Page 124 - Malaysia 2016
P. 124
2016
sustainable and that the risks of financial To further ensure sufficient liquidity in
imbalances emerging was minimised. the domestic financial system, the
Bank reduced the Statutory Reserve
Ringgit developments in 2015 were Requirement (SRR) ratio from 4.00% to
heavily influenced by portfolio 3.50%, effective from 1 February 2016.
investment flows arising primarily from With the continued ample liquidity
external factors. For the year as a conditions and orderly financial market
whole, the ringgit depreciated by conditions, the financial intermediation
18.6% against the US dollar. The broad process continued to function smoothly,
depreciating trend in the ringgit was with financing activity remaining at a
an outcome of several key factors. The healthy level.
anticipation and eventual normalisation
of US interest rates had resulted in a Net financing to the private sector
rebalancing of portfolio investments expanded at an annual rate of 8.2% in
towards US financial assets and led to a 2015 (2014: 8.6%). The more moderate
significant appreciation of the US dollar. pace of growth during the year was
Furthermore, there were significant driven by lower growth of loans to the
portfolio outflows from many emerging household sector. The lower growth in
market economies, including Malaysia. household debt was partly an outcome
Concerns over the impact of lower of the pre-emptive measures by the
prices of crude oil and commodities on Bank and the Government since 2010
the domestic economy and negative to ensure the sustainability of household
domestic sentiments also led to a larger debt. Financing to businesses, however,
depreciation in the ringgit against remained robust and in line with
other currencies. For an open economy economic activity, with higher growth
like Malaysia, the depreciation of the in outstanding loans and net issuances
ringgit was a necessary adjustment of private debt securities (PDS) by
to the external headwinds facing the businesses. Financing to the small and
economy. A weaker ringgit helped to medium enterprises (SMEs), in particular,
mitigate potential losses to exporters continued to record strong growth in
from lower commodity prices by 2015 driven mainly by
increasing ringgit earnings from loans to the services sector.
currency conversions. Nevertheless, the
massive shifts in cross-border capital Outlook for the Malaysian Economy in
flows during the year caused the 2016
ringgit to become undervalued and
misaligned. The international economic and
financial landscape is likely to remain
In 2015, the Bank’s monetary operations challenging in 2016 and will be a key
were focused on managing the factor that will influence the prospects of
reduction in liquidity within the banking the Malaysian economy. Depending on
system caused by the large external their nature, global developments can
outflows. Contractionary pressures on pose both upside and downside risks to
liquidity were offset by the net release of the Malaysian economic growth. The
funds placed with the Bank. In addition, Malaysian economy is expected to grow
the issuance of Bank Negara Monetary by 4.0 - 4.5% in 2016. Domestic demand
Notes (BNMNs) was replaced with will continue to be the principal driver
other instruments of shorter maturities of growth, sustained primarily by private
to enable banks to readily meet any sector spending. Private consumption
sudden withdrawals of funds caused growth is expected to trend below its
by the outflows. The Bank also used its long-term average, reflecting largely
monetary operations, including the the continued household adjustments
reverse repo facility, to provide liquidity to an environment of higher prices and
to the banking system when needed. greater uncertainties. These moderating
sustainable and that the risks of financial To further ensure sufficient liquidity in
imbalances emerging was minimised. the domestic financial system, the
Bank reduced the Statutory Reserve
Ringgit developments in 2015 were Requirement (SRR) ratio from 4.00% to
heavily influenced by portfolio 3.50%, effective from 1 February 2016.
investment flows arising primarily from With the continued ample liquidity
external factors. For the year as a conditions and orderly financial market
whole, the ringgit depreciated by conditions, the financial intermediation
18.6% against the US dollar. The broad process continued to function smoothly,
depreciating trend in the ringgit was with financing activity remaining at a
an outcome of several key factors. The healthy level.
anticipation and eventual normalisation
of US interest rates had resulted in a Net financing to the private sector
rebalancing of portfolio investments expanded at an annual rate of 8.2% in
towards US financial assets and led to a 2015 (2014: 8.6%). The more moderate
significant appreciation of the US dollar. pace of growth during the year was
Furthermore, there were significant driven by lower growth of loans to the
portfolio outflows from many emerging household sector. The lower growth in
market economies, including Malaysia. household debt was partly an outcome
Concerns over the impact of lower of the pre-emptive measures by the
prices of crude oil and commodities on Bank and the Government since 2010
the domestic economy and negative to ensure the sustainability of household
domestic sentiments also led to a larger debt. Financing to businesses, however,
depreciation in the ringgit against remained robust and in line with
other currencies. For an open economy economic activity, with higher growth
like Malaysia, the depreciation of the in outstanding loans and net issuances
ringgit was a necessary adjustment of private debt securities (PDS) by
to the external headwinds facing the businesses. Financing to the small and
economy. A weaker ringgit helped to medium enterprises (SMEs), in particular,
mitigate potential losses to exporters continued to record strong growth in
from lower commodity prices by 2015 driven mainly by
increasing ringgit earnings from loans to the services sector.
currency conversions. Nevertheless, the
massive shifts in cross-border capital Outlook for the Malaysian Economy in
flows during the year caused the 2016
ringgit to become undervalued and
misaligned. The international economic and
financial landscape is likely to remain
In 2015, the Bank’s monetary operations challenging in 2016 and will be a key
were focused on managing the factor that will influence the prospects of
reduction in liquidity within the banking the Malaysian economy. Depending on
system caused by the large external their nature, global developments can
outflows. Contractionary pressures on pose both upside and downside risks to
liquidity were offset by the net release of the Malaysian economic growth. The
funds placed with the Bank. In addition, Malaysian economy is expected to grow
the issuance of Bank Negara Monetary by 4.0 - 4.5% in 2016. Domestic demand
Notes (BNMNs) was replaced with will continue to be the principal driver
other instruments of shorter maturities of growth, sustained primarily by private
to enable banks to readily meet any sector spending. Private consumption
sudden withdrawals of funds caused growth is expected to trend below its
by the outflows. The Bank also used its long-term average, reflecting largely
monetary operations, including the the continued household adjustments
reverse repo facility, to provide liquidity to an environment of higher prices and
to the banking system when needed. greater uncertainties. These moderating
