On March 20, Bank Negara Malaysia (BNM) released its annual report for 2023, which can be viewed here. With so many pages, you might be wondering: why is this report important, and how is the information relevant to the everyman?
To help you out, here are seven key points from our central bank’s report, and how the data and information can be interpreted to help you in your career and financial journey.
1. Economic growth to improve in 2024
Economic growth or gross domestic product (GDP) came in at 3.7% in 2023. This year, the bank projects that the economy will grow at a higher range of 4-5%, which is in line with the 10-year historical average (2010-2022) of growth at 4.6%.
What should you infer from this? The economy will grow at a normal rate, which is good: stability is important for businesses, and growth spells good news for share prices and dividends.
If you are an investor, the market won’t be as volatile as it has been the past few years.
BNM attributes this growth in 2024 to projected stronger trade performance, while more tourists are expected to visit Malaysia.
2. Trade performance will be better
Malaysia’s exports declined by 7.9% last year, which makes sense given the overall global situation and impact on commodity prices.
This year, exports are expected to rebound to a positive growth of 4%, riding on the recovery of the technology cycle.
“The global tech upcycle is projected to be driven by the replacement cycle of consumer electronics and global inventory correction as firms replenish depleting stocks,” BNM writes.
“Structural factors will lend further support, including rising demand for electric vehicles, industrial automation, and the incorporation of artificial intelligence in consumer and industrial goods.”
Malaysia’s projected export growth is consistent with global trade growth, which is expected to rise to 2.9-3.4% this year from 0.4% in 2023.
3. More tourists
Cuti-cuti Malaysia! BNM is hopeful there will be more visitors this year – so much so that the tourism ministry anticipates arrivals to increase by 36% to 27.3 million. This is higher than the pre-pandemic level of 26.1 million in 2019.
As such, the government is promoting more tourism activities overseas, and has given 30-day visa-free opportunities to visitors from China and India.
4. Risk of global conflict and lower commodity prices
It’s not all sunshine and roses, however: BNM also flagged risks for the Malaysian economy, including global conflicts and wars:
- conflict between Russia and Ukraine (since 2022);
- tensions in the Middle East (since last October);
- worsening of US and China relations (since 2018).
These events disrupt supply chains and global trade, as well as trigger financial market volatility and higher commodity prices.
5. Inflation, inflation
For most people, BNM’s forecast of inflation between 2% and 3.5% this year might not make much sense. Last year, inflation was 2.5%.
What the bank is trying to say is, it is not sure how inflation will be in 2024 – hence the wide range. And one clue lies in the lack of info on fuel subsidy changes: if and when fuel prices rise, it would lead to higher prices for other products.
Right now, it’s almost guaranteed that inflation will be as high as 3.5% this year, and that petrol costs will increase.
6. Ringgit recovery
Bank Negara has not given an exact forecast of the ringgit’s expected performance, but nevertheless suggests a general direction – recovery. Here are their reasons:
- US monetary policy;
- trade rebound;
- higher economic growth in Malaysia.
Over the past few years, the ringgit has been weaker owing to higher US interest rates, which attracts investors to buy the dollar. This year, the US is planning on doing the opposite, which should theoretically bring investors back to the ringgit.
Malaysia’s 7.9% decline in exports last year is also part of the reason behind its weaker currency. The projected rebound this year, coupled with economic growth, means we can be cautiously optimistic that the ringgit will strengthen in 2024.
7. ESG for businesses
ESG stands for environmental, social, and governance. If you are a business owner, you will be glad to know that banks are committing more funding to help Malaysian businesses to transition to ESG practices, by:
- greening the value chain: providing technical training and tools to SMEs to report carbon emissions;
- standardising due diligence: helping businesses with the financing applications;
- providing a climate data catalogue: listing granular data for businesses.
According to BNM, the financial industry allocated RM240 billion to ESG last year, compared with RM110 billion in 2022.
This article was written by Su-Wei Ho for MyPF. To simplify and grow your personal finances, follow MyPF on Facebook and Instagram.