KUALA LUMPUR: Bank Negara Malaysia (BNM) has forecast the country’s economy to grow at a more conservative 4.5% to 5.5% this year due to risks from the global economy and external factors.
The central bank’s forecast was slightly below the forecast of 5% and 5.5% envisaged by the Federal Government in the Economic Report 2013/14 released last year.
However, this is still stronger when compared with the growth of 4.7% in 2013.
According to the BNM Annual Report released Wednesday, the manufacturing and services sectors will underpin the country’s economic growth.
BNM expects the manufacturing sector to grow at 3.5% in 2014 compared with 3.4% in 2013 and the services sector to expand by 6.2% (2013: 5.9%).
As for agriculture, it is expected to grow at a faster pace of 3.8% (2013: 2.1%) while mining and quarrying is forecast to expand at 1.6% from 0.5%. Construction could see slower growth at 10% compared with 10.9%.
Following are the highlights of the report.
The headline inflation is expected to average 3% to 4% due mainly to domestic cost factors. This is higher than the 2%-3% as forecast in the Economic Report 2013/2014.
BNM said the factors for the higher inflation for 2014 were due to recent price adjustments arising from the subsidy rationalisation and spillover effect.
New reference rate for banks
There will be the introduction of the Base Rate for the pricing of floating-rate bank loans. The Base Rate will replace the Base Lending Rate that has been in place for more than 30 years.
E-payment via Interbank Giro
BNM has deferred the implementation of the Interbank Giro (IBG) from April 1, 2014 to Jan 1, 2015 as not all had the required systems or devices to accept e-payments.
The IBG is to encourage the switch from cheques to IBG services. It costs RM3 to process a cheque while the cost of executing transactions using the IBG was reduced to 10 sen.
Bank Negara said that on the payment side, 95% of the government agencies were equipped to handle transactions via e-payments. However, on the receiving side, only 65% were ready to handle the e-payments.
Outstanding bank lending to the household sector grew 12% to RM690.6bil or 70.2% of GDP as at end-2013. The growth was mainly due to lending for buying residential and non-residential properties, mainly shops.
Lending growth in these segments has declined from the peak growth rates recorded in 2010.
Residential property financing remained relatively stable over the last four years, while non-residential property financing showed a declining trend.
The composition of bank lending to households remained broadly unchanged, with lending for the purchase of properties representing 56.5% of total household loans from the banking system.
BNM said many Malaysians also view owning or investing in properties as an important financial goal in preparation for marriage and retirement, to finance education of children, or to provide a form of financial security for the next generation.
Financial institutions’ exposure to property sector
Total exposures of financial institutions to the property sector expanded by 14.3% (2012: +15.1%) during the year to RM553.5bil, or 21.9% of total financial system assets.
Of this amount, aggregate exposures of the banking system to the property market increased by 14.7% to RM526.2 billion, or 25.4% of total assets.
About 65% of such exposures comprised end-financing extended for the purchase of residential properties, while about 29% was for the acquisition of non-residential properties.
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