Malaysia’s broad money supply growth moderated in April as slower deposit expansion and weaker foreign asset growth weighed on liquidity conditions, although loan growth accelerated to its strongest pace in 15 months, according to Kenanga Research.
Broad money (M3), a key measure of liquidity in the economy, expanded 5.0% year-on-year in April, easing from 5.5% in March.
The moderation was largely attributed to slower growth in demand deposits, which rose 10.6% compared with 13.3% in March, after previously reaching their highest level since May 2021. Growth in foreign currency deposits also slowed to 3.2% from 5.9% previously.
Together, these two components contributed 2.5 percentage points to M3 growth, down from 3.4 percentage points in March.
On a month-on-month basis, money supply was virtually unchanged, rising by just RM0.5 billion or 0.02% after expanding 1.4% in March.
Kenanga noted that weaker foreign assets were a key factor behind the softer growth in money supply.
Net foreign assets expanded only 0.6% year-on-year in April, sharply lower than the 2.9% growth recorded in March. The slowdown reflected weaker growth in banking system foreign assets and a fourth consecutive monthly decline in Bank Negara Malaysia’s net foreign asset position.
Meanwhile, net claims on the government rose 2.2% from 0.7% previously, largely due to a sharp decline in government deposits.
Net claims on the private sector improved slightly to 6.4% from 6.2%, supported by continued expansion in both lending and private sector securities holdings.
Despite the moderation in money supply growth, loan growth strengthened to 5.6% year-on-year in April, up from 5.4% in March and marking the fastest pace since January 2025.
The improvement was driven by stronger borrowing for non-residential property purchases, which expanded 7.5%, the highest level in 12 months, as well as increased demand for working capital financing.
By sector, lending growth was led by the real estate industry and wholesale and retail trade of motor vehicles, reflecting continued business activity in selected segments of the economy.
However, month-on-month loan growth slowed significantly to 0.2%, adding only RM4.4 billion in new loans compared with RM24.2 billion in March.
Deposit growth also moderated, easing to 3.4% year-on-year from 4.2% previously following March’s strong increase.
The slowdown reflected weaker growth across several categories, including demand deposits, foreign currency deposits, fixed deposits and repurchase agreements.
On a monthly basis, deposits contracted 0.5%, equivalent to RM13.9 billion, reversing the RM50.7 billion expansion recorded in March.
Looking ahead, Kenanga maintained its 2026 loan growth forecast of between 5.0% and 5.5%, compared with 4.8% growth in 2025.
The research house expects household spending to remain the primary driver of credit demand, supported by stable employment conditions and income growth.
However, business borrowing is likely to remain cautious amid rising operating costs, softer business sentiment and continued global economic uncertainty.
Kenanga noted that higher energy prices could increase both household living costs and business expenses, potentially dampening discretionary spending and borrowing activity during the second half of the year.
Household loans, which account for nearly 60% of total banking system loans, remained resilient with growth holding steady at 5.2% in April.
The research firm also highlighted that government support measures, including RM5 billion in financing facilities for micro, small and medium enterprises (MSMEs) and an additional RM5 billion in guarantees under the Syarikat Jaminan Pembiayaan Perniagaan (SJPP), should help sustain business access to financing and mitigate downside risks to credit growth.
On monetary policy, Kenanga expects Bank Negara Malaysia to keep the Overnight Policy Rate (OPR) unchanged at 2.75% throughout 2026.
While inflation is expected to trend higher in the coming months due to rising energy-related costs, the research house believes the pressures are largely supply-driven rather than demand-led.
“With external risks remaining elevated, Bank Negara is likely to maintain its current policy stance to support economic growth while preserving financial stability,” Kenanga said.
