BNM: Net financing growth continues to support economic activity

KUALA LUMPUR: Malaysia’s net financing growth continued to support economic activity but moderated to 6.8 per cent in March this year from 7.4 per cent in February.

Bank Negara Malaysia (BNM) said the growth of net outstanding issuances of corporate bonds moderated to 14.2 per cent compared with 16.4 per cent in February, while the banking system’s outstanding loans growth was sustained at 4.4 per cent.

“Business loan growth remained steady at 1.9 per cent in March compared with two per cent in February. In particular, the growth of loans to small and medium enterprises increased to 5.8 per cent from 5.4 per cent in the preceding month.

“Household loan growth was stable at 5.6 per cent,” BNM said in its March 2018 monthly highlights.

The central bank said domestic financial markets were affected by volatile global conditions.

In March, BNM said the domestic financialmarketsrecordedpositive performance amid easing concerns over uncertainties surrounding the US monetary policy and USChina trade tensions.

“Slower wage growth in the US and the unchanged projected path of monetary policy normalisation by the Federal Reserve reduced uncertainty over the pace of interest rate increases in 2018,” it said.

On the ringgit, BNM said it appreciated by 1.6 per cent and the five-year Malaysian Government Securities yield declined by 8.1 basis points following nonresident inflows.

“Foreign exchange (FX) swap volume increased by US$17.9 billion (US$1 = RM3.91) to US$120.9 billion due mainly to an increase in interbank swap activity, corresponding to quarter-end increase in dollar demand by importers and corporates.

“This led to one-month implied dollar funding cost via FX swaps increasing by 2.0 basis points to 2.31 per cent as of end-March (end-February: 2.29 per cent) and the average one-month US dollar/ringgit swap points correspondingly declining three points to 40 points,” it said.

The central bank also said the banking system’s asset quality remained sound where the level of impaired loans marginally increased to 0.99 per cent of total loans net of individual impairment provisions (February: 0.94 per cent).

Since January 2018, it said the provisioning levels of banks increased as they refined their methodologies in estimating impairment provisions with the implementation of the Malaysian Financial Reporting Standards 9.

“The total provisions to total loans ratio sustained at 1.5 per cent,” it added.

In another development, BNM said the headline inflation for March remained low at 1.3 per cent.

“The transport category registered lower inflation of -1.5 per cent due to the decline in average domestic fuel prices during the month.

“Inflation in the food and nonalcoholic beverages category also moderated further to 2.8 per cent in March (February: 3.0 per cent), reflecting mainly the improved supply of fresh seafood,” the central bank said.

BNM said international reserves increased to US$110.0 billion as at April 13, this year.

“The reserves position remains adequate to facilitate international transactions. It is sufficient to finance 7.7 months of retained imports, significantly higher than the three-month international threshold, and is 1.1 times the short-term external debt,” it added. — Bernama