Bank Negara Malaysia’s latest financial developments for January reports that the headline inflation moderated to 2.3% in January 2022 from December being 3.2%, this was due mainly to the lower contribution from fuel and electricity inflation.
It was also partly offset by higher food and non-alcoholic beverages inflation (3.6%; December: 3.2%).
The central bank added that the underlying inflation, as measured by core inflation, increased to 1.6% (December: 1.1%), driven mainly by food away from home, and repair and maintenance for personal transport.
Wholesale and retail trade growth moderated in December 2021
- The Index of Wholesale and Retail Trade expanded at a more moderate pace of 0.6% in December 2021 (November: 2.4%). The slower growth was recorded across all sub-components.
- The index decelerated on a seasonally adjusted month-on-month basis (-0.4%; November: 1.2%), reflectking mainly on slowing activities in the retail segments, amid rising price pressures faced by consumers in the last quarter of the year.
Sustained net financing growth amid continued support from bank lending
- As for Net financing, the growth was sustained at 4.8% in January 2022, as outstanding loan growth increased (4.7%; December: 4.5%) amid some moderation in outstanding corporate bond growth (5.0%; December: 5.5%).
- Outstanding household loans grew by 4.7% (December: 4.3%), in line with the higher growth in loan disbursements (21.3%; December: 7.4%), which outpaced the growth in loan repayments (6.0%; December: 1.2%).
- Growth in outstanding business loans (5.3%; December: 5.0%) continued to be supported by working capital loans. By sector, it was mainly driven by the manufacturing and wholesale and retail trade sectors.
Financial markets driven by expectations of tighter global monetary conditions
- It said, domestic financial market conditions tightened in January 2022 as MGS yields rose and the domestic equity market declined. This was driven mainly by firmer expectations for a faster pace of US monetary policy tightening and the corresponding broad strengthening in the US dollar.
- During the month, despite marginal ringgit depreciation, Malaysia had continued to record non-resident portfolio inflows into the equities and bond market. Importantly, despite the weaker financial market performance, financial market adjustments remained orderly amid sufficient trading liquidity.
Banking system capitalisation remains strong
- Banks remain well-capitalised to withstand potential stress and continue supporting credit flows to the economy.
- Capital ratios rose slightly in January 2022 due to recognition of year-end profits, this was also partially offset by valuation adjustments on available-for-sale financial instruments.
- Bank Negara added the Banks’ loss-absorbing capacity remains strong, with excess capital buffers of RM131.9 billion.
The resilience of banks continued to be underpinned by sound asset quality
- Overall gross and net impaired loans ratios remained broadly stable at 1.4% and 0.9%, respectively. BNM adds the Banks continue to set aside additional provisions against potential credit losses. Total provisions currently stand at 1.9% of total banking system loans and 130.5% of impaired loans.
