Monetary and financial developments in October 2021

Monetary and financial developments in October 2021

Embargo: For immediate release Do not publish or broadcast before 3:00 p.m. on Tuesday, November 30, 2021
November 30, 2021

Headline inflation rose to 2.9% in October

  • Headline inflation rose to 2.9% (September: 2.2%) mainly due to the expiration of the 3-month electricity bill discount under Pakej Perlindungan Rakyat dan Pemulihan Ekonomi (PEMULIH ). The cancellation of the electricity discount contributed 0.6 point to headline inflation.

  • Core inflation, measured by core inflation, was also slightly higher at 0.7% (September: 0.6%) due to the gradual reopening of the economy.

Strong export growth in October

  • Exports rose 25.5% (September: 24.7%), reflecting continued strength in demand in Malaysia’s products and export markets.

  • Going forward, export performance will continue to benefit from the bull cycle in global technology. In addition, strong demand for non-E&E manufactures and rising commodity prices will further boost export growth.

  • Nonetheless, the business outlook remains dependent on the evolution of the pandemic, as well as the continued development of global supply chain disruptions.

Higher growth in net funding

  • Growth in net funding edged up to 4.0% (September: 3.9%). This reflects higher growth in outstanding loans (October: 3.3%; September: 2.9%), in a context of slower growth in outstanding corporate bonds (October: 5.9%; September: 6.5%).

  • Growth in outstanding loans to households rose to 3.7% (September: 3.2%), against the backdrop of higher loan disbursements for all intents and purposes.

  • For businesses, growth in outstanding loans (October: 3.1%; September: 2.3%) continued to be supported by stronger growth in working capital loans (October: 5.9%; September: 4.5%), which remain above their historical average.

Domestic financial markets have been supported by more positive growth prospects

  • In October, the sentiments of global investors were driven by heightened expectations that the US Federal Reserve will begin to scale back its asset purchase program by the end of 2021. As a result, global bond yields, including the The benchmark yield of the 10-year AMS has increased in line with the increase in long-term yields of the US Treasury.

  • Domestically, investor sentiments have been bolstered by optimism about the prospects for domestic growth following the easing of restrictions on interstate and international travel from October 11, 2021.

  • As a result, the KLCI FBM rose 1.6% and the ringgit appreciated 1.1% against the US dollar. Rising commodity prices also further supported the ringgit exchange rate.

Sufficient liquidity of the banking system supported by sustained growth in deposits

  • The financing and liquidity positions of the banking system remained favorable to intermediation activity.

  • At the end of October 2021, the short-term liquidity ratio (LCR) of the banking system remained solid (October: 153.3%; September: 154.4%).

  • The loan-to-fund and loan-to-fund and equity ratios also remained stable at 81.6% and 71.1%, respectively.

The quality of bank assets remained solid

  • The overall gross bad loan ratio edged down to 1.5% (September: 1.6%), driven by the household segment. Banks continue to support viable borrowers facing temporary financial difficulties through repayment assistance programs.

  • The banks remain cautious in the provisioning of bad debts. The total provisions made for potential credit losses amount to 1.9% of total banking system loans.

See also:

Press release [PDF]

Bank Negara Malaysia
November 30, 2021

© Bank Negara Malaysia, 2021. All rights reserved.

Disclaimer

Central Bank of Malaysia published this content on November 30, 2021 and is solely responsible for the information it contains. Distributed by Public, unedited and unmodified, on November 30, 2021 07:10:14 AM UTC.


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