Japan

Regional economies:Stronger growth expected

Advanced economies: Recovery andimproving financial conditions

Key interest rates, % Key interest rates, %


10/45


The Malaysian economy is projected to grow by4.5% to 5.5% in 2010

Growth will be underpinned by

strengthening domestic demand

and an improving externalenvironment

The underlying strong

fundamentals will provide supportto a private sector-led recovery

Continued access to financing key

in supporting private sector-led

growth-2

-1

0

1

2

3

4

5

6

7

2001

2002

2003

2004

2005

2006

2007

2008

2009p/

2010f/

Annual

change (%)

Source: Department of Statistics, Malaysia and Bank Negara Malaysia

4.5%

5.5%


11/45


Strengthening domestic demand to drive growth,reinforced by external demand

2009p 2010f 2009p 2010f

Annual change (%)Contribution to

growth (p.p)

Domestic demand -0.4 3.2 -0.3 2.8Private sector -3.4 3.3 -2.2 2.1

Consumption 0.8 3.8 0.4 2.0

Investment -21.8 0.7 -2.6 0.1

Public sector 7.7 2.7 1.9 0.7

Consumption 3.7 -2.7 0.5 -0.4

Investment 12.9 9.3 1.3 1.1

Net exports 8.4 -18.6 1.1 -2.7Exports of G&S -10.1 7.7 -12.0 8.3

Imports of G&S -12.5 11.7 -13.1 11.0

Real GDP -1.7 4.5 ~ 5.5 -1.7 4.5 ~ 5.5


12/45


Private consumption to strengthen during the year

% yoy 2008 2009p 2010f

Privateconsumption

8.5 0.8 3.8

Stronger expansion in consumer spending will be supported by :Improvements in labour market conditions

Steady increase in disposable income

Sustained consumer confidenceContinued access to financing


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Improving labour market conditions in 2010

2.4

3.1

3.43.6

3.6

3.3

3.7

1.5

2.0

2.5

3.0

3.5

4.0

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

2009

e

2010f

Unemployment rate

(as % of labour force)

-4

-2

0

2

4

6

8

10

annual change (%)

Employment (RHS) Labour force(RHS) Unemployment rate (LHS)

Lower unemployment rate in 2010

eEstimatef Forecast

Source: Economic Planning Unit


14/45


Private investment to recover gradually

% yoy 2008 2009p 2010f

Real private investment 0.8 -21.8 0.7

Capital spending is forecast

to

recover

with the

strengthening of domestic

and external demand

Improved business optimism

and resumption of projects

that have been deferred

Nominal Private Investment

0

10

20

30

40

50

60

70

80

90

2006 2007 2008 2009p/ 2010f/

RM billion

Agriculture Mining Manufacturing

Construction Services

Source: Department of Statistics, Malaysia and BNM

62.1

77.0 80.6

62.565.4


15/45


Gross FDI inflows sustained in 2010

Gross inflows of FDI at RM32.4

billion in 2010

Inflows into the manufacturing,

services, and oil and gas

sectors

Gross FDI inflows into Malaysia

32.4

25.427.1

37.3

46.2

31.6

49.0

0

10

20

30

40

50

2004 2005 2006 2007 2008 2009p 2010f

RM billion

p/ preliminary; f/ forecast

Source: Department of Statistics, Malaysia and Bank Negara Malaysia


16/45


Public sector to continue to support domestic

demand in 2010

2009p 2010f

Annual change (%)

Public sector 7.7 2.7

Consumption 3.7 -2.7

Investment 12.9 9.3

Contribution to growth (p.p)

Public sector 1.9 0.7


17/45


External trade to expand in 2010

Broad-based expansion in external trade

-30

-20

-10

0

10

20

30

2005 2006 2007 2008 2009e/ 2010f/

yoy (%)

-200

-100

0

100

200

RMb

Trade balance (RHS)Exports (LHS)Imports (LHS)

2009e 2010f

Annual change (%)

Gross exports -16.6 11.2

Manufactured

E&E

Non E&E

Commodities

Agriculture

Minerals

-12.5

-11.0

-14.5

-27.6

-21.6

-32.2

10.1

10.0

10.3

16.3

12.8

19.4

Source: Department of Statistics, Malaysia and Bank Negara Malaysiae/ estimate f/forecast

-16.6%

11.2%14.6%

-16.6%

RM116.7b

Export expansion to be more

broad-based:

Stronger external demand,

particularly from the region

Higher commodity prices

Imports to expand faster than

exports:

expansion in manufactured

exports

higher imports of

consumption & capital

goods

Current account surplus to narrow but remains


18/45


Source: Department Statistics, Malaysia and Bank Negara Malaysia

p/ preliminary f/ forecast

Current account surplus to narrow but remainssignificant

Trade surplus to narrow as

imports expand faster than

exports

Recovery in external trade

and outbound tourism will

result in a marginal services

deficit

Income deficit to widen due

mainly to repatriation of

profits and dividends by

MNCs operating in Malaysia

Narrowing current account surplus

-50

-20

10

40

70

100

130160

190

220

2006 2007 2008 2009p/ 2010f/

RMb

-5

0

5

10

15

20% GNI

Goods ServicesIncome Current transfersCurrent Account, % GNI (RHS)

14.3%17%

RM112.7b RM103.8b


19/45


Annual change (%) 2009p 2010f

Agriculture 0.4 3.1

Mining -3.8 2.5

Manufacturing -9.3 6.5

Construction 5.7 3.7

Services 2.6 4.9

Real GDP -1.7 4.5 ~ 5.5

Broad-based growth across all sectors

S i t t b k t ib t t th


20/45


Services sector to be a key contributor to growth

Sub-sector

2009p 2010f

Annual change (%)

Total Services 2.6 4.9

Finance & insurance 4.4 5.2

Real estate & business

services2.1 7.0

Wholesale & retail trade 1.2 4.4

Accommodation &restaurant

2.7 4.8

Transport & storage -2.8 4.8

Communication 6.0 6.5

Utilities 0.4 5.0

Other services 4.4 5.1

Government services 3.0 3.0

Higher demand for

consumption-related services

Continued lending and financial

intermediation activities

Recovery in trade andmanufacturing-related services

Strong recovery in the manufacturing sector


21/45


Strong recovery in the manufacturing sector

Broad-based expansion

across all clusters,

reflecting:

Improved external

demand

Strengthening ofdomestic demand

Value-added growth(% yoy)

2009p 2010f

Total Manufacturing -9.3 6.5

Export-oriented -11.7 6.7

E&E -18.7 9.6

Primary-related

(e.g. chemicals, petroleum, rubber,

wood)

-5.1 4.3

Domestic-oriented -4.5 6.2

Construction-related

(e.g. iron & steel, cement)-2.6 6.5

Consumer-related

(e.g. food & beverages,

transport equipment)

-9.4 5.4

Better performance in the agriculture and mining


22/45

22

Better performance in the agriculture and miningsectors

% yoy 2009p 2010f

Agriculture 0.4 3.1

Palm oil -1.0 1.1

Rubber -20.2 20.3

Mining -3.8 2.5

Crude Oil -4.4 1.8

Natural gas -4.0 2.5

Agriculture

Production of palm oil andrubber are expected to increaseto meet higher demand

Mining

Higher crude oil production withthe recovery in demand

Higher gas output partly

reflecting LNG exports to China

Construction sector to maintain growth momentum


23/45


Construction sector to maintain growth momentum

Growth supported by the second

stimulus package, benefiting the

civil engineering and non-residential sub-sectors, and the

remaining projects under the Ninth

Malaysia Plan

Continued growth in

residential

sub-sector due to stronger demand

2.1

5.7

3.7

4.7

0

1

2

3

4

5

6

2007 2008 2009p/ 2010f/

% yoy

Growth in the Construction Sector

Headline inflation to remain modest at 2.0 2.5%


24/45


Headline inflation to remain modest at 2.0 2.5%in 2010

0

1

2

3

4

5

6

2005 2006 2007 2008 2009 2010/f

Annual

change

(%)

Inflation Forecast for 2010

2.0 2.5%

Price increase in 2010 modest

reflecting :

Improving demand conditions

Potential adjustments to

administered prices

Monetary policy remains supportive of


25/45


OPR

2.0%

3.5%

2.25%

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

%

Monetary policy remains supportive ofeconomic growth

The OPR was raised by 25 bps in March

OPR was reduced to a historic low inearly 2009 under extraordinaryconditions

Given improved economic outlook, theOPR was adjusted in March 2010 to:

o

normalise monetary conditions

o

prevent the risk of financialimbalances that could underminethe economic recovery process

Monetary policy continues to remainaccommodative to provide support todomestic economic activity

Continued access to financing is a key


26/45


g ysupport to economic recovery

Net financing through banking system loans and PDS

Feb-10

9.9%

5

6

78

9

10

11

12

13

14

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

yoy, %

Q3 09:

7.2%

Q4 09:

8.5%

Financing to businesses and

households increasing,

supported by :

continued access to

financing

ample liquidity

low interest rate

environment

Expansion in other sources

of financing

Domestic Sources of Financing for the Private Sector as at

end 2009

PDS

19%

DFIs

6%

Other financialintermediaries

9%

Equities

13%

Banking systemloans

53%

C f fi i i l


27/45


Commercial Banks' Lending Rates

4.85%

Average

Lending Rate

5.76%

Base Lending

Rate

4

6

8

10

12

14

Jan95

Mar96

May97

Jul98

Sep99

Nov00

Jan02

Mar03

May04

Jul05

Sep06

Nov07

Jan09

Mar10

%

15Mar10p

Cost of financing remains low

BLR responded to OPR

adjustments

Lending rates remained near

historical lows :

Base lending rate: 5.76%(15 March 2010)

Average lending rate:4.85% (end-Feb 2010)

P

Preliminary

Deposit rates have increased


28/45


Deposit rates have increased

Term Structure of FD rates

2.052.042.032.00

2.50

2.35

2.3

2.25

2.35

2.66

1.9

2.0

2.1

2.2

2.3

2.4

2.5

2.6

2.7

1 3 6 9 12

mths

% p.a.

Post OPR hike

(15 Mar '10p)

Pre-OPR hike

(Feb '10)

P

Preliminary

FD rates raised by16-30 bps followingincrease in OPR

Domestic equity market recovered on improving


29/45


economic conditions

KLCI and Bursa Malaysia

sectoral indices

30

40

50

60

70

80

90

100110

120

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

Finance

KLCI

Industrial

Construction

Plantations

Index

(Jan 2008=100)

Performance of Major Indices (% growth)

-50.6

-46.0

-49.2

-47.6

-48.3

-48.3

-40.7

-39.3

-38.5

-31.3

-42.1

87.0

78.3

64.5

63.2

63.0

52.0

49.7

45.2

23.5

22.1

19.0

-60 -40 -20 0 20 40 60 80 100

Indon

Taiwan

Spore

Thai

Phil

HK

Korea

Msia

US

UK

Jpn

%

2008 2009

Ringgit performance driven by external developments


30/45


Ringgit performance driven by external developmentsand improving domestic fundamentals

Ringgit was on a broad

appreciating trend, in

tandem with regionalcurrencies

Generally, orderly ringgitadjustment

Regional: CNY, IDR, KRW, PHP, SGD, TWD, THB

Major: AUD, JPY, EUR, GBP

Movement of Currencies against USD

(31 Dec 2008 - 23 Mar 2010)

90

95

100

105

110

115

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

In

dex31Dec08=

100

Appreciation

against USD

Regional

Major

Ringgit

For Malaysia, policies will focus on strengthening


31/45


y , p g gprivate sector led growth

Strategies being put in place to transition Malaysia to a

high value-added, high income economy

Measures to promote private investment

incentives for high growth sectors

liberalisation of the economy

privatisation of Government-owned corporations

Monetary policy to remain supportive of growth

Ensure continued access to financing


32/45

32

Bank Negara MalaysiaAnnual Accounts 2009

Financial position of the Bank remained strong in 2009


33/45


Total assets of BNM increased by RM18.5 billion to RM363billion with international reserves of RM331.3 billion(USD96.7 billion)

Net profit of RM7.7 billion

Dividend paid amounted to RM2 billion

Financial position of the Bank remained strong in 2009


34/45

34

FINANCIAL STABILITY ANDPAYMENT SYSTEMS REPORT 2009


35/45

35

Financial system stability waspreserved, supported by a well-functioning financial intermediationprocess and orderly financial markets

High degree of financial system resilience


36/45


High degree of financial system resilience

Banking sector (%) Dec 08 Jan 10Risk-weighted capital ratio 12.6 14.8

Core capital ratio 10.6 13.3

Capital buffer (RM billion) 38.7 60.3

Insurance sector (%) Dec 08 Dec 09Capital adequacy ratio 187.6 230.0

Capital buffer (RM billion) 12.3 18.6

Strong solvency position

Forward looking capitalmanagement since 2008

High quality of capital

Loan quality intact

Improved underwriting

standards

Pro-active management ofdebts

Historical high provisions

Profitability sustained

RoE

of 13.9% and RoA

of 1.2%

0

2

4

6

8

10

12

2001 2002 2003 2004 2005 2006 2007 2008 2009 Jan'10

%

Net NPL ratio

1.7%1.8%2.2%

3.2%

Access to financing supported early recovery


37/45


0

2

4

6

8

10

12

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

RM billionPDS issued

Loans approved - Large Businesses

2009

0

5

10

15

20

25

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

RM billionLoans approved - Households

Loans approved - SMEs

2009

Access to financing supported early recovery

Improving quality of loan portfolio


38/45


p g q y p

0

10

20

30

40

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

RM billion

0

1

2

3

4

5%

2-


39/45


and robust prudential framework

Early and prompt detection and management of emerging risks

Enhanced surveillance and stress testing

Strengthening of home-host supervisory engagement

to support consolidated supervision

Improved risk management and governance practices

Implementation of more sophisticated approaches to assessments of capitaladequacy under Basel II and Risk-Based Capital Framework

Continued strengthening of capital buffers to withstand potential shocks

Enhanced liquidity framework to address market disruptions and foreign currency

exposures

Continued improvements in governance practices

Strengthened oversight capability of boards of financial institutions

Policy measures to enhance access to financing


40/45


y g

Special funds

SME Assistance Guarantee Scheme (RM 2 billion)

Working Capital Guarantee Scheme (RM 7 billion)

Industry Restructuring Guarantee Scheme (RM 3 billion)

Avenues for debt restructuring

Large corporations: Corporate Debt Restructuring Committee (CDRC)

SMEs

: Small Debt Resolution Scheme (SDRS)

Individuals

: Agensi

Kaunseling

dan

Pengurusan

Kredit

(AKPK)

Avenues for complaints and financial adviceBNM Integrated Contact Centre

ABMConnect

Introduction of credit enhancement agency in 2009

Danajamin

Nasional

Berhad

Developmental strategies continued to be pursued- In addition to institutional arrangements mechanisms and schemes for


41/45


- In addition to institutional arrangements, mechanisms and schemes foraccess to financing

Enhance interlinkages with international economies

Liberalisation

plan for financial sector

MoUs

to strengthen bilateral and multilateral cooperation

Reinforce international dimension of Islamic finance

Promote financial inclusion

Raise level of financial literacy

Operational flexibilities for new branches and bancassurancearrangements forinsurance companies and takafuloperators

Continuous priority on human capital development

Asian Institute of Finance (AIF) fully operationalisedto coordinate human capitaldevelopment initiatives

Continuous enhancement to FSTEP programme

design and delivery

Enhance FIDE programme

for boards of financial institutions

Outlook for domestic financial stability


42/45


Malaysian financial system has adequate buffers to withstand

external risks and domestic challenges

Banking system capitalisation expected to remain >10% under most

challenging stress test scenario Downside risks mainly stem from external environment

Sustainability of global economic recovery

Orderly exit from unconventional support measures

Reforms in global prudential regulations and regulatory structure

Destabilising

capital flows

Supported by strengthened financial stability

framework under Central Bank of Malaysia Act 2009


43/45


framework under Central Bank of Malaysia Act 2009

Greater clarity in mandates, functions and power

Captures core elements of macroprudential stability

Ex-ante surveillance powers for timely risks identificationPre-emptive powers to avert or mitigate systemic risks

Ex-post powers for resolution to reduce impact of instability

Complemented by strengthened framework for governance,transparency and accountability Positions the Bank to effectively address current and futurechallenges

Areas of focus for financial sector in 2010


44/45


Blueprint for financial sector development

Develop a strong and stable financial sector that best serves Malaysia

Competitive, dynamic and inclusive financial system

Comprehensive review of existing legislations to ensure aneffective and efficient legislative framework to:

Align legislation with more principle-based and differentiated supervisory

approaches

Enhance appropriate enforcement and resolution framework

Achieve more consistent legal framework across different financial sectors

Strengthen market conduct regulation and supervision

Transition to enhanced deposit guarantee scheme

Greater internationalisation

of sukuk

market


45/45


Thank you

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