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/

Macroeconomics: Malaysian Sovereign Debt

As a Malaysian, nowadays we always hear that our country debt is skyrocketing. But, how and where can we obtain the latest exact figure?

First, we goto Bank Negara Malaysia website.
http://www.bnm.gov.my/

Then, "Publications & Research Paper"-> "Periodicals"-> "Monthly Statistical Bulletin" , we will see a lot of data. Let's filter out some of the important information.

3.8 External Reserve

From the above, we see that Malaysian External Reserve dropped to lowest at August 2015 and rebound back after September 2015. The rebound is due to the government rescuing effort by relocating back overseas investment assets to strengthen the country fundamental.

3.7 External Debt

As of 2010 3Q, Malaysian external debt is RM 427,023 million , while as of 2015 3Q, it has double to RM 852,864 million. Short term debt can be found at the last column "Overall external debt profile". It is about RM 373,005 million.

3.1.1 Federal Government Revenue

Federal Government Revenue records the income of government, for example corporate tax, personal tax, GST, Petroleum Tax and so on. We can see that from year 2015 to 2016, income from Petroleum Tax is decreasing, meaning that the dividend that government gets from Petronas which is much more bigger in amount is decreasing too.

3.1.4 Federal Government Debt

As of 2015 3Q, Federal Government Debt is RM 623,348 million, about 73% of total external debt. Federal Government Debt to GDP ratio always being used as an gearing ratio for a country to evaluate how much more debt the country can sustain.

3.1.5 Federal Government Debt Issued Domestically

As of 2015 3Q, it is RM 601,101 million, about 96% of total federal government debt.

3.1.6 Federal Government Debt : Classification by Currency and Remaining Maturity

As of 2015 3Q, Federal government debt in RM currency is RM 601,099 million.
We can see that Malaysian debt is skyrocketing and most of it is in RM currency.