Gradual improvement to drive economy further in 2021 – BNM


KEY economic indicators have shown a gradual recovery driven by the recovery in global growth as well as continued domestic support, which will edge up the economic outlook in 2021.

Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus (picture) said the reopening of economic activities, a concurrent improvement in the labour market, as well as strong financing conditions were indications of expansion.

“Net financing have seen a steady increase driven by higher loan growth by businesses, for disbursement for working capital, due to cheaper borrowing cost,” she said in a press conference to announce the country’s second-quarter (Q2) and first-half gross domestic product (GDP) performance today.

Net financing to the private sector continued to expand at 3.7 per cent on an annual basis, while growth in outstanding business loans increased from 3.4 per cent in Q1 2020 to 3.9 per cent in Q2 2020, she said.

“On a monthly basis, disbursements for business loans recovered to normal levels in June from low levels during the Movement Control Order in April and May.”

Nor Shamsiah said the banking sector remained resilient even though the COVID-19 pandemic has caused economic activities to grind to a halt while capital buffers remained adequate despite the stress it went through.

“The transition of loan repayment from the blanket moratorium to targeted approach will continue to support the economy as it would cushion the impact especially for those who face job loss, and now banks are actively engaging affected borrowers for assistance,” she said.

Nor Shamsiah also added that in the case of another resurgence of COVID-19 outbreak, there is room for targeted policy measures to complement earlier actions.

On the capital market, she said the equity and ringgit volatility would continue as the market remains sensitive due to lingering concerns.

“So far, the ringgit has seen an appreciation and the equity market has improved due to demand by domestic investors.”

On economic outlook, she said it would be underpinned by global conditions and supported by new investments especially in technology and healthcare products as well as commodity-related expansion.

She emphasised that this would push the local economy forward as it is expected to stage a rebound of 5.5 per cent to 8.0 per cent growth next year.

“This will also be driven by stronger domestic demand as the job market has seen gradual improvement backed by initiatives placed under PENJANA (National Economic Recovery Plan) and PRIHATIN (Prihatin Rakyat Economic Stimulus Package), which have helped to support the local market during the COVID-19 pandemic,” she said.

Meanwhile, Malaysia’s GDP in Q2 saw a sharp contraction of 17.1 per cent, the first double-digit contraction recorded since Q4 1998.

Despite the downturn, BNM is optimistic that the economy is expected to see gradual improvement in the second half of this year, before recovering fully next year with an expected growth of between 5.5 per cent and 8.0 per cent.