challenging times: impacts & issues 10 aug 2009. overview
TRANSCRIPT
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Challenging Times: Challenging Times: Impacts & IssuesImpacts & Issues
10 Aug 200910 Aug 2009
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Overview
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The Crisis Easing, But Still On
• recession easing in the US (%GDP in 2Q09: -1.0%, from 1Q09: -6.4%)
• 15 EU countries in recession, -4.9% in 1Q09 after -1.5% in 4Q08, worst since 1995; Germany and UK badly hit
• Japan slid -14.2% (annualised) in 1Q09, from -12.1% in 4Q08, worst drop since the 70s
• NIEs in recession but receding; Singapore (2Q09: -3.7%); Korea (2Q09: -2.5%)
• Growth stalling in Australia (1Q09: 0.4%) and New Zealand (1Q09: -2.2%)
• China registered a 7.9% growth in 2Q09.
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East Asia : Quarterly GDP Growth (%)
% y-o-y 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09
China 10.6 10.1 9.0 6.8 6.1 7.9
India 8.8 7.9 7.7 5.8 5.8
Hong Kong 7.1 4.1 1.5 -2.6 -7.8
Singapore 7.0 2.5 0.0 -4.2 -9.6 -3.7
Korea 5.8 4.3 3.1 -3.4 -4.2 -2.5
Taiwan 6.3 4.6 -1.0 -8.6 -10.2
Malaysia 7.1 6.6 4.8 0.1 -6.2
Indonesia 6.4 6.4 6.4 5.2 4.4
Thailand 6.1 5.3 3.9 -4.2 -7.1
Philippines 4.7 4.0 4.3 2.7 0.4
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Rocky Road to Recovery
Recovery will be bumpy due to:
• liquidity trap
• fiscal fatigue
• exchange rates going nowhere
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Malaysia: Comparing Crises
1998 Crisis Current Crisis
Origin of crisis Home-grown/ Regional
Externally induced/ Global
Recovery trend V-shape U-shape
Export performance growing falling sharply
Commodity prices high relatively lower
Bal. of Payments deficit surplus
Foreign Reserves low high
Banking sector weak much stronger
Stock market collapsed robust
FDI flows lacklustre worse
Unemployment mild high
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Malaysia’s Response
• Monetary Policy - interest rate cuts/ lower reserve ratio
• Fiscal Policy - 1st stimulus package (RM7 bil in Nov’08) - 2nd stimulus package
(RM60b in Mar’09)
• Liberalisation of 27 services sub-sectors, e.g.
• computer & related services, health & social services, tourism services, transport, recreational, business services & shipping.
• NEP reforms/ Ekuinas
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Impact of the global crisis on Malaysia
Malaysia: Total Exports and Industrial Production (%yoy)
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
J08 F M A M J J A S O N D J09 F M A M
Exports Industrial Production
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Malaysia: GDP Growth by Sector (%yoy)
5.5 5.76.7 7.3 7.4 6.7
4.7
0.1
-6.2
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09
RGDP Agriculture Mining Manufacturing Construction Services
%yoy
-17.6%
-5.2%
-4.3%
-0.1%
0.6%
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Malaysia: Exports & Imports
-40
-30
-20
-10
0
10
20
30
Jan-
07Fe
b-07
Mar
-07
Apr
-07
May
-07
Jun-
07Ju
l-07
Aug
-07
Sep
-07
Oct
-07
Nov
-07
Dec
-07
Jan-
08Fe
b-08
Mar
-08
Apr
-08
May
-08
Jun-
08Ju
l-08
Aug
-08
Sep
-08
Oct
-08
Nov
-08
Dec
-08
Jan-
09Fe
b-09
Mar
-09
Apr
-09
May
-09
Trade Balance(RM bil) Export(%yoy) Import(%yoy)
% yoy
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Export Growth by Destination
Source: DOS
-50
-40
-30
-20
-10
0
10
20
30
40
50
601Q
06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
Apr
-09
May
-09
Jun-
09
Japan% China% USA% EU%
% yoy
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CAB, Overall Balance & Foreign Reserves
-75.0
-50.0
-25.0
0.0
25.0
50.0
75.0
100.0
125.0
150.0
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09
Overall Bal (RM bil) CAB (RM bil) Reserves (US$ bil)
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Malaysia: Capital Flows (RM bill.)
-60.0
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09
Reverse Investments FDIs Portfolio flows
RM billion
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MIDA’s Foreign Manufacturing Approvals
0
5
10
15
20RM bill
Foreign approvals
Jan-May'09 Jan-May'08
• FDI approvals fell
76.4% in Jan-May’09
to a value of RM4.2
bill (Jan-May’08:
RM17.7 bill)
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MIDA’s Domestic Approvals
domestic approvals down 42.7% to RM4.8 bill in Jan-May’09 (Jan-May’08: RM8.4 bill)
0
1
2
3
4
5
6
7
8
9
Domestic Approvals
Jan-May'09 Jan-May'08
RM bill.
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Malaysia:Industrial Production Index (IPI)
-30.0
-25.0
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0Ja
n-07 Mar
May Ju
l
Sep
Nov
Jan-
08 Mar
May Ju
l
Sep
Nov
Jan-
09 Mar
May
IPI Mining Electricity Manuf
% yoy
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Malaysia: Foreign Reserves (US$ bill.)
80
85
90
95
100
105
110
115
120
125
130
Jun
-07
Jul-
07
Au
g-0
7
Sep
-07
Oct
-07
No
v-07
Dec
-07
Jan
-08
Feb
-08
Mar
-08
Ap
r-08
May
-08
Jun
-08
Jul-
08
Au
g-0
8
Sep
-08
Oct
-08
No
v-08
Dec
-08
Jan
-09
Feb
-09
Mar
-09
Ap
r-09
May
-09
Jun
-09
7.0
7.5
8.0
8.5
9.0
9.5
10.0
Reserves (US$ bill) Months of Imports
US$ bil months
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Stock Market Indices (Jan’08=1.00)
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
02-J
an-0
8
01-F
eb-0
8
02-M
ar-0
8
01-A
pr-
08
01-M
ay-0
8
31-M
ay-0
8
30-J
un-
08
30-J
ul-
08
29-A
ug
-08
28-S
ep-0
8
28-O
ct-0
8
27-N
ov-
08
27-D
ec-0
8
26-J
an-0
9
25-F
eb-0
9
27-M
ar-0
9
26-A
pr-
09
26-M
ay-0
9
25-J
un-
09
25-J
ul-
09
KLCI Sing TI KOSPI Hang Seng Jakarta Shanghai
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Stock Market Indices (% chg 2 Jan’09 – 3 Aug’09)
71.4
49.445.3
39.736.8
34.631.4
16.9
1.50.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Indon JCI PhilipPCOMP
Sing STI Thai SET HongKong HS
KoreaKOSPI
Mal KLCI Nikkei225
DowJones Ind
Ave
% chg
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Regional Currencies vs. US$ (Jan’08=1.00)
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
31/1
2/07
24/1
/08
19/2
/08
11/3
/08
2/4/
08
23/4
/08
15/5
/08
6/6/
08
27/6
/08
18/7
/08
8/8/
08
29/8
/08
22/9
/08
15/1
0/08
6/11
/08
27/1
1/08
19/1
2/08
14/1
/09
10/2
/09
3/3/
09
25/3
/09
15/4
/09
7/5/
09
28/5
/09
18/6
/09
9/7/
09
30/7
/09
0.80
0.90
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
RM SGD THB100 PHP100 KRW100 IDR100
regional currencies depreciate
against US$
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Regional Currencies vs. US$ (% chg 2 Jan’09 – 3 Aug’09)
9.8
8.0
2.72.2
1.6
-2.6-1.6-1.5
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Indonrupiah
Koreanwon
euro Thai baht Sing $ Philippeso
Mal RM Jap yen
appreciate against US$ (% chg)
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Malaysia: Leading Index & GDP Growth
-15
-10
-5
0
5
10
15
20
1Q
96
1Q
97
1Q
98
1Q
99
1Q
00
1Q
01
1Q
02
1Q
03
1Q
04
1Q
05
1Q
06
1Q
07
1Q
08
1Q
09
RGDP(%yoy) Leading Index Coincident Index
%change yoy
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Mini Budget 2009 (RM60 bil.)
25%
41%
17%
12%
5%
Fiscal injection Guarantee funds Equity investment PFI/ Off-budget Tax initiatives
RM15 b
RM25 b
RM10 b
RM7 b RM3 b
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Why the impact of the fiscal stimulus will likely be limited
• small size of fiscal spending
• slow implementation
• lack of fiscal discipline
• lack of transparency
• consumer cautiousness
• small domestic sector
• leakages and weak multipliers
• likely to kick in towards year-end
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Monetary Indicators
0
5
10
15
20
25
Ja
n-0
6 F M A M J J A S O N DJ
an
-07 F M A M J J A S O N D
Ja
n-0
8 F M A M J J A S O N DJ
09 F M A M J
M1 M2 M3
Slower growth in M1, M2 and M3
Source: BNM
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Real Interest Rate (%)
-8
-6
-4
-2
0
2
4
6
8
10
Ja
n-0
6
Ma
r
Ma
y
Ju
l
Se
p
No
v
Ja
n-0
7
Ma
r
Ma
y
Ju
l
Se
p
No
v
Ja
n-0
8
Ma
r
Ma
y
Ju
l
Se
p
No
v
J0
9
Ma
r
Ma
y
Real Interest Rate Inflation 3m Fixed Dep
Inflation
3mFD
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Malaysia: Loans Approved & Disbursed (%yoy)
-60
-40
-20
0
20
40
60
80
100
Ja
n-0
6
Ma
r
Ma
y
Ju
l
Se
p
No
v
Ja
n-0
7
Ma
r
Ma
y
Ju
l
Se
p
No
v
Ja
n-0
8
Ma
r
Ma
y
Ju
l
Se
p
No
v
Ja
n-0
9
Ma
r
Ma
y
% y-o-y
Loans disbursed Loans approved
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NPLs/Total Loans Ratio& Capital Adequacy Ratio
0
2
4
6
8
10
12
14
16
Ja
n-0
5
Ap
r
Ju
l
Oc
t
Ja
n-0
6
Ap
r
Ju
l
Oc
t
Ja
n-0
7
Ap
r
Ju
l
Oc
t
Ja
n-0
8
Ap
r
Ju
l
Oc
t
Ja
n-0
9
Ap
r
0
2
4
6
8
10
12
14
16
RWCR 3-month arrears 6-month arrears
per cent (%)
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… and inflation is falling
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
J08 F M A M J J A S O N D J09 F M A M J
CPI Core CPI Food PPI
%yoy
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Malaysia: Retrenchment
0
2,000
4,000
6,000
8,000
10,000
12,0001Q
05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
Total Retrenchment Agriculture
Mining Manufacturing
Construction Services
No of Workers
Source: Ministry of Human Resource
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Federal Government Fiscal Balance (% of GDP)
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Fiscal Balance (% of GDP) GDP growth%
per cent (%)
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Federal Government Debt (% of GDP)
0
10
20
30
40
50
60
70
80
90
100
110
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Fed Gov Debt (Total) Domestic Foreign
% of GDP
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Federal Gov’t Revenue (% share)
Oil + Gas rev (est)41%
Corporate taxes24%
Personal9%
Other revenue26%Oil + Gas rev (est)
16%
Corporate taxes23%
Personal12%
Other revenue49%
1995 (RM51 b) 2008 (RM160 b)
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Fiscal Deficit Scenario (RM mil)
-200,000
-150,000
-100,000
-50,000
0
50,000
100,000
150,000
200,000
250,000
300,00020
05
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Surplus/Def Revenue Oper. Expen. Dev. Expen.Trend(Rev) Trend(Op. Exp.) Trend(Dev. Exp.)
RM mill
-7.6%-9.5%
-11%
-15.2%
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MIER 2Q09 INDICESMIER 2Q09 INDICES
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Business Conditions Indexa glimmer of hope
40
50
60
70
80
90
100
110
120
130
2002
:1Q 2 3 4
2003
:1Q 2 3 4
2004
:1Q 2 3 4
2005
:1Q 2 3 4
2006
:1Q 2 3 4
2007
:1Q 2 3 4
2008
:1Q 2 3 4
2009
:1Q 2
• BCI gains 41.1 points q-o-q
• All eight sub-indices higher q-o-q
• Only exp. production rose y-o-y
• Lower inventory levels &wage pressures, increased hirings
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50
60
70
80
90
100
110
120
130
140
150
1Q
03 2 3 4
1Q
04 2 3 4
1Q
05 2 3 4
1Q
06 2 3 4
1Q
07 2 3 4
1Q
08 2 3 4
1Q
09 2
Consumer Sentiments Index (CSI)the smiles are back
• CSI breaches 100-point threshold level after four consecutive quarters in the red
• Jobs and incomes lift consumer spirits, spending plans on again
CSICSI
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CEO Index & GDP Growth
-10
-8
-6
-4
-2
0
2
4
6
8
10
'04 '05 '06 '07 '08 '09
0
20
40
60
80
100
120
140
GDP% CEO-INDEX
GDP% CEO Index
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MIER’s Sectoral Indices & GDP%
0
20
40
60
80
100
120
140
160
180
01:Q
2 Q3
Q4
02:Q
1 Q2
Q3
Q4
03:Q
1 Q2
Q3
Q4
04:Q
1 Q2
Q3
Q4
05:Q
1 Q2
Q3
Q4
06:Q
1 Q2
Q3
Q4
07:Q
1 Q2
Q3
Q4
08:Q
1 Q2
Q3
Q4
09:Q
1 Q2
-13
-11
-9
-7
-5
-3
-1
1
3
5
7
9
GDP%(RHS) Auto Index(LHS) Retail Trade Index(LHS)
Res. Property Index(LHS) Tourism Index(LHS)
GDP%Index
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MIER ForecastMIER Forecast
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World Economy
3.64.1 4.2
2.83.7
4.7
2.22.8
3.6
4.9 4.55.1 5.0
1.9
-2.9
2.0
-8
-6
-4
-2
0
2
4
6
95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
% g
row
th
World GDP USGDP% EU-GDP% JapGDP%
Source: IMF Jul’09, World Bank & MIER
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Asian Economies
-8-6-4-202468
101214
95 96 97 98 99 '00
'01
'02
'03
'04
'05
'06
'07
'08
'09f
'10f
% g
row
th
China Korea Singapore
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Malaysia: Growth by Sector services sector is the critical growth driver
manufacturing sector to contract in ‘09, as export demand falls
stimulus packages and corridor projects to support construction activity
-15
-10
-5
0
5
10
Agriculture Mining Manuf Construction Services
% growth
'08 '09f '10f
Source: DOSM, MIER
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Malaysia: Real GDP Growth Global downturn to adversely affect Malaysia’s GDP growth Malaysia’s GDP projected to contract by 4.2% in ‘09, but to recover
gradually to 2.8% in ‘09 (‘08: 4.6%)
2.8
-8
-6
-4
-2
0
2
4
6
8
10
98 99 00 01 02 03 04 05 06 07 08 09f 10f
% chg
-7.4
6.1
8.9
0.5
5.45.8
6.8
5.35.8
6.3
4.6
-4.2
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Currency volatilityCurrency volatility
Downside Risks
DownsiDownside Risksde Risks
Politicalclimate
Politicalclimate
Wideningfiscal deficit
Wideningfiscal deficit
Rise of protectionism
Rise of protectionism
Protractedglobal recession
Protractedglobal recession H1N1H1N1
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Major Concerns• depressed external demand
• “Double-dip” recovery
• lethargic FDI inflows
• H1N1
• swelling fiscal deficit
• over-dependence on oil revenue
• liquidity trap
• asset bubble
• ringgit weakness
• weak commodity prices
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Mitigating Factors
• East Asian vibrancy
• fiscal stimulus & liberal investment policies
• policy reforms
• sound banking sector
• potential strength of ringgit
• comfortable reserves
• high savings rate
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