社会经济研究中心 SOCIO SOCIO-ECONOMIC ECONOMIC RE RESE SEAR ARCH CH CE CENTR NTRE Qu Quar arte terly Eco Economy nomy Trac acker er (A (Apr pr-Jun un 2017 2017) Sustaining momentum 5 Jul uly 2017 2017
Age Agend nda Global economy is gaining momentum A broadening base for domestic growth But, there are risks to the growth story Conclusion Socio-Economic Research Centre 1
Key ey messa messages ges The global economy is in a “synchronized recovery” • A broad-based economic upswing • Entrenching the recovery calls for a delicate balancing-act between monetary and fiscal policy • Avoid policy missteps But, risks remain • Be wary of political developments, policy, regulatory and geopolitical risks • Inward-looking policies, UK Brexit negotiations and the Gulf crisis • Tighter global financial conditions arising from higher US interest rates • China’s build-up of debt is of an enduring concern Malaysia: Policy balancing to sustain growth & preserve economic resilience • Stay on the path of fiscal consolidation to build fiscal space and contain debt • Carefully calibrate monetary policy to anchor growth amid financial volatility • Continued vigilance on financial risks through macroprudential measures • Leveraging on productivity, innovation and digitalisation Socio-Economic Research Centre 2
Global ec Globa econ onomic omic act activ ivity ity exp xpan ansion sion co cont ntinue inues • Growth is becoming more synchronised. • The IMF raised 2017 ’s global growth estimate to 3.5% from 3.4% previously while keeping 2018 ’s at 3.6% (3.1% in 2016). • Industrial activity, exports and global trade have picked up. • Sustained domestic demand and stronger exports underpinned growth in Asia. Real GDP growth (% YoY) 6.9% 6.8% 6.6% 5.6% 5.0% 5.1% 4.9% 4.5% 4.5% 3.3% 3.2% 3.0% 2.9% 2.9% 2.7% 2.7% 2.4% 2.3% 2.1% 2.2% 2.0% 1.8% 1.7% 1.7% 1.6% 1.3% 1.2% US Euro Area Japan China Malaysia Indonesia Thailand South Korea Singapore 4Q16 1Q17 2017e Socio-Economic Research Centre 3
Global ac Globa activi tivity ty indica indicato tors ga gaining ining mome moment ntum um OECD CLIs show stable growth momentum PMI for manufacturing & services continued to expand 102 60 101 55 100 99 50 98 97 45 2010 Jan Jul 2011 Jan Jul 2012 Jan Jul 2013 Jan Jul 2014 Jan Jul 2015 Jan Jul 2016 Jan Jul 2017 Jan 2010 Jan Jul 2011 Jan Jul 2012 Jan Jul 2013 Jan Jul 2014 Jan Jul 2015 Jan Jul 2016 Jan Jul 2017 Jan Total OECD CLI US CLI Euro Area CLI Japan CLI Global Manufacturing PMI Global Services PMI Rising consumer and business confidence Regional exports in a synchronized recovery 102 30% 20% 101 10% 0% 100 -10% 99 -20% -30% 98 -40% 97 2016 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 Jan Feb Mar Apr May 2010 Jan Jul 2011 Jan Jul 2012 Jan Jul 2013 Jan Jul 2014 Jan Jul 2015 Jan Jul 2016 Jan Jul 2017 Jan Malaysia (yoy) China (USD, yoy) Singapore (yoy) Thailand (USD, yoy) OECD-CCI OECD-BCI South Korea (USD, yoy) Source: OECD; Markit, DOS, Malaysia; NBS China; Singapore DOS; Bank of Thailand; MOTIE Korea Socio-Economic Research Centre 4
Global ce Globa cent ntral al banks banks signa signal an an end end to to ea easy sy-mon money ey er era? a? • Central banks’ hawkish comments signal the beginning of the end of ultra-loose monetary policy. • Headline inflation have generally risen amid the uneven pace of oil prices. • The Fed still on course for the third rate hike this year; will begin to pare down its balance sheet if the conditions were right. The Fed’s rate hike cycle Inflation eased after 1Q17 Higher bond yields differential continues; Is BoJ and ECB in 2017 ready to act? % % 1.4 5% 4.0 1.2 3.5 4% 3.0 1.0 3% 2.5 0.8 2% 2.0 0.6 1.5 1% 0.4 1.0 0.2 0% 0.5 0.0 -1% 0.0 -0.2 -2% -0.5 -0.4 2011 Jan Jul 2012 Jan Jul 2013 Jan Jul 2014 Jan Jul 2015 Jan Jul 2016 Jan Jul 2017 Jan 2011 Jan Jul 2012 Jan Jul 2013 Jan Jul 2014 Jan Jul 2015 Jan Jul 2016 Jan Jul 2017 Jan -0.6 2011 2012 2013 2014 2015 2016 2017 Jun United States (yoy) US 10-Yr Treasury Yield Curve Rates Federal Funds Rate ECB's Desposit Facility Japan (yoy) Japan 10-Yr Govt Bond Interest Rates BoJ Policy Rate Euro Area (yoy) Germany 10-Yr Govt Bond Interest Rate Source: Federal Reserve; ECB; BoJ; U.S. BLS; Eurostat; Statistics Bureau, Japan; U.S. Department of the Treasury; MOF, Japan Socio-Economic Research Centre 5
Wha hat co could uld trig trigge ger an anot othe her finan financial cial cr crisi isis? s? • The stock market value is nearly 150% higher than the nation’s GDP (WB) Market valuations • S&P 500 is trading at 25x trailing 12-month earnings (historical average of 16) • 83% of FM said the US stocks are overvalued (BoA) • Policy outcomes fall short of expectations or fizzled out Fading hopes • Rising US interest rates cause reassessment of price-earnings that could send asset prices instability • World debt at US$215 trillion or 325% GDP • Rising interest rates is a growing burden on debt-ridden emerging Bloated debt economies • Canada and China would face the highest risk of a financial crisis, owing to elevated debt levels • The impending rollback of the Dodd-Frank Act Lack of financial • Create the circumstances for financial instability due to excessive oversight risk-taking by banks and brokerages Socio-Economic Research Centre 6
The he Malaysi alaysian an ec econ onomy omy ge gets ts to to a roa oaring ring sta start in in 2017 2017 • Resilient consumer spending despite grapping with high cost of living and inflation. • Stronger private investment growth, underpinned by capital spending in the manufacturing and services sectors. • We have raised this year GDP growth estimate to 5.0% (4.3% previously) and 4.9% in 2018 (4.6% previously). 1Q17’s GDP growth higher than Unrelenting private Private investment bounced expected consumption growth back strongly in 1Q17 12.9 8.9 5.8 11.5 5.6 4.9 4.7 6.6 4.6 6.4 4.5 6.3 6.2 6.1 4.3 4.1 4.0 5.2 4.9 4.1 5.6 5.3 4.9 4.8 4.7 3.8 2.1 2015Q1 Q2 Q3 Q4 2016Q1 Q2 Q3 Q4 2017Q1 2015Q1 Q2 Q3 Q4 2016Q1 Q2 Q3 Q4 2017Q1 2015Q1 Q2 Q3 Q4 2016Q1 Q2 Q3 Q4 2017Q1 Real GDP (% YoY) Real Private Investment (% YoY) Real Private Consumption (% YoY) Source: Department of Statistics, Malaysia Socio-Economic Research Centre 7
Econ Economic omic ac activi tivity ty indica indicato tors sho show co cont ntinue inued exp xpan ansion sion Malaysia’s leading index suggests positive Industrial production grew steadily economic prospects RM billion 12% 120 4% 10% 119 3% 8% 118 2% 6% 117 1% 4% 116 0% 2% 115 -1% 0% 114 -2% -2% 113 -3% -4% 112 -4% -6% 2014 Jan Apr Jul Oct 2015 Jan Apr Jul Oct 2016 Jan Apr Jul Oct 2017 Jan Apr 2011 Jan Apr Jul Oct 2012 Jan Apr Jul Oct 2013 Jan Apr Jul Oct 2014 Jan Apr Jul Oct 2015 Jan Apr Jul Oct 2016 Jan Apr Jul Oct 2017 Jan Apr Leading Index (LHS) Changes in Leading Index (yoy) (RHS) Industrial Production (yoy) Imports of consumption, investment and Manufacturing sales trending higher intermediate goods 100% 20% 80% 15% 60% 10% 40% 5% 20% 0% 0% -20% -5% -40% -10% 2014 Jan Apr Jul Oct 2015 Jan Apr Jul Oct 2016 Jan Apr Jul Oct 2017 Jan Apr 2011 Jan Apr Jul Oct 2012 Jan Apr Jul Oct 2013 Jan Apr Jul Oct 2014 Jan Apr Jul Oct 2015 Jan Apr Jul Oct 2016 Jan Apr Jul Oct 2017 Jan Apr Import of Consumption Goods (yoy) Import of Investment Goods (yoy) Manufacturing Sales (yoy) Import of Intermediate Goods (yoy) Source: Bank Negara Malaysia; Department of Statistics, Malaysia Socio-Economic Research Centre 8
Househ Hou sehold old and and bu business siness loan loan growth th tr tren end Business loan growth eases; household loan Loan applications growth back to positive steady 14% 25% 20% 12% 15% 10% 10% 8% 5% 0% 6% -5% 4% -10% 2% -15% 0% -20% 2014 Jan Apr Jul Oct 2015 Jan Apr Jul Oct 2016 Jan Apr Jul Oct 2017 Jan Apr 2014 Jan Apr Jul Oct 2015 Jan Apr Jul Oct 2016 Jan Apr Jul Oct 2017 Jan Apr Household Sector (yoy) Business Sector (yoy) Loan Application (yoy) Loan approvals fell to negative in May Loan disbursements growth remains uneven 40% 25% 20% 30% 15% 20% 10% 10% 5% 0% 0% -10% -5% -20% -10% -30% -15% 2014 Jan Apr Jul Oct 2015 Jan Apr Jul Oct 2016 Jan Apr Jul Oct 2017 Jan Apr 2014 Jan Apr Jul Oct 2015 Jan Apr Jul Oct 2016 Jan Apr Jul Oct 2017 Jan Apr Loan Approval (yoy) Loan Disbursement (yoy) Source: Bank Negara Malaysia Socio-Economic Research Centre 9
For oreign eign dir direc ect in invest estmen ment stil still flo flowing ing in in de despite spite he head adwi wind nds Gross FDI is still higher than the Malaysia’s FDI stock in Malaysia: Diversified investors investments abroad RM billion 160 140 2.0% 120 6.3% 100 8.7% 80 13.0% 60 40 20.9% 20 0 2010 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017 (Jan-Mar) (Jan-Mar) Gross Foreign Direct Investment (FDI) Gross Direct Investment Abroad (DIA) Singapore Japan Netherlands United States China Source: Bank Negara Malaysia; MIDA Socio-Economic Research Centre 10
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