Outlook of Domestic Market ( Macroeconomics Approach)

Consumer Price Index (CPI) released by DOSM for May, June, July 2021 are 4.4%, 3.4% and 2.2% respectively. It shows a decreasing trend.

While, on the other hand, Producer Price Index (PPI) in manufacturing shows an upward trend, 11.9%, 11.5% and 11.7% respectively for May, June, July 2021 .

It is obvious that the downtrend of recent CPI is due to MCO 3.0 lockdown which suppress spending among consumers. As a matter of fact, the actual CPI  is rising behind with the skyrocketing in sea freight rate and increase in raw materials.

Since the beginning of the year, sea freight cost has been increasing due to disruption by the pandemic worldwide. Factories of different countries and areas shut down and reopen on and off. Thus, causing delay in goods finished which then interfere sea freight shipping and then the cost.

Let's see the latest data released by BNM. 

As of 2021 2nd Quarter, total Federal Government Debt is RM 958.3 billion

GDP for 2020 is RM 1342 billion.

So,   total Federal Government Debt / GDP = 71.4%

While, actual total debt/GDP around  98~99%

(Included Government Guarantees and other liabilities: 1MDB ......)

That's why after huge bailout to the domestic market during MCO 1.0 ,  government no longer has more bullets to save the market and people for MCO 3.0

The strategy used during MCO 3.0  is based on 20/80 theory , allowing factories (which contribute to most of GDP) to operate while closing micro & SME (which consists of more than 50% of employment market.)

As of 2021, Malaysia consists of 30.0 million citizen and 2.7 million non-citizen.

As of June 2021, labour force consists of 16.07 million people.

So, theoretically, there will be less than 25% of the population moving around during MCO 3.0 

On the other hand, we can see a weak trend of RM currency.

And, the upcoming reduction of quantitative easing (QE) by FED and the rate hikes will make the situation worse. 

While, the support of RM currency from both Crude Oil & CPO Price are fragile.

 KLSE CPO future shows a down trend of CPO price (current at high price due to lack of foreign workers to harvest, then lead to reduction of existing CPO stock in the market)

Current Crude Oil Price at 69.10. It may be maintained around this level by OPEC so as to align with the economy recovery worldwide from the pandemic.

Refering to above mentioned,

total Federal Government Debt / GDP = 71.4%

actual total debt/GDP around  98~99%

We can foresee that there will be the coming back of GST after election ( July 2023 or earlier), whether current government or opposition.

While, the main and biggest threat is still the new variant that emerges from time to time. 

Chan Hang 

Sept 2021

Reference

1) https://tradingeconomics.com/

2) https://fbx.freightos.com/ 

3) https://www.bnm.gov.my/

4) https://www.dosm.gov.my/

5) https://finance.yahoo.com/

6) https://www.bursamalaysia.com/