Bank Negara Malaysia 2015 Annual Report highlights

Annual report focuses on slower economic growth, fiscal consolidation, property market and the country’s external debt.

Malaysian property market

* Over the past five years, annual completion of houses fell to 80,089 units, far below the 166,000 average net increase in the number of households annually.

* Average shortage of 85,911 housing units per year between 2011 and 2015.

* In 2014, median house price was RM242,000. This was RM76,940 more than an affordable price for a median household. Gap is most severe in Kuala Lumpur at RM215,680.

* About 202,571 new houses are needed annually 2016 to 2020 to match the estimated growth in households, about 2.5 times number of houses built annually in the previous five years.

* Oversupply of office space. In 2015, the Klang Valley recorded a vacancy rate of 20.4% for its office space versus regional average of 6.6% and national level of 16.3%.

* Oversupply in retail segment in the major Malaysian urban areas, particularly in Penang, Johor and the Klang Valley. Vacancy rates of 12.4% in Klang Valley to 28.2% in Penang are higher versus other regional economies.

* Oversupply of commercial space may have potential spillover impact on other sectors in the economy



* Malaysian economy to grow at 4.0% to 4.5% in 2016 from 5% in 2015.

* Agriculture to contract 0.3%; mining to expand 3.5%; manufacturing to grow 4.1%; construction to expand 7.9%; services to see 4.4% growth.

* Domestic demand continues as principal driver of growth.

* Private consumption growth to trend below its long-term average.

* Current account surplus to narrow to 1.0% – 2.0% of gross national income (GNI).

* Headline inflation higher at 2.5 – 3.5% in 2016 (2015: 2.1%), due mainly to adjustments in prices of several price administered items and weak ringgit exchange rate.
Monetary and fiscal policy

* Monetary policy in 2016 will focus on ensuring monetary conditions remain supportive of sustainable domestic growth with price stability.

* Fiscal policy in 2016 will continue to focus on fiscal consolidation.

* Fiscal resources in 2016 will focus on high impact infrastructure projects with larger multiplier effects.

*Contribution of oil-related revenue to total revenues fell to 21.5% in 2015 versus 30% in 2014. Expected to further decline to 13%-14% in 2016.

External debt

* Malaysia’s external debt RM833.7bil (US$192.2bil) or 72.1% of GDP as at end-2015. At end-2014, external debt RM747.5bil (US$211.8bil) or 67.5% of GDP.

* External debt profile healthy as more than half was of medium- to long-term tenure (57.8%). About 36% of the external debt is denominated in ringgit, mainly in the form of non-resident holdings of domestic debt securities and deposits.

* As at end-2015, offshore borrowing was low, about half of the total external debt and only 40.1% of GDP (Asian Financial Crisis (AFC): 60.0% of GDP).

* Offshore borrowing, denominated largely in foreign currency, remained manageable.

* Banks and corporations accounted for about 75% of Malaysia’s external financial assets at end-2015.

* External debt up 11.5% in 2015, mainly due to valuation effects from depreciation of ringgit against most currencies from January-September. Ringgit depreciation affected mainly offshore borrowing, which increased by RM92.6bil or 24.9% to RM463.6bil (end-2014: RM371.1bil).

* Excluding forex revaluation changes, offshore borrowing up 4.0% during the year, contributing two percentage points to overall rise in the external debt.

* Non-resident holdings of domestic debt securities fell by RM11.9bil or 5.3% to RM211.3bil, particularly in the first three quarters of the year (end-2014: RM223.3bil).

* As at end-2015, non-resident holdings of Bank Negara Monetary Notes (BNMNs) rose but remained low at RM23.7bil or 11.2% of non-resident holdings of domestic debt securities.

Bank Negara assets

* BNM’s total assets at RM440.6bil, with a net profit of RM7.8bil for FY ended Dec 31, 2015.

* BNM declared a dividend of RM3bil to the Government for the year 2015.