KUALA LUMPUR: The country’s monetary and financial conditions are expected to remain accommodative and supportive of economic growth, with operations to be supported by vibrant money and foreign exchange markets, as well as intermediation activities.
In its Economic Outlook 2020 report released today, the Ministry of Finance (MoF) said it expects the banking sector to remain robust and orderly, underpinned by ample liquidity and strong capital buffers.
“The monetary policy is expected to continue to support economic growth and ensure price stability.
“Meanwhile, the financial market is anticipated to be vibrant, supported by steady domestic economic activities and the revival of strategic projects,” it said.
The report said the monetary policy in 2019 remained accommodative and supportive of growth, amid stable prices.
The Overnight Policy Rate (OPR), which was kept unchanged at 3.25 per cent since January 2018 was reduced by 25 basis points (bps) to 3.00 per cent in May 2019 after taking into consideration the downside risks on growth from heightened uncertainties in the global environment, trade tensions and extended weaknesses in the commodity prices.
The interest rate in the banking system was lowered in tandem with the OPR adjustment.
The report said activities in the banking system during the first seven months of 2019 remained resilient with loan approvals and disbursements expanded 5.8 per cent and 2.8 per cent to RM238 billion and RM704.8 billion, respectively.
Nevertheless, loan applications declined 1.8 per cent to RM500.9 billion, while total loans outstanding expanded 3.9per cent to RM1.73 trillion as at end-July 2019.
“Borrowing to businesses expanded with total disbursements increasing 0.4 per cent to RM446.3 billion, representing about 63 per cent of total loans disbursed.
“Loan applications by businesses declined 0.7 per cent to RM203.6 billion between January and July 2019,” it said.
The report indicated that the bulk of the loans were channelled into manufacturing (31.8 per cent); wholesale and retail trade, restaurants, and hotels (29.4 per cent); and construction (11.4 per cent) sectors.
Loans outstanding to businesses increased by 2.5 per cent to RM610.2 billion, accounting for 35.3 per cent of total loans outstanding.
“For the rest of the year and 2020, the banking system is expected to remain sound, operating with strong capital and liquidity buffers,” it said.
As for households, lending continued to grow with loan approvals increasing 3.7 per cent to RM128.1 billion and disbursements expanding 1.4 per cent to RM199.8 billion.
Loans disbursed to the household sector were mainly for consumption credit (49.8 per cent), followed by the purchase of residential properties (24.8 per cent) and passenger cars (10.9 per cent).
As at end-July 2019, total outstanding household loans grew 4.7 per cent amounting to RM1.01 trillion, which accounts for 58.3 per cent of total outstanding loans in the banking system.
“The overall household debt increased slightly to RM1.22 trillion, accounting for 82.2 per cent of gross domestic product as at end-June 2019.
“Nevertheless, the debt level has been moderating since 2015 following macro-prudential measures and financial literacy programmes introduced to rein in household debt levels,” it added.
Meanwhile, the report said Malaysia’s capital market is anticipated to be resilient, driven by well-developed infrastructure and instruments.
Nevertheless, external factors, which include the lingering US-China trade tensions, concerns over the pace of world growth, as well as volatile global financial markets may influence financial and capital market performance, it added. - Bernama