2030年可持续发展议程被誉为“我们的共同利益，确保我们的共同生存”。这不再只是一种雄心勃勃的情绪。尽管还没有人能够预测COVID-19本身是否会对经济和生活造成损害，以及政策应对措施所引发的损害，最终将证明干预性过度死亡和其他困难的更大驱动力，但我们可以假设，间接影响将主导世界上许多低收入国家和较贫穷社区长期。世界上的大部分地区仍处于这场具有多维多米诺骨牌效应的COVID-19灼热体验之中。特殊的不确定性围绕着我们的生活、生计和全球秩序的哪些主要特征将永久性地改变或实际上已经改变。然而，新全球环境的一些基本轮廓比其他轮廓更容易追溯，即使它们的具体后果仍然是推测性的。在这篇文章中，我们回顾了柯维德危机的一些特征，并将其叠加在早期观察到的趋势和动态上，探讨了这场大流行所带来的发展机构战略方向的一些变化和趋势。我们以双边发展机构需要应对的三个基本挑战作为结束，这些挑战将确定它们在可预见的未来的发展合作和国际伙伴关系。COVID-19以惊人的速度在全球范围内引发了巨大的经济冲击，导致了许多国家的严重衰退。它对妇女、年轻人、穷人、非正规就业者以及在接触密集型部门工作的人产生了毁灭性的影响。到2020年，绝大多数新兴市场和发展中经济体的人均收入缩水，数百万人重新陷入贫困。国际货币基金组织(IMF)估计，2020年全球GDP将萎缩3.5%，这是自第二次世界大战以来最严重的全球衰退。相比之下，在2009年全球金融危机期间，世界经济产出仅下降了0.1%，尽管这个数字掩盖了各国之间的巨大差异。这种流行病已将非洲推入25年来的首次衰退。到2020年，撒哈拉以南非洲地区的人均实际国内生产总值预计将收缩2.6%，到2021年底，很可能已经回落到2008年的水平。因此，COVID-19可能使非洲多达3400万人陷入极端贫困，抹去至少5年来在消除贫困方面取得的进展。
2021-04-06
17页
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在最近由世界可持续发展商业理事会主办的一次活动上，Works Design的可持续发展总监Wesley Gee与WBCSD的Johanna Thtinen就重要性、智能报告和可持续发展传播的未来进行了交谈。在报告重要性方面，您认为最大的挑战是什么?公司能做些什么?大多数公司通过研究可持续性会计准则委员会(SASB)所揭示的主题，严重依赖于财务上重要的东西(而不是从更广泛的角度来看重要的东西)，主要是因为这样做更容易，而且会取悦投资者关系部的同事，但实际上可能会疏远其他人。公司有机会让自己的员工和最有影响力的利益相关者(如客户、合作伙伴、投资者)考虑他们的优先事项和期望，并利用这段时间了解他们希望如何获得信息和参与，从而超越客观的调查/报告信息，加强联系。此外，在一份报告中，公司有机会提供更多的背景信息，而不仅仅是矩阵和方法的基本描述。特别是对于复杂的组织，我们已经看到一些强有力的报告描述了为什么特定的主题被认为是重要的(从其他人的角度来看)，并且基于他们经营的地区或他们支持的部门描述了为什么一些重要的主题比其他主题更重要。企业如何着手解决这些问题，并决定什么形式和渠道是最好的?有时，公司只需要在其沟通渠道中进行更多的合作，这通常涉及公司沟通、投资者关系、社区关系、内部沟通和可持续发展同事，以确定关键受众，了解他们希望如何获得信息/参与(例如，社交媒体、报告、，网络研讨会、网站)以及这些团体最感兴趣的话题。没有银弹，但这些战术的组合总是首选。在一开始就有一个伟大的计划，承认这些受众和他们的差异将导致更周到地使用网络，社会和报告。这就是为什么我们有许多客户，我们可以开发一个完整的报告PDF，并辅以一个摘要微型网站，易于共享的视频和插图，以及一个三到六个月的社会日历，与资产，达到特定主题的关键受众，而不是只有一个基本的“嘿，读我的报告!“信息。
2021-04-02
22页
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除了收入损失和成本增加外，企业还面临着价值链中断、资金撤出以及危机导致的严重贸易收缩。旅游业等面对面服务行业的公司受到的打击尤为严重。微型、小型和中型企业(MSME)和妇女主导的小型和中型企业(WSM.
2021-03-22
136页
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正如我们说的那样，我们将摆脱到2020年，我们满怀信心地进入2021年，新的市场和商业周期已经出现。经济从新冠肺炎引发的衰退的深渊中走出来，进入了一个漫长的复苏阶段，其间不可避免地会出现间歇性复苏，正如2020年底的经历一样。美国要恢复其充分的生产能力和充分的就业可能还需要数年时间。尽管如此，市场仍将关注未来几年经济活动的改善。类似的故事已经在亚洲大部分地区上演。我们期待复苏交易以通常的形式出现，包括温和陡峭的收益率曲线，从稳定到疲软的美元，以及股市表现优于周期性的部分。在以下展望中，我们通过回答所有投资者都需要评估的持续问题，并提供提供答案的框架和图表，阐明我们对未来12个月的看法。
2021-03-18
20页
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亚洲开发银行在继续努力消除亚太地区极端贫困的同时，展望了一个繁荣、包容、坚韧和可持续的亚太地区。它通过提供贷款、技术援助、赠款和股权投资来帮助其成员和合作伙伴，以促进社会和经济发展。亚行通过促进政策对.
2021-03-17
45页
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作为2030年战略的一部分，亚洲开发银行(ADB)提出了建设繁荣、包容、有韧性和可持续的亚太地区的愿景，已确认承诺帮助发展中成员国加强国内收入动员，提高技术和创新的可及性，并开展能力建设。国内公共资源.
2021-03-17
93页
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Economic Outlook2021 Copyright Reserved All rights reserved. No part of this publication may be reproduced, stored in retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording and/or otherwise without prior permission of: Chief Economist, Fiscal and Economics Division, Ministry of Finance Malaysia, Level 9, Centre Block, Kompleks Kementerian Kewangan, No. 5, Persiaran Perdana, Precint 2, Federal Government Administrative Centre, 62592 Putrajaya. Fax: 03-88823881 E-mail: bfetreasury.gov.my The Economic Outlook is an annual publication released on the same day as the Annual Budget. The 2021 edition is released on 6 November 2020. Sale copies are obtainable from: and MPH Book Store. This publication is also available for download at: www.treasury.gov.myPRINTED BYPERCETAKAN NASIONAL MALAYSIA BERHADKUALA LUMPUR, .myemail: .myTel.: 03-92366895 Fax: 03-92224773economic outlook 2021iiiPRIME MINISTER MALAYSIAFOREWORD“Safeguard lives and protect the livelihood of the rakyat”The year 2020 began with nations around the world gearing up to contain the spread of COVID-19 pandemic by undertaking various measures which include enforcing movement restrictions and closing borders. The unprecedented situation has severely impeded overall global economic activities with the world economy experiencing a sharp contraction that economists believe to be worse than the Great Depression in the 1930s. Being a highly open economy, Malaysias GDP has also been adversely affected.From the onset, the Government has been resolute in its stand to safeguard lives and protect the livelihood of the rakyat. We seek to address the pandemic through a systematic approach that focuses on three pillars: safeguard the rakyat, support businesses and finally, strengthen the economy. These three pillars underline all subsequent economic stimulus packages that we have unveiled throughout the year.Apart from implementing various stages of the Movement Control Order (MCO) since March 2020 to curb the transmission of COVID-19, the Government has embarked on a series of economic stimulus measures totalling RM305 billion entailing fiscal and non-fiscal measures. In this regard, the Economic Stimulus Package Prihatin Rakyat (PRIHATIN) totalling RM250 billion was unveiled in March 2020, followed closely by the PRIHATIN SME worth RM10 billion in April. In June, we announced the Short-Term Economic Recovery Plan (PENJANA) totalling RM35 billion and in September, we released the RM10 billion additional package, dubbed the PRIHATIN Supplementary Initiative Package (KITA PRIHATIN). Under the PRIHATIN package, the nations healthcare services were strengthened by additional allocation for among others, medical equipment, enhancing testing capacity and developing the MySejahtera application for contact tracing. PRIHATIN also provided immediate financial assistance to ease the cash flow burden of the rakyat and businesses, including employment retention support, deferment or restructuring of loan repayments as well as provision of credit facilities. Furthermore, we implemented the PRIHATIN SME to ensure the survival and ease the financial burden of SMEs.When the COVID-19 curve flattened, the subsequent strategy was to reopen the economy by allowing the rakyat to return to work and companies to resume operations. Hence, the PENJANA package was announced in June to support the economy to operate in a new normal. economic outlook 2021ivThe Government is ever ready to step in and provide additional assistance when deemed necessary. As such, realising that the rakyat and businesses still needed financial assistance, we swiftly announced in September this year an additional allocation to the existing initiatives, for example, the wage subsidy programme, the special grants to micro-companies and also assistance to the lower and middle-income households and individuals under the KITA PRIHATIN package.LAKSANA, a unit under the Ministry of Finance, was established to ensure all economic stimulus programmes are implemented promptly and can effectively reach the targeted groups. The Unit has now evolved into a full-fledged agency in monitoring implementation outcomes of the stimulus programmes across 53 ministries and Government agencies nationwide. Together, we have braved and withstood the unprecedented crisis as a nation. I would like to express my deepest gratitude to the frontliners whose efforts have saved countless lives and upheld Malaysias healthcare system as among the best in the world. Let me also thank the rakyat for their patience and close cooperation in combating the pandemic together. Alhamdulillah, we have achieved positive results thus far. However, we cannot afford to be complacent because the war against COVID-19 is not over yet, until and unless a vaccine has been found and is made available across the world.Against the backdrop of strong economic fundamentals, a diversified economic base as well as proactive measures which have been implemented, we are confident in mitigating the economic impact arising from this crisis. Nevertheless, the socio-economic impact of the pandemic is expected to run its course until next year. Hence, the 2021 Budget will still focus on protecting lives and livelihood with additional measures to cope with the lingering effects of the pandemic on the economy as a whole. Insya-Allah, we will register a rebound in economic growth in 2021.The crisis has given us the opportunity to look inwards, reassess our priorities and reset our targets. Moving forward, we will continue to revitalise and reform our economy for a sustainable future of shared prosperity under a new normal. It is our aspiration to steer the economy to a higher growth trajectory that is inclusive in nature. I would like to reiterate that this Government is committed to serving the rakyat and ensuring their well-being as well as supporting the businesses to thrive. Insya-Allah, we will be able to achieve this if we all work closely together. TAN SRI HAJI MUHYIDDIN BIN HAJI MOHD YASSIN6 November 2020economic outlook 2021vMINISTER OF FINANCEMALAYSIAPREFACECOVID-19 has had a major impact on global growth, particularly due to its capacity to disrupt and dismantle development progress that has been made across social, business and economic fronts. For as long as a vaccine is yet to be found, the entire global economy Malaysia included remains at its mercy. At the heart of this unprecedented economic challenge is the consequential threat to lives, as well as risk of increased poverty and long-term systemic damage to our socio-economic fabric.It was against this backdrop that Malaysia instituted the Movement Control Order (MCO). Although the Malaysian economy lost an estimated RM2 billion each day while the MCO was in effect, the Government was decisive in crafting our own unique 6R Strategy, comprising six stages of Resolve, Resilient, Restart, Recovery, Revitalise and Reform, to help the nation cope. Against a backdrop of many unknowns, the Government had to put together no less than four stimulus packages in record time to protect lives, businesses and the economy. Deciding on what would be sufficient was not easy. Our fiscal limitations needed to be matched with our fiscal muscle. One thing was clear, though: our response had to be fast and decisive. Hence, the RM250 billion PRIHATIN Economic Stimulus Package was born, incorporating a RM25 billion fiscal injection. Subsequently, three additional packages followed: PRIHATIN SME , PENJANA and KITA PRIHATIN in April, June and September respectively. All four packages comprising fiscal and non-fiscal measures totalled RM305 billion, or 21% of our gross domestic product (GDP). With the measures rollout being tracked and monitored by the Economic Stimulus Implementation and Coordination Unit Between National Agencies (LAKSANA), many lives were saved, livelihoods supported, and businesses remained afloat. The MCO and its various iterations not only flattened our COVID-19 curve but also contributed to the deep contraction in the GDP by 8.3% in the first half of 2020. Nevertheless, month-to-month economic data clearly signals green shoots of recovery, with a rebound in production and trade figures, a decline in unemployment and a recovery in private consumption compared to the monthly data of the second quarter of 2020. The Governments stimulus packages are expected to contribute over 4 percentage points to the nations GDP growth.This momentum is expected to set the foundation for the nations GDP to grow by up to 7.5% in 2021. That achievement hinges heavily on the next phase in our 6R strategy Revitalise represented by Budget 2021. As a strategic plan for ensuring Malaysias economic outlook 2021vigrowth in the coming year, Budget 2021 seeks to balance healthcare capacity needs, while building upon the current economic recovery momentum together and developing better resilience for the future. Meanwhile, it is important for us to not only adapt to this new norm, but also find growth opportunities. COVID-19 has accelerated the adoption of digitalisation by businesses, the education sector and society. Studies have estimated that the economic value of digital trade-enabled benefits to the Malaysian economy, if fully leveraged, could grow to RM222 billion by 2030 from RM31 billion in 2019. This presents a new growth trajectory for many service-based industries and supporting sectors like E&E, e-commerce and the gig economy. Another huge potential is in healthcare and its ancillary sectors. Medical products, services and equipment are expected to grow in the coming years. Budget 2021 has been crafted across four broad principles, namely, caring for the people; steering the economy; enabling sustainable living and enhancing public service delivery. The Government will continue with its targeted initiatives to support lives and livelihoods while prioritising vulnerable groups. Sustainability, as one of the key principles, will also lay the foundation for existing and fresh policies to be mapped against the UN Sustainable Development Goals (SDGs). Related to this, one of the sectors that is a natural fit into our sustainability aspiration is Islamic finance, which subscribes to Value-Based Intermediation principles, similar to Environmental, Social and Governance (ESG) principles. This could help grow the Islamic economy, through various concepts including wakaf, and in developing communities sustainably. On multiple other fronts, the Government also hopes to work closely with its agencies, the private sector and civil society to catalyse a higher, more sustainable growth trajectory from 2021 onwards. The Government expects its fiscal deficit to reach 6% of GDP, the highest since the 2009 Global Financial Crisis, while the Federal Governments statutory debt is expected to rise to about 57% of GDP by end-2020, due to the four necessary economic stimulus packages. Nonetheless, the Government is committed to its fiscal responsibility agenda, in line with the goal of reducing the fiscal deficit to under 4% of GDP over the next three to four years. Against the backdrop of a huge unknown that is outside our control, we have been focusing on aspects that we can and must control. Our economic fundamentals are still strong, our economic base sufficiently diversified, and we still have fiscal muscle. But above all, I believe the economic rebound in 2021 and beyond depends as much on our strategy, as it does on Malaysians indomitable spirit to work together and brave the unknown as one. Thank you to all Malaysians for your past, present and future contribution in helping the nation face this enormous challenge. I am confident that together we can and will win this war against COVID-19, and emerge from this episode as a stronger nation, Insya-Allah. SENATOR TENGKU DATO SRI ZAFRUL TENGKU ABDUL AZIZ6 November 2020economic outlook 2021viiTHE ECONOMY 2021in constant 2015 prices(share to total in %)DEMANDPrivateConsumption39.9%PublicConsumption8.0%PrivateInvestment19.7%PublicInvestment14.1%Exportsof Goods32.5%Exports ofServices 5.8%SUPPLYMining4.4%Manufacturing14.9%Construction2.8%Services38.3%Importsof Goods27.8%Importsof Services7.0%Agriculture4.8%RM 2,225,935MILLIONRM 2,225,935MILLION1Includes change in stocks Source: Ministry of Finance, MalaysiaCOVID-19 Fund38,00017,000-55.3economic outlook 2021xiiCONTENTSFOREWARDiiiPREFACEvACRONYMS AND ABBREVIATIONSxviiCHAPTER 1ECONOMIC MANAGEMENT AND PROSPECTSOverview5Outlook6Feature Article 1.1 COVID-19: Impact and Policy Responses8Issues and Challenges 12Feature Article 1.2 Labour Market Mismatch13Information Box 1.1 Mapping the UN Sustainable Development Goals onto the National Budget19Feature Article 1.3 Assessing Housing Affordability in Malaysia24Strategic Initiatives 2021 Budget29Information Box 1.2 Social Safety Net in Malaysia30Conclusion33References34CHAPTER 2GLOBAL ECONOMIC OUTLOOKOverview41Global Economy42Information Box 2.1 Response to the COVID-19 Pandemic by Selected Multilateral Development Banks44Conclusion59References60CHAPTER 3MACROECONOMIC OUTLOOKOverview71economic outlook 2021xiiiSectoral71Feature Article 3.1 Gig Economy74Feature Article 3.2 Digitalisation in the Logistics Industry79Feature Article 3.3 Small and Medium Enterprises: Building Resilience to Weather Crises83Information Box 3.1 The Importance of Commodity Sector to the Malaysian Economy88Domestic Demand92Feature Article 3.4 Shadow Economy in Malaysia94External Sector97Prices102Feature Article 3.5 Dynamic Relationship Between Consumer and Producer Price Indices104Labour Market107Conclusion108References110CHAPTER 4MONETARY AND FINANCIAL DEVELOPMENTSOverview119Monetary Development119Performance of Ringgit120Banking Sector Performance120Feature Article 4.1 Digital Banks in Malaysia123Capital Market Performance 126Information Box 4.1 Key Capital Market Measures130Islamic Banking and Capital Market Performance131Conclusion132References133STATISTICAL TABLES135ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIA177economic outlook 2021xivFIGURESThe Economy 2021Figure 2.1. Real GDP Growth for Global, Advanced Economies, and Emerging Market and Developing Economies41Figure 2.2. Inflation Rate for Global, Advanced Economies, and Emerging Market and Developing Economies42Figure 3.1. Selected Indicators for the Services Sector73Figure 3.2. Output of Manufacturing Sector82Figure 3.3. Supply Indicators of Residential Property91Figure 3.4. Malaysia House Price Index91Figure 3.5. Supply Indicators of Non-Residential Property92Figure 3.6. Savings-Investment Gap94Figure 3.7. Top 10 Trading Partners99Figure 3.8. International Reserves102Figure 3.9. CPI and PPI Trends104Figure 4.1. Monetary Aggregates119Figure 4.2. Performance of Ringgit Against Selected Currencies120Figure 4.3. Banking System: Impaired Loans and Net Impaired Loans Ratio121Figure 4.4. Malaysian Government Securities (MGS) Indicative Yields127Figure 4.5. Share of Foreign Holdings in Total MGS Outstanding128Figure 4.6. 5-Year Corporate Bond Yields128Figure 4.7. Performance of Bursa Malaysia129Figure 4.8. Performance of Selected Stock Markets129Figure 4.9. Global Sukuk Outstanding by Country132economic outlook 2021xvTABLESTable 1.1. Economic Stimulus Packages 20206Table 2.1. Selected Indicators for the United States43Table 2.2. Selected Indicators for the United Kingdom44Table 2.3. Selected Indicators for the Euro Area50Table 2.4. Selected Indicators for Germany50Table 2.5. Selected Indicators for France51Table 2.6. Selected Indicators for Japan52Table 2.7. Selected Indicators for Australia53Table 2.8. Selected Indicators for Republic of Korea54Table 2.9. Selected Indicators for China54Table 2.10. Selected Indicators for India55Table 2.11. Selected Indicators for ASEAN-556Table 2.12. Selected Indicators for Indonesia56Table 2.13. Selected Indicators for Thailand57Table 2.14. Selected Indicators for Singapore57Table 2.15. Selected Indicators for Philippines58Table 3.1. GDP by Sector71Table 3.2. Services Sector Performance72Table 3.3. Manufacturing Production Index83Table 3.4. Value-added in the Agriculture Sector87Table 3.5. GDP by Aggregate Demand93Table 3.6 External Trade98Table 3.7. Gross Exports98Table 3.8. Exports of Manufactured Goods99Table 3.9. Gross Imports by End Use100Table 3.10. Current Account of the Balance of Payments101economic outlook 2021xviTable 3.11. Consumer Price Index103Table 3.12. Producer Price Index 103Table 3.13. Labour Market Indicators107Table 3.14. Employed Persons by Sector108Table 4.1. Factors Affecting M3120Table 4.2. Banking System: Loan Indicators121Table 4.3. Banking System: Loans Outstanding by Sector122Table 4.4. Funds Raised in the Capital Market127Table 4.5. New Issuance of Corporate Bonds by Sector127Table 4.6. Bursa Malaysia: Selected Indicators129Table 4.7. Islamic Banking: Key Indicators131economic outlook 2021xviiACRONYMS AND ABBREVIATIONS11MPEleventh Malaysia Plan, 2016 202012MPTwelfth Malaysia Plan, 2021 20254Gfourth-generation cellular network5Gfifth-generation cellular network ADBAsian Development BankAIartificial intelligenceAIIBAsian Infrastructure Investment Bank APIsApplication Programming InterfaceASEANAssociation of Southeast Asian NationsAUDAustralian dollarB40bottom 40% of household income groupBNMBank Negara MalaysiaBOPbalance of paymentsbpsbasis pointsCDACurrency Demand ApproachCFTAComprehensive Free Trade AgreementCGEComputable General EquilibriumCMCOConditional Movement Control OrderCOVID-19Coronavirus Disease 2019CPIConsumer Price IndexCPOcrude palm oilCSOscivil society organisationsDEdevelopment expenditureDFIsDevelopment Financial InstitutionsE&Eelectrical & electronicsEACEconomic Action CouncilECBEuropean Central BankEMDEsemerging market and developing economiesEUEuropean UnionEUReuroFBM KLCIFTSE Bursa Malaysia Kuala Lumpur Composite IndexFDIforeign direct investmentFedUS Federal ReserveGDPgross domestic productGNIgross national incomeGNSgross national savingHIS & BAHousehold Income and Basic Amenities SurveyIHLsInstitutions of Higher LearningHOCHome Ownership CampaignIBRDInternational Bank for Reconstruction and DevelopmentICDIslamic Corporation for the Development of the Private SectorICIECIslamic Corporation for the Insurance of Investment and Export Credit ICMIslamic Capital MarketICTinformation, communication and technologyICSIDInternational Centre for Settlement of Investment DisputesIDAInternational Development AssociationIDRIndonesian rupiahIFCInternational Finance Corporationeconomic outlook 2021acronyms and abbreviationsxviiiILOInternational Labour OrganisationIMFInternational Monetary FundIoTInternet of ThingsIPOInitial Public OfferingIR4.0Industrial Revolution 4.0IRTIIslamic Research and Training InstituteIsDBIslamic Development BankIsDBGIslamic Development Bank GroupITFCInternational Islamic Trade Finance CorperationKASAMinistry of Environment and WaterKeTSAMinistry of Energy and Natural ResourcesKeTTHAMinistry of Energy, Green Technology and WaterKITA PRIHATINPRIHATIN Supplementary Initiative PackageLAKSANANational Economic Stimulus Implementation and Inter Agency Coordination UnitLDMCsleast developed member countriesLNGliquefied natural gasLPILogistics Performance IndexLRT3Light Rail Transit 3M&Amerger and acquisitionM1money supplyM40middle 40% of household income groupMCOMovement Control OrderMDBsmultilateral development banksMGIIMalaysian Government Investment IssuesMGSMalaysian Government SecuritiesMIGAMultilateral Investment Guarantee AgencyMIMICMultiple Indicators Multiple CausesMOFMinistry of FinanceMRT2Mass Rapid Transit 2MTARMomentum Threshold AutoregressiveNGOsnon-governmental organisationsNREMinistry of Natural Resources and EnvironmentO&Goil and gasOPECOrganization of the Petroleum Exporting CountriesOPROvernight Policy Ratep.a.per annumpbper barrelPENJANANational Economic Recovery PlanPforRProgram-for-ResultPHPPhilippine pesoPLIPoverty Line IncomePPIProducer Price IndexPRGTPoverty Reduction and Growth TrustPRIHATINPrihatin Rakyat Economic Stimulus PackagePRSPrivate Retirement SchemesR&Dresearch and developmentRBIReserve Bank of IndiaRCFRapid Credit FacilityRFIRapid Financing InstrumentRMCORecovery Movement Control OrderRPGTReal Property Gains TaxRTORent-to-Owneconomic outlook 2021acronyms and abbreviationsxixSDGsSustainable Development GoalsSDRSpecial Drawing RightSEshadow economySGDSingapore dollarSLLShort-term Liquidity LineSME Corp. MalaysiaSME Corporation MalaysiaSMEssmall and medium enterprisesSOPsStandard Operating ProceduresSRRStatutory Reserve RequirementSSRSelf-Sufficiency RatioTHBThai bahtTVECMThreshold Vector Error Correction ModelUIUser InterfaceUKUnited KingdomUNUnited NationsUSUnited States USDUS dollarUXUser ExperienceWBGWorld Bank GroupWFHwork from homeWHOWorld Health Organizationchapter 1Economic Management and Prospects05overview 06outlookFeature Article 1.1 COVID-19: Impact and Policy Responses12issues and challenges Feature Article 1.2 Labour Market MismatchInformation Box 1.1 Mapping the UN Sustainable Development Goals onto the National BudgetFeature Article 1.3 Assessing Housing Affordability in Malaysia29strategic initiatives 2021 budget Information Box 1.2 Social Safety Net in Malaysia33conclusion34referencesSupportive Monetary PoliciesOvernight Policy RateStatutory Reserve RequirementNEW ACT: Temporary Measures for Government Financing (Coronavirus Disease 2019 (COVID-19) 2020 was passed in Parliament on 21 September 2020.Budget 2021 enters 5th R stage RevitaliseOBJECTIVE: Address the challenges faced by Malaysia towards becoming an advanced and inclusive nationECONOMIC ACTION COUNCIL: 27 MarchPRIHATIN6 April PRIHATIN SME 5 June PENJANA23 September KITA PRIHATINMonetary & Financial DevelopmentsImplementation of 6R Strategy Resolve, Resilience, Restart, Recovery, Revitalise, ReformRobust Banking SectorResilient Capital MarketOPRSRRMeasures are being formulated to enhance peoples livelihood, rejuvenate the economy, ensure sustainable development and improve public service delivery. Rakyats Prosperity, Business Continuity and Economic Resilience.Malaysia: Economic Management & ProspectsGlobal ChallengesVolatile Commodity Prices Muted Global GrowthCovid-19 PandemicRestriction in the movement of people and goods as well as provision of servicesImpacting Malaysian businessesImpactingthe healthand livelihood of Malaysians11 March 2020Roadmap for Immediate ActionRoadmap for Way Forward for next 12 monthsGlobal EconomyCHAPTER 1 SUMMARY: ECONOMIC MANAGEMENT AND PROSPECTS 20202021CHAIRED BY YAB PRIME MINISTER WITH MOF AND EPU AS JOINT SECRETARIATGlobal OutlookMitigation FactorsEconomic ManagementBudget 2021NEW ACT: Temporary Measures for Government Financing (Coronavirus Disease 2019 (COVID-19) 2020 was passed in Parliament on 21 September 2020.Budget 2021 enters 5th R stage RevitaliseOBJECTIVE: Address the challenges faced by Malaysia towards becoming an advanced and inclusive nationECONOMIC ACTION COUNCIL: 27 MarchPRIHATIN6 April PRIHATIN SME 5 June PENJANA23 September KITA PRIHATINMonetary & Financial DevelopmentsImplementation of 6R Strategy Resolve, Resilience, Restart, Recovery, Revitalise, ReformRobust Banking SectorResilient Capital MarketOPRSRRPace of Global Economic RecoveryEscalating US-China tensionsWeak Commodity PricesVolatile Global Financial MarketsDomestic EconomyMeasures are being formulated to enhance peoples livelihood, rejuvenate the economy, ensure sustainable development and improve public service delivery. Rakyats Prosperity, Business Continuity and Economic Resilience.Global ChallengesVolatile Commodity Prices Muted Global GrowthImpacting Malaysian businessesImpactingthe healthand livelihood of MalaysiansIMPLEMENTATION OF STIMULUS PACKAGES UNDER THE 6R STRATEGYAggravating FactorsRoadmap for Immediate ActionRoadmap for Way Forward for next 12 monthsGlobal EconomyCHAPTER 1 SUMMARY: ECONOMIC MANAGEMENT AND PROSPECTS 20202021CHAIRED BY YAB PRIME MINISTER WITH MOF AND EPU AS JOINT SECRETARIATMitigation Factorschapter 1 economic management and prospectseconomic outlook 20215OverviewRecovering the economy from the COVID-19 pandemic has been a daunting task for all nations. The pandemic not only has impacted peoples health and livelihood but has also dampened global growth, a situation described as far more challenging than the Great Depression of the 1930s. It has essentially positioned the world into a territory that has never been seen before.The pandemic turned into a global crisis as nations began to restrict the physical mobility of people and movement of goods and services, which in turn impacted businesses and economies as a whole. The turn of events has muted the anticipated moderation in the US-China trade tension following their trade deal in January 2020. The presumed immediate benefits of the trade deal did not materialise as nations began to take drastic measures to contain the COVID-19 by closing their borders. Closer to home, the Malaysian Government is riding its own challenges, where the sudden emergence of the pandemic and its rapid spread caught everyone off-guard.As a trading nation, the Malaysian economy faces greater challenges posed by the pandemic. While enduring challenges from an already muted global economic growth amid volatile commodity prices, the nation saw a new administration taking the helm. With cases on the rise, the new Government established the Economic Action Council (EAC) on 11 March 2020 to formulate short- and medium-term measures to protect the people and livelihood. Chaired by the Prime Minister, the EAC comprises economic ministers, high-level public sector officials and captains of industries, as members. The EAC subsequently endorsed a six-stage systematic approach Resolve, Resilient, Restart, Recovery, Revitalise and Reform to address the pandemic with the priority to protect both the people and the economy. The Government announced the Prihatin Rakyat Economic Stimulus Package (PRIHATIN) on 27 March 2020. The package, valued at RM250 billion, is aimed at protecting the people, supporting businesses and strengthening the economy. In essence, the package provided financial assistance to the people as well as initiatives to secure jobs, boost consumer confidence and stimulate the economy. On 6 April 2020, the PRIHATIN Plus package of RM10 billion was announced to provide further support to small and medium enterprises (SMEs). With the reduction in the number of COVID-19 cases, the Government launched the RM35 billion National Economic Recovery Plan (PENJANA) on 5 June 2020 to restart the economy. Additionally, the Government announced the PRIHATIN Supplementary Initiative Package (KITA PRIHATIN) on 23 September 2020 amounting to RM10 billion to further ease the burden of the people and keep businesses afloat. chapter 1Economic Management and Prospectschapter 1 economic management and prospectseconomic outlook 20216OutlookGlobal EconomyThe global economy is projected to record a negative growth of 4.4% in 2020 due to wavering performance in both the advanced economies and the emerging market and developing economies (EMDEs). The gross domestic product (GDP) of the advanced economies is projected to contract 5.8% in 2020, as a result of sluggish private consumption, coupled with lacklustre global trade. Similarly, the GDP of the EMDEs is expected to decline by 3.3% in 2020, due to a drop in both private consumption and investment as well as unfavourable external demand. TABLE 1.1. Economic Stimulus Packages 2020PROGRAMMERM BILLIONPRIHATIN250.01Loan Moratorium100.02Danajamin: Financing Guarantee Scheme50.03EPF: i-Lestari Scheme40.04Bantuan Prihatin Nasional10.05EPF: Employer Advisory Services10.06Wage Subsidy Programme5.97BNM: Facilitation Fund4.08Small Infrastructure Projects2.09Healthcare (COVID-19)1.510Food Security Fund1.011Micro Credit Scheme0.512Assistance for Tertiary Students0.313Other PRIHATIN Measures5.114Economic Stimulus Package19.7PRIHATIN Plus10.015Additional Wage Subsidy Programme(enhancement of the existing programme)7.916Geran Khas PRIHATIN2.1PENJANA35.017Initiatives to Empower the People13.218Initiatives to Propel Businesses9.719Initiatives to Stimulate the Economy6.720Other PENJANA Measures5.4KITA PRIHATIN10.021Bantuan Prihatin Nasional 2.07.022Wage Subsidy Programme 2.02.423Geran Khas PRIHATIN0.6GRAND TOTAL305.0Source: Ministry of Finance, Malaysia chapter 1 economic management and prospectseconomic outlook 20217In 2021, the global economy is projected to recover with a growth of 5.2%. The advanced economies are forecast to rebound by 3.9%, led by improved domestic demand and trade activities. Likewise, the GDP of the EMDEs is expected to record a growth of 6%, driven by steady domestic demand and higher exports. Risks to global outlook include re-intensified US-China trade disputes, uncertainties surrounding Brexit, continued low oil prices and deepening climate crisis. Domestic EconomyThe Malaysian economy contracted by 8.3% in the first half of 2020, with a decline of 17.1% in the second quarter. The economy is expected to contract at a slower pace in the second half of the year, aided by the speedy implementation of various stimulus packages to support the people and revitalise the economy. In 2020, the economy is expected to contract by 4.5%. The impact of the packages is anticipated to have spill-over effects and provide an additional boost to the economy in 2021. With the anticipated improvement in global growth and international trade, the Malaysian economy is projected to rebound between 6.5% and 7.5% in 2021. Growth will continue to be supported by strong economic fundamentals and a well-diversified economy. However, the favourable outlook hinges on two major factors the successful containment of the pandemic and sustained recovery in external demand. Monetary and Financial DevelopmentsThe Overnight Policy Rate was reduced successively by 125 basis points to a historic low of 1.75% during the first seven months of 2020. Similarly, the Statutory Reserve Requirement was reduced by 100 basis points from 3.00% to 2.00% to ensure sufficient liquidity to support the domestic financial market. Monetary policy will continue to be supportive of the domestic economy. The banking sector will remain robust and orderly, underpinned by ample liquidity and strong capital buffers. Likewise, the capital market is anticipated to be resilient, driven by well-developed infrastructure and instruments. However, the pace of global economic recovery, weak commodity prices and volatile global financial markets are among factors which may hamper the performance of the domestic financial market. Economic ManagementThe immediate focus of the Government in managing the crisis is on ensuring the safety of the people and addressing the needs of households and businesses adversely affected by the COVID-19. A new Act entitled Temporary Measures for Government Financing (Coronavirus Disease 2019 (COVID-19) 2020 was passed in Parliament on 21 September 2020 to finance the stimulus packages. The Act enables the Government to implement the stimulus packages formulated on the six-stages of R effectively. The “Resolve” stage was characterised by the Governments effort to contain the spread of the virus through the implementation of a full Movement Control Order (MCO). The “Resilient” stage was when the Government announced the PRIHATIN and the PRIHATIN Plus stimulus packages. During the “Restart” and “Recovery” stages when the COVID-19 curve was flattened and the economy was gradually opened, the Government announced the PENJANA package. PENJANA aimed at rejuvenating the economy based on three strategic thrusts empowering the people, propelling businesses and stimulating the economy. The next two stages “Revitalise” and “Reform”, will involve the formulation and implementation of measures in the 2021 Budget and the Twelfth Malaysia Plan, 2021-2025 (12MP). In particular, the 2021 Budget will focus on caring for the people, enabling local businesses and revitalising the economy.economic outlook 20218chapter 1 economic management and prospectsfeature article 1.1COVID-19: Impact and Policy ResponsesIntroductionCOVID-19, the viral outbreak that was first detected at the end of 2019, coincided with a worldwide economic slowdown amid trade tensions and commodity price volatility. As the virus spreads around the world, it has far-reaching consequences beyond the disease and the efforts to contain it. Various measures to contain the outbreak, such as border closures, physical distancing and lockdowns, have led to sluggish aggregate demand and disruptions in the supply chain. The pandemic is now expected to cause the worst global recession in history, far worse than the Great Depression in the 1930s (International Monetary Fund, 2020). Governments worldwide responded by expanding their monetary policy and increasing fiscal spending to prop up household incomes, support employee retention and provide liquidity assistance for businesses. Malaysia: Case in PointThe crisis brought on by the pandemic presents a unique challenge as policymakers have to balance between protecting lives and livelihood in managing the pandemic. Malaysia is no exception. During the initial stage of the outbreak, the impact was limited to the tourism-related industries, including airlines, tour operators, recreational activities, accommodation and restaurants. In response, the Government announced the first stimulus package of RM20 billion on 27 February 2020. The package was aimed at increasing capacity of the healthcare sector in containing the outbreak, supporting the cash flow of affected businesses and stimulating domestic tourism industry. FIGURE 1.1.1. New Cases vs RecoveriesSource: Ministry of Health, MalaysiaDEATHS (RIGHT SCALE) 2nd waveGe03006009001,2001,500RECOVEREDCONFIRMED0246810Number of casesNumber of casesRMCOCMCOMCONote: MCO : 18 March 3 May 2020CMCO : 4 May 9 June 2020RMCO : 10 June 31 December 20203rd wave19-Oct6-Oct21-Sep6-Sep22-Aug7-Aug23-Jul8-Jul23-Jun8-Jun24-May9-May24-Apr9-Apr25-Mar10-Mar24-Feb9-Feb25-Janeconomic outlook 20219chapter 1 economic management and prospectsLocal cases started to escalate in early March 2020 (Figure 1.1.1.), with more clusters began to emerge during what was categorised as the second wave of transmission. Within a few weeks, Malaysia recorded the largest cumulative number of confirmed COVID-19 transmission in Southeast Asia, with over 2,000 active cases by the end of March. In a critical move to mitigate the outbreak and flatten the curve as recommended by the World Health Organisation, the Government imposed a full Movement Control Order (MCO) effectively on 18 March 2020. In addition, the Government established a task force to manage the crisis led by the Prime Minister himself, with representation by relevant ministries and agencies. The task force is responsible for gathering intelligence on the development of the pandemic and coordinating efforts to contain the outbreak.The MCO was made more lenient under the Conditional Movement Control Order (CMCO) on 4 May 2020, where most economic sectors were allowed to resume operations under certain Standard Operating Procedures (SOPs). At this stage, all businesses, with a few exceptions, were allowed to reopen under strict SOPs, including contact tracing, mandatory use of face masks in public and physical distancing. Nonetheless, international and interstate travels were still restricted as the threat of the virus persisted. As cases began to de-escalate, the economy was reopened for people to resume their economic activities and livelihood. The CMCO was then followed by the Recovery Movement Control Order (RMCO) starting 10 June 2020, which is extended until 31 December 2020. The implementation of the RMCO is based on protecting vulnerable groups, empowering the community, embracing the new normal, resuming almost all economic sectors, continuing border control and enhancing public health.Malaysia received global recognition as among the more successful countries in containing the pandemic. Nonetheless, the Government is fully aware that this containment move has to be parallel with the reopening of the economy to prevent long-term structural damage. Therefore, the Government applied the 6R approach, representing six stages: Resolve, Resilient, Restart, Recovery, Revitalise and Reform (Figure 1.1.2.).FIGURE 1.1.2. 6R Strategy for Resilient and Sustainable GrowthSource: Ministry of Finance, MalaysiaRESOLVEKetegasanRESILIENTKetahananRESTARTMemulakanSemulaRECOVERYPemulihanREVITALISEMemperkasaREFORMMenyusunSemula6RStrategyB U D G E TTWELFTHMALAYSIAPLAN2021-2025economic outlook 202110chapter 1 economic management and prospectsThe Resolve strategy was implemented as early as when the MCO was first announced on 18 March 2020. The movement control and physical distancing resulted in temporary closures of most businesses, especially the non-essential sectors, which resulted in higher unemployment. Accordingly, the Government announced the second stimulus package on 27 March 2020. The package, known as Prihatin Rakyat Economic Stimulus Package (PRIHATIN), totalling RM230 billion, was aimed at softening the impact of the crisis. PRIHATIN provided cash transfers to supplement the loss of income and wage subsidies to encourage businesses to retain employees. In addition, the package includes an automatic moratorium on loan repayments for six months to households, which ended in September 2020, partly to encourage private consumption. Subsequently, the Government announced an additional RM10 billion through PRIHATIN PLUS on 6 April 2020, particularly to help the small and medium enterprises (SMEs) remain resilient to weather the unprecedented crisis.As part of the fourth stage of the 6R approach (Recovery), the Government announced a short-term economic recovery plan or Pelan Jana Semula Ekonomi Negara (PENJANA) on 5 June 2020 totalling RM35 billion. The main objective of PENJANA was to restart the economy by incentivising people and businesses to resume their activities, amid the new normal. It was complemented with the implementation of the RMCO, with almost all restrictions lifted. However, businesses were required to self-regulate, adhere to the SOPs and adjust to the new normal. As the loan moratorium period and wage subsidy ended in September 2020, the Government received feedback that people and businesses were still financially-stricken. Hence, an additional stimulus package was announced on 23 September 2020 to further ease the peoples burden and keep businesses afloat. The package, PRIHATIN Supplementary Initiative Package (KITA PRIHATIN), amounting to RM10 billion, will benefit micro SMEs, local workers as well as B40 and M40 groups. In addition, a targeted loan moratorium was extended to businesses and people to ease their financial commitment.Budget 2021 is the fifth stage of “Revitalise” in the 6R approach, aiming to revitalise post-crisis economic growth. The Budget focuses on four areas caring for the people, steering the economy, sustainable living and enhancing public service delivery. The final stage of the 6R approach is “Reform”, where medium-term strategies to reform the economy will be outlined in the Twelfth Malaysia Plan, 2021 2025. These strategies will take advantage of the economic momentum in efficiency and productivity, towards a more sustainable and higher value-added economy (Figure 1.1.3.).FIGURE 1.1.3. Measures under the Economic Stimulus PackagesSource: Ministry of Finance, MalaysiaNote: There was a change ofGovernment on 23 February 2020Pakej RangsanganEkonomi 202027 February 2020RM20 billion1. Mitigating Impact of COVID-192. Spurring Economic Growth3. Promoting Quality InvestmentMeasures (among others): Support healthcare sector Cash flow assistance for tourism-related sectorPRIHATIN27 March 2020RM230 billion1. Protecting Rakyat2. Supporting Businesses3. Strengthening EconomyMeasures (among others): Bantuan PRIHATIN Nasional Wage Subsidy Automatic six-month loan moratorium EPF i-Lestari Cash aid for government servants and pensioners SME soft loan funds Corporate loan guaranteesPRIHATIN PKS 6 April 2020RM10 billion Supporting Businessess, especially SMEsMeasures (among others): PRIHATIN Special Grant for micro SMEs Wage Subsidy (additional)PENJANA5 June 2020RM35 billion1. Empowering Rakyat2. Propelling Businesses3. Stimulating EconomyMeasures (among others): Wage Subsidy (extension) Reskilling fund One-off support to vulnerable groups Financing and liquidity supports E-commerce incentives Tax exemption measuresKITA PRIHATIN23 September 2020RM10 bilionKerangka Inisiatif TambahanSupporting Micro SMES,Local Workers and PeopleMeasures (among others): PRIHATIN Special Grant for micro SMEs (new) Wage Subsidy 2.0 (extension) Bantuan PRIHATIN Nasional 2.0economic outlook 202111chapter 1 economic management and prospectsEconomic Impact of COVID-19 Efforts by the Government to revive the economy have proven to be effective as reflected in the improving macroeconomic indicators from the significant decline in the second quarter of 2020 (Figure 1.1.4.). The stimulus packages that consist of fiscal and non-fiscal measures totalling RM305 billion are expected to cushion the crisis and stimulate the economy by boosting aggregate demand and sustaining employment. Internal estimates project that the packages would add to the gross domestic product (GDP) growth by 4.0 4.2 percentage points in 2020. The estimated impact on employment is 3.5 percentage points, preventing about 560,000 workers from losing their jobs.11 Based on the Dynamic Computable General Equilibrium (CGE) for the Malaysian Economy (MyAGE) model, Ministry of Finance, MalaysiaConclusionThe timely response by the Government in imposing the MCO to flatten the curve, complemented by swift stimulus packages, has cushioned the impact of the crisis. This success was also supported by the overall strict adherence of the public to the different phases of MCO and SOPs, which was crucial in containing the pandemic. As a result, the economy is expected to improve gradually in the second half of the year, as reflected by various macroeconomic indicators. The stimulus measures have paved the way for a firm economic recovery, subject to successful, continued containment of the pandemic. Being an open economy, the speed and magnitude of Malaysias full economic recovery are also dependent on the performance of its major trading partners. Nevertheless, the crisis offers businesses the opportunity to reform strategies, expedite digital transformation and reallocate resources to increase efficiency and productivity. Unless and until a vaccine is found and made widely accessible, the war against COVID-19 is not over, and efforts to curb the virus and its impact are still ongoing.Note: The third wave of COVID-19 outbreak suddenly emerged and a 14-day CMCO had to be imposed commencing 13 October 2020 in Sabah, 14 October 2020 on three states Selangor, Federal Territories of Kuala Lumpur and Putrajaya and 17 October 2020 in Federal Territories Labuan, to re-flatten the COVID-19 curve. At the time of printing, the number of positive cases has yet to peak.FIGURE 1.1.4. Short-term Macroeconomic Indicators% growth Source: Department of Statistics, Malaysia, Bloomberg and IHS Markit20192020-40-35-30-25-20-15-10-5051015SALES VALUE OF WHOLESALE AND RETAIL TRADEMALAYSIA MANUFACTURING PURCHASING MANAGERS INDEX (PMI)KUALA LUMPUR COMPOSIT INDEX (KLCI)INDUSTRIAL PRODUCTION INDEX (IPI)SepAugJulJunMayAprMarFebJanDecRMCOCMCOMCOchapter 1 economic management and prospectseconomic outlook 202112Issues and Challenges As Malaysia intensifies its efforts to unshackle itself from the middle-income trap, it continues to face several challenges. The most pertinent issue following the outbreak of the pandemic is the drastic decline in economic activities, particularly the tourism-related subsectors. The pandemic exacerbated the existing structural problems, such as food insecurity, limited employment opportunities, regional imbalances, lack of focus on sustainable development, the rising cost of living and insufficient affordable housing. In addition, the apparent digital gap between industries and the limitation in the logistics sector continue to hamper economic progress.Impact of COVID-19 on Tourism-related Subsectors The tourism industry, with a share of 15.9% of GDP, is one of the main contributors to the services sector in 2019. Domestic tourists contributed RM92.6 billion while international tourists spent RM89.4 billion in 2019. The implementation of the MCO in Malaysia and the closure of international borders to contain the virus outbreak have affected peoples movements and activities, particularly in tourism-related sub-sectors. According to Malaysia Association of Hotels, hotel booking cancellations from January 2020 to 20 March 2020 breached over 193,000 rooms, which translates into RM76 million losses in revenue for the industry. At the same time, the hotel occupancy rate dropped from 61.6% in January 2020 to 25% in March 2020. With the gradual recovery of the economy, the accommodation industry started to pick-up with the occupancy reaching 42.1% from 30 August to 5 September 2020. In addition, the Malaysian aviation industry is projected to lose RM13 billion in 2020 as air travel plummeted following international travel restrictions. As it is still uncertain when a vaccine for COVID-19 will be available and made accessible to all, the tourism industry is facing a bleak near-term future. Food InsecurityAlthough the Government continues to focus on the development of the agriculture sector, food insecurity remains an issue. The 2019 Global Food Security Index ranks Malaysia at 28th position, which is lower compared to other nations with lesser natural resources (Economist Intelligence Unit, 2019). Furthermore, the 2019 Self-Sufficiency Ratio (SSR) indicates that Malaysia has yet to be self-sufficient in some of its staple foods (Department of Statistics Malaysia, 2020). For example, in 2019, Malaysias rice production is sufficient to meet only 70% of domestic demand. Other food items with lower SSR includes sweet potato (81.7%), coconut (68.2%), cabbage (36.2%), mango (32.1%), chilli (30.8%) and ginger (16.2%). Factors contributing to the unattractive supply of staple foods include low wages in the agriculture sector, the prevalence of pests and diseases, lack of technology adoption and low interest among the younger generation in the agriculture sector. Limited Employment OpportunitiesYouth unemployment continues to be an issue, recording double-digit rates even during the overall full employment periods in the economy. The educational mismatch is also prevalent in the labour market, where individuals with tertiary education are employed in the semi-skilled and low-skilled occupations. In 2019, a total of 26.7% of graduates was underemployed mainly due to insufficient jobs in skilled occupations. Malaysia is also heavily reliant on migrant workers, particularly low-skilled foreign workers. At the same time, while the gig economy is gaining prominence, it does not provide gig workers with appropriate social safety coverage. economic outlook 202113chapter 1 economic management and prospectsfeature article 1.2Labour Market MismatchIntroductionEducation plays a significant part in building human capital. It creates a sufficient pool of educated workforce and is an essential determinant of a high-income and advanced nation. Given its importance, the percentage of Government expenditure on tertiary education has increased significantly from 11.3% of total expenditure on education in 1971 to 21.3%1 in 2018 (World Bank, 2020) to support this aspiration. The Private Higher Educational Institutions Act 1996 Act 555 was also introduced to further complement the effort to increase access to tertiary education. This investment has resulted in millions of knowledge workers with tertiary2 education entering the labour market.On the demand front, the unemployment rate is a common proxy to measure the health of the labour market. While a low unemployment rate is an ideal situation, it can hide other aspects such as underemployment or a mismatch. In general, underemployment3 or mismatch refers to the underutilisation of workers education and skills (Figure 1.2.1.). Malaysias achievement in maintaining the economy at full employment level since 1992 is commendable. However, there are concerns on whether the investment in education has achieved the desired outcome, given the current high incidence of underemployment or mismatch, particularly among graduates. 1 Excludes private expenditure in education, where the sector was liberalised in 1996.2 According to the International Labour Organisation (ILO), tertiary educated refers to graduates with diplomas and above.3 ILO defines time-related underemployment as a situation in which a worker is employed for less than 30 hours per week.Underemployment or educational mismatch remains a common long-standing structural issue in many countries, including Malaysia. This can be seen from the occupational trend analysis, which reveals that the share of employment with tertiary education is larger than employment in the skilled category (Figure 1.2.2.). Over qualification mismatch in the labour market sends a signal that returns on investment in education were not optimised as workers were not fully absorbed by the labour market. This article provides an analysis of the current scenario of mismatches in Malaysias labour market, particularly among graduates and youths, and proposes measures to reduce the mismatches. It also suggests recommendations regarding employment prospects following the COVID-19 pandemic that can be leveraged as an option for job seekers.FIGURE 1.2.1. Types of Skill MismatchSkill gapsWorkers lack the skills necessary to perform jobs effectivelyOver/Underqualification or vertical mismatchLevel of education is higher or lower than job requirementOver/Under skillingWorkers with skills above or below job requirement Source: International Labour Organisation, 2015Skills obsolescenceWorkers lose their skills over time due to underutilisation or when skills become irrelevant due to changes in workplaceSkills shortagesDifficulty for employers to recruit professionals with the right qualifications and skillsField of study or horizontal mismatchWorkers are employed in unrelated field of studyeconomic outlook 202114chapter 1 economic management and prospectsSituational AnalysisOccupational analysis in Malaysia for the period 2010 to 2019 indicates the existence of the continuous phenomenon of the educated workforce being employed in the lower occupational category (Figure 1.2.3.). The scenario, which is also commonly referred to as a vertical mismatch, reflects that graduates are accepting jobs despite being overqualified. FIGURE 1.2.2. Employment by Education and Skills for Selected Countries, 2018 Note: Employment for population aged 15-64 Source: International Labour Organisation, 2018 020406080100SKILLEDSEMI-SKILLEDLOW-SKILLEDViet NamThailandSingaporeRepublic ofKoreaMalaysiaJapanIndonesiaEmployment by Educational Attainment020406080100TERTIARYSECONDARYPRIMARY & BELOWViet NamThailandSingaporeRepublic ofKoreaMalaysiaJapanIndonesiaEmployment by Skills Category12.6R.628.656.059.017.013.111.624.827.239.556.913.811.7FIGURE 1.2.3. Employment by Education and Skillsin Malaysia, 2010 2019 FIGURE 1.2.4. Graduate Mismatch vsGraduate Unemployment Source: Department of Statistics and Ministry of Finance, Malaysia Source: Department of Statistics and Ministry of Finance, Malaysia 051015202530GRADUATE UNEMPLOYMENT RATEGRADUATE MISMATCH RATE2019201720152013201120092007200520032001020406080100TERTIARYSECONDARYPRIMARY & BELOW2019201520102019201520108.811.814.061.772.870.1V.0Low-andSemi-Skilled Skilled underqualifiedoverqualified7x4xeconomic outlook 202115chapter 1 economic management and prospectsThe difficulty of the workforce in finding suitable jobs that match their qualifications and skills is due to the shortcomings in the labour market capacity. The phenomenon has been ongoing for some time, thus contribute to rising graduate unemployment (Malaysia Employers Federation, 2019). While the graduate unemployment rate remained relatively stable, between 3.1% to 4.1%, the graduate mismatch rate has more than doubled between 2001 and 2019 (Figure 1.2.4.). The increasing rate of mismatch is a concern as more graduates are working in the semi- and low-skilled categories. The 2019 Graduates Tracer Study by Ministry of Higher Education (MOHE) also indicates that 30.6% of the respondents with tertiary education were underemployed. In the incidence of horizontal mismatch, Zakariya, Z. (2014) reveals that 52% of workers were employed in jobs that are not related to their field of study. Reasons for MismatchThe main contributing factor for the mismatch is due to limited jobs in the market to meet the increasing number of labour supply, including new graduates. Today, having a university degree does not guarantee a job. With the rising number of graduates every year, the labour market has become very competitive, especially when there is economic uncertainty. Consequently, the job seeker is left with no option but to accept being underemployed.For almost a decade, there were more than three million new jobs created in the economy. However, job creation has remained concentrated in low- and semi-skilled jobs. From the total new jobs created during the period, only 26% were in the skilled category while the remaining 74% were in the low- and semi-skilled categories (Figure 1.2.5.). As at December 2019, out of 62,400 vacancies in the market, only 5% were for skilled workforce. In contrast, from a total of 299,600 job seekers, 72% were graduates, of whom more than half were fresh graduates with less than one-year experience (Figure 1.2.6.). The 2019 Graduates Tracer Study highlights that 13.7% of graduates were still unemployed six months after completing their studies. They were mainly graduates from education; arts and humanities; as well as agriculture and veterinary. 02,0004,0006,0008,00010,00020192010SkilledSemi-skilledLow-skilledFIGURE 1.2.5. Jobs Created by SkillsNumber ofjobs creationSource: Department of Statistics and Ministry of Finance, MalaysiaShare 2019:14.8%Share 2019:59.2%Share 2019:26.00406080100OVERALL JOB SEEKERSOVERALL VACANCIESSkilledSemi-skilledLow-skilledFIGURE 1.2.6. Vacancies and Job Seekers, 2019%Source: Ministry of Finance and Ministry of Human Resources, Malaysia73.86.121.972.021.25.0economic outlook 202116chapter 1 economic management and prospectsFrom the perspective of new jobs created by age cohort, only 16.6% of jobs created were for youths aged 15 24 (Figure 1.2.7.). Whereas, data on job seekers showed that 78.9%4 of the total active job seekers were youths. This indicates that jobs were mostly created for the adult cohort, hence the continuous double-digit youth unemployment rate in the past two decades. These scenarios also attest that there were insufficient jobs created in the market to absorb the increasing demand from job seekers, especially graduates.Advancement of technology is another reason for the mismatch. According to Kaufman (1974), technological progress has led to skill obsolescence, where professionals lack up-to-date knowledge or skills to maintain effective performance in their jobs. While it is true that technological changes can improve or deteriorate skills mismatch, there is significantly a greater number of ways in which such changes lead to negative implications on employment (Allen & de Grip, 2012).Another reason that pushes many individuals to accept mismatch and lower-quality jobs is due to the geographical factor. Employees disposition to move to another job or position is very much linked with location and commuting issues which results in work-life balance (Direnzo et al., 2015; Lambert et al., 2005). In the case of Malaysia, Khazanah Research Institute (2018) highlights that 19% of their respondents rejected job offers due to inconvenient locations. This may be partially contributed by the increasing cost of living in urban areas that discouraged new graduates from accepting job offers, even with higher pay. Impact of MismatchSkills mismatch can impact workers well-being in several ways. It has led workers to receive a lower pay as compared to what they deserve. According to the 2019 Graduates Statistics report, salaries obtained by graduates working in the low- and semi-skilled categories were 3.0 times and 2.3 times lower than that of graduates working in the skilled category (Figure 1.2.8.). When skilled individuals work in a lower-skilled category, not only they are underpaid, their potential is under-exploited, leading to lower productivity. Labour mismatch is one factor that may contribute to cross-country differences in labour productivity.Studies indicate that greater skills mismatch is associated with lower labour productivity through less efficient allocation of resources. Skills mismatch is also known to be correlated with low job satisfaction as a result of unequal wage-earning, underutilisation of skills and fear of job insecurity. Ogbonnaya et al. (2017) reports that overqualified employees are more likely to feel they are being tasked for more work due to their education but are given low wages. This decreases their job satisfaction. 02040608010025-6415-242010 - 201920192010FIGURE 1.2.7. Jobs Created by Age Cohort %Source: Department of Statistics and Ministry of Finance, Malaysia59.840.265.634.483.416.64 Based on December 2019 active job seekers.economic outlook 202117chapter 1 economic management and prospectsRecommendations If Malaysia is to harness the full potential of its human capital, the persistence of skill mismatches in the labour market must be addressed. All stakeholders, including industries, learning institutions and Government agencies, need to closely collaborate to tackle the issue, both from the supply and demand-side perspectives. Labour market capacity to provide sufficient jobs is limited unless and until the production structure of industries undergoes a rapid transformation into high-end production as envisaged in the industrial master plans. In such a situation, self-employment can be a viable option for job seekers. Initiatives should be focused on generating more job creators through entrepreneurship opportunities. As entrepreneurs generally face difficulties in securing loans, financial institutions and relevant agencies may facilitate entrepreneurs applying for soft-loans or matching grants and other business support programmes.The issue of job opportunities has gained more attention during the COVID-19 outbreak when retrenchment surged during the first half of 2020 as compared to the same period last year. As most of economic activities were not allowed during the Movement Control Order (MCO), many workers were laid off. Nevertheless, some industries had benefitted, especially online retail and delivery services. There was an increase in the number of marts and restaurants migrating to the digital platforms to facilitate the people who were unable to leave their homes while adhering to the MCO. Similarly, recruitment for food delivery workers and ride-hailing drivers also increased to cater for the spike in demand for delivery services during the MCO period. In this case, technology plays a vital role as the enabler to make online marketplaces accessible. The COVID-19 pandemic has also brought changes to the employment landscape from traditional full-time employment to short-term and more flexible employment. Gig works have become predominantly important to the economy, and gig workers are likely to have better income prospects. A survey on the ride-hailing workers also reported that 54% of respondents indicated that gig jobs is their primary source of income (The Centre, 2019). The result has shown that online platform should be strengthened to facilitate these gig workers and online entrepreneurs.FIGURE 1.2.8. Mean Monthly Salary for Graduates by Skills Category, 2016 2019 Source: Department of Statistics, Malaysia01,0002,0003,0004,0005,0006,0007,000SKILLEDSEMI-SKILLEDLOW-SKILLED2019201820172016RM3.6x1,3471,9661,9021,9912,2192,2672,4182,5114,8585,3055,5915,8822.2x2.7x2.3x2.9x2.3x3.0 x2.3xchapter 1 economic management and prospectseconomic outlook 202118Nevertheless, there is a strong ground for having a more comprehensive social safety net in place, especially given the growing number of gig workers. Unlike paid employees, many of the self-employed, including gig workers, are lacking access to social security protection, such as insurance benefits and pensions, and are not covered by labour legislation. There is also the potential for a transition from standard employment to business-digitalisation related activities, implying that the vulnerable workers should be provided with sufficient and structured safety net. As an immediate strategy, all self-employed, including gig workers, should make a mandatory contribution to social security protection under the Self-Employment Social Security Act 2017 Act 789. This will entitle them to receive assistance, especially during unprecedented economic downturns. From the labour supply perspective, education and training institutions need to have more and closer collaboration with industries to determine the type of skills that suits companies requirement in the future. In-house assessment by individual employers is required to develop the retraining and upskilling programmes needed by their employees to minimise the mismatch. This will lead to better wages for the employees, and indirectly, can eventually address both the mismatch and low-wage issues.ConclusionOver the years, underemployment or mismatch continues to be persistent in the Malaysian labour market despite strategies to balance between labour supply and demand. The lack of job creation, particularly for skilled occupations, seems to be the main contributing factor to the phenomenon. A prolonged mismatch indicates that the potential of the educated workforce has not been fully optimised for economic growth, thus limiting the nations economic potential. Self-employment or gig job opportunities should be promoted as the career of choice for job seekers, given the growing importance of the gig economy. Thus, structured and comprehensive regulations and social safety net need to be in place to safeguard the workers well-being, especially during economic downturns. Regional Imbalances As Malaysia progresses towards a high-income and developed nation, the problem of regional development imbalance persists. According to the Department of Statistics Malaysia (2020), Malaysias average GDP per capita in 2019 was RM46,450. While the more developed states continue to record above-average per capita income, the income gap among states remains. For instance, Sabahs income per capita was 45.5% below the national average, and that of Kedah and Kelantan was at 51.8% and 69.2%, respectively.It is also reported that in 2019, Wilayah Persekutuan Kuala Lumpur and Wilayah Persekutuan Putrajaya recorded the lowest poverty rates of 0.2% and 0.4% of households, respectively. In comparison, states such as Sabah and Kelantan recorded significantly higher poverty rates of 19.5% and 12.4%, respectively. This illustrates a pronounced disparity in economic development among states in Malaysia.Lack of Alignment between Environmental Sustainability and Sustainable Development Efforts to ensure environmental sustainability need to be aligned with the sustainable development agenda. Unsustainable consumption and production practices as well as lack of shared responsibility among stakeholders, continue to impact the well-chapter 1 economic management and prospectseconomic outlook 202119information box 1.1Mapping the UN Sustainable Development Goals onto the National BudgetIntroductionAll member states of the United Nations (UN) adopted the UN 2030 Agenda for Sustainable Development (2030 Agenda) in 2015, and the 17 Sustainable Development Goals (SDGs) are to be achieved by the year 2030. The SDGs, among others, aim to end all forms of poverty, fight against inequalities, create peace, tackle urgent environmental issues and ensure that no one is left behind. The success of the global initiative requires concerted efforts by member states to ensure that related plans, programmes and projects at national levels are geared towards achieving these goals within the stipulated timeline. Sustainable and inclusive development has always been the mainstay of Malaysias development since the 1970s. Economic growth has always been emphasised by the Government. At the same time, various initiatives have been implemented to eradicate poverty, improve the well-being of the people, provide universal access to education and health and protect the environment. The Eleventh Malaysia Plan, 2016 2020 (11MP), continued to pursue sustainable development based on three main goals, namely achieving a high-income economy, promoting inclusivity and ensuring sustainability. In line with the 2030 Agenda, all the SDGs were subsequently incorporated into all initiatives under the 11MP to ensure alignment between national objectives and SDGs as well as for sufficient resource allocation and proper monitoring. As the implementation of various programmes and projects will be supported by the annual allocation, this article highlights the efforts taken by Malaysia towards mapping the SDGs in the annual budget (Figure 1.1.1.).being of the rakyat. For example, water disruptions in the Klang Valley as a result of river pollutions in Selangor had not only social but also economic impact, affecting both the households and businesses alike. The implementation of the MCO to contain the COVID-19 pandemic has indirectly contributed to better air and water quality. Nevertheless, this situation is likely to be temporary as it will continue to be business as usual when economic activities recover. However, this situation can still be maintained if all parties were to realise and take responsibility for ensuring environmental sustainability accompanied by comprehensive enforcement action. At the international level, Malaysia has adopted the 2030 Sustainable Development Agenda, which outlines 17 Sustainable Development Goals (SDGs). Malaysia needs to establish a comprehensive mechanism to measure and monitor the development and progress of the SDGs to ensure it covers the overall financing dimension in attaining SDGs. For example, development allocation is mainly categorised according to ministries and agencies and are more focused on projects and programmes. As such, there is a need to realign budget allocations to the SDGs to ensure the achievement of national indicators, targets and goals. economic outlook 202120chapter 1 economic management and prospectsNational Budgetary ProcessThe 2015 UN Addis Ababa Action Agenda (Action Agenda) provides a global framework for financing sustainable development, which supports the implementation of the 2030 Agenda, including the SDGs. The Action Agenda aligns all domestic and international resource flows, policies and international agreements with economic, social and environmental priorities. The specific action areas of the Action Agenda are: Domestic public resources; Domestic and international private business and finance; International development cooperation; International trade as an engine for development; Debt and debt sustainability; Addressing systemic issues; and Science, technology, innovation and capacity building.With the SDGs fully aligned to the initiatives and targets of the 11MP, development expenditure (DE) has been allocated to support both national objectives and the SDGs. However, for the annual budget allocation, a mechanism has yet to be established to monitor the progress of the allocations to support the SDGs comprehensively and more frequently. The 2021 Budget will be the base to align its annual budget to the SDGs, beginning with the DEs allocation. At the Federal level, the yearly budget is determined through several processes involving engagement with ministries and central agencies such as the Economic Planning Unit. These include dissemination of guidelines in preparing the estimated budget for the following year to all ministries and agencies, receipt of proposals from all ministries and agencies by the Ministry of Finance, followed by budget screening by respective budget review officers. The next process involves approval by the Cabinet before presentation and debate in Parliament. After the budget is approved by Parliament and consented by Seri Paduka Baginda Yang di-Pertuan Agong, the General Warrant is issued. This allows expenditures in the budget to be spent on various programmes and projects.FIGURE 1.1.1. Sustainable Development GoalsSource: United Nations, 2015123NO POVERTY7AFFORDABLE ANDCLEAN ENERGY8DECENT WORKAND ECONOMICGROWTH9INDUSTRY, INNOVATIONAND INFRASTRUCTURE1OREDUCEDINEQUALITIES11SUSTAINABLE CITIESAND COMMUNITIESCLIMATEACTIONLIFE BELOWWATERLIFE ON LANDPEACE, JUSTICEAND STRONGINSTITUTIONSPARTNERSHIPSFOR THE GOALS121314151617RESPONSIBLECONSUMPTIONAND PRODUCTIONZERO HUNGERGOOD HEALTHAND WELL-BEING4QUALITYEDUCATION5GENDEREQUALITY6CLEAN WATERAND SANITATIONeconomic outlook 202121chapter 1 economic management and prospectsMapping the SDGs onto the Programmes and Projects in the Annual BudgetThere are many ways in which countries adopt the SDGs into their national budgeting process. According to Hege & Brimont (2018), there are four approaches to achieve this: improving the budget proposal narrative; mapping and tracking the budgetary contribution to the SDGs; using SDGs as a management tool for negotiations; and improving budget performance evaluation. This article focuses on mapping Malaysias annual budget through the lens of the SDGs as an initial effort to improve its alignment to the SDG financing for development framework. At this juncture, the ex post mapping exercise is focused on the actual spending on all development projects for two ministries, the Ministry of Energy and Natural Resources (KeTSA) and the Ministry of Environment and Water (KASA) for budget year 20191 in comparison with that for the Ministry of Energy, Green Technology and Water (KeTTHA) and the Ministry of Natural Resources and Environment (NRE) for budget year 20152. In terms of methodology, each project was first assigned to the respective SDGs. For example, the project of upgrading of the Congok Dam in Mersing in 2019 was aimed at resolving water woes in the area. Therefore, its DE was classified as supporting SDG6, which is to attain Clean Water and Sanitation. However, the main challenge arises if a project could support the attainment of more than one SDG. For example, the project of management and conservation of forest reserve can contribute towards attaining two SDGs, namely SDG13 on Climate Action and SDG15 on Life on Land. There were 361 projects worth RM3.2 billion in 2019 under the responsibility of the two ministries, compared with 272 projects worth RM2.9 billion in 2015. As the two ministries are mainly responsible for the sustainability, the DE of the ministries would naturally support the SDGs directly related to sustainable energy, utilities, environment and natural resources. So, it is not surprising that almost 90% of their DE supported SDGs 6, 7, 11 and 13 for both years. However, expenditure on four SDGs which were directly under the purview of the ministries was relatively lower compared to the SDGs of 6, 7, 11 and 13. The another four SDGs are Responsible Consumption and Production (SDG12), Life Below Water (SDG14), Life on Land (SDG15) and Partnerships for the Goals (SDG17). It is interesting to note that DE allocation for the two ministries was provided, albeit in smaller magnitudes, to other SDGs not directly related to sustainability. This proves that the SDGs are very much inter-related with each other and should not be treated in a silo. Therefore, there is still room for improvement in mapping SDGs covering all ministries and the private sector (Table 1.1.1. and Figure 1.1.2.). 1 Year 2019 was chosen to reflect the most recent actual year of expenditure.2 Year 2015 was chosen as the base reference year when 2030 Agenda was first signed by all countries. The portfolios for KeTTHA and NRE were reassigned to KASA and KeTSA, respectively.economic outlook 202122chapter 1 economic management and prospectsTABLE 1.1.2. Development Expenditure for KeTTHA and NRE in 2015, and for KASA and KeTSA in 2019 by SDG SUSTAINABLE DEVELOPMENT GOAL20152019RM MILLION%TOTALRM MILLION%TOTALGoal 1No Poverty0.000.000.000.00Goal 2Zero Hunger0.000.000.000.00Goal 3Good Health and Well-Being2.030.100.030.00Goal 4Quality Education0.250.002.860.10Goal 5Gender Equality0.000.000.000.00Goal 6Clean Water and Sanitation1,303.45 44.201,608.68 50.70Goal 7Affordable and Clean Energy132.20 4.50411.16 13.00Goal 8Decent Work and Economic Growth0.38 0.002.30 0.10Goal 9Industry, Innovation and Infrastructure51.86 1.8039.89 1.30Goal 10Reduced Inequalities0.00 0.000.00 0.00Goal 11Sustainable Cities and Communities697.32 23.70385.50 12.20Goal 12Responsible Consumption and Production29.04 1.00117.42 3.70Goal 13Climate Action496.55 16.90441.45 13.90Goal 14Life Below Water35.08 1.207.12 0.20Goal 15Life on Land52.20 1.8087.75 2.80Goal 16Peace, Justice and Strong Institutions12.65 0.4031.32 1.00Goal 17Partnerships for the Goals133.09 4.5035.66 1.10Total2,946.08 100.003,171.13 100.00Note: 1 DE for projects contributing to more than one SDG is divided equally ex post with the number of respective SDGs 2 Total may not add up due to roundingSource: Ministry of Finance, MalaysiaOTHERSGOAL 13GOAL 11GOAL 7GOAL 6OTHERSGOAL 13GOAL 11GOAL 7GOAL 6FIGURE 1.1.2. Development Expenditure for KeTTHA and NRE in 2015 and for KASA and KeTSA in 2019 by SDGSource: Ministry of Finance, Malaysia16.9D.2.7#.7 15RM2.9 billion13.9P.7.2.2.0 19RM3.2 billion4.5%chapter 1 economic management and prospectseconomic outlook 202123Moving ForwardThe ex post mapping of DE to the respective SDGs in the annual budget of the two ministries is just a beginning. The next step is to replicate the same exercise across all ministries, where the final aim is to identify gaps in the implementation of the SDGs. This can then be a useful guide to fill the gap from various sources of financing. The methodology of ascertaining ex post which programme or project supports which SDG needs to be further refined. In addition, the mapping of the DE to various SDGs needs to be further improved by central agencies and ministries, especially in cases where programmes and projects support more than one SDG. For effective monitoring, the respective public project monitoring systems will have to be enhanced to allow ex ante SDG tagging codes on all programmes and projects. Thus, at the start of the budgeting process, each programme and project proposal will have its own SDG tag which allows subsequent ex post classification easier. In addition, efforts to increase awareness of SDG-aligned budgeting process and enhance capacity building among public servants to embed SDGs in their budget considerations will be necessary. ConclusionAs Malaysia has taken on board the main elements of the sustainability and inclusivity in its development strategies since the 1970s, embedding the SDGs in its development planning process was an easier task. However, continuous efforts need to be undertaken including establishing a comprehensive financing framework that encompasses various forms of financing and meet the needs of stakeholders to ensure fair and equitable resources are allocated, overlaps are minimised, and gaps are addressed towards the attainment of the SDGs. While Malaysias five-year development plans have now been fully aligned to the SDGs, efforts are underway to ensure its annual budget will also be so. In addition, there is clearly room for other stakeholders, especially the private sector and non-governmental organisations to be contributors to SDG-related initiatives. Efforts are also in place to establish appropriate mechanisms to enable more of such financing. Rising Cost of LivingAchieving a developed, high-income, and an inclusive nation must be accompanied with higher purchasing power. Unfortunately, the rising cost of living remains a critical concern among the rakyat, particularly the low-income group. From 2016 to 2019, the Consumer Price Index rose by 1.8% while the median household income increased by 3.9%. The World Bank (2019) reports that although the median income continued to outpace inflation, the income growth for low-income Malaysians slowed between 2014 and 2016. The report also highlights the disparity in purchasing power of households in different parts of the country. Poor financial planning, growth in household indebtedness and unaffordable housing are among the key factors affecting the cost of living. Furthermore, the mean income of the top 20% (T20) and the bottom 40% (B40) of households widened from RM8,679 in 2009 to RM15,354 in 2019. This signifies the widening of the income gap between the two groups. Insufficient Affordable Housing By any standards, home ownership in Malaysia can be considered high at 76.9% of households in 2019. Nevertheless, affordable housing remains a concern despite various affordable housing programmes being implemented, chapter 1 economic management and prospectseconomic outlook 202124feature article 1.3Assessing Housing Affordability in MalaysiaIntroductionHome ownership continues to be a concern for most of the rakyat, particularly those in the B40 and lower M40 households. The Government has undertaken various efforts to ensure greater home ownership for the rakyat, particularly the lower-income group through various affordable housing programmes. Affordable housing can be defined as the provision of adequate homes that meets the needs of the people in terms of quality and location as well as reasonably priced, whereby house buyers will still have discretionary income to purchase other basic necessities (UN-Habitat, 2011). This article analyses housing affordability in Malaysia based on the 2019 Household Income and Basic Amenities Survey (HIS & BA).Home Ownership and Trends of Household Income and House Prices in MalaysiaBased on the HIS & BA report, home ownership has marginally improved between 2016 and 2019. In 2019, 76.9% of households owned their homes compared to 76.3% in 2016. At this rate, home ownership in Malaysia can be considered as high by any standards, especially when Malaysia does not have a universal home ownership policy (Figure 1.3.1.). In this regard, Malaysia compares well with other advanced countries such as Canada at 66.3%, US (65.3%), UK (65.2%) and South Korea (56.8%). Nevertheless, there is some disparity in home ownership among states in Malaysia. States with high ownership of above 84% include Terengganu, Sarawak, Kelantan, Kedah and Perlis. However, home ownership was lower than 76% in Labuan, Kuala Lumpur, Selangor, Sabah and Pahang. complemented by the provision of financing facilities for affordable housing as well as rental and rent-to-own housing programmes. Khazanah Research Institute (2019) reported that the median multiple1 affordability for Malaysia increased from 4.1 to 5.0 from 2002 to 2016. According to the World Bank (2019), the median multiple of more than 3.0 is considered unaffordable. This indicates that house prices in Malaysia are generally unaffordable, mainly due to house prices rising faster than income growth. The median house price from 2012 to 2014 rose at a compound annual growth rate of 23.5%, while the median household income expanded significantly slower at 11.7% (Khazanah Research Institute, 2019). Since 2014, house prices have moderated following the measures undertaken by the Government. However, houses remain unaffordable for the majority of the rakyat.1 Median multiple, also known as house-price-to-income ratio, is the ratio of the median house price by the median annual gross household income.economic outlook 202125chapter 1 economic management and prospectsRegarding the trend of house prices and household incomes, it is evident that prices of houses rose slower at 3.4% on average than that of household incomes at 5.2% during the period of 2001 2009 (Figure 1.3.2.). However, house prices rose in double digits by 11.8% compared to household income at 9.9% during the period of 2011 2013. The drastic increase during the period has generally rendered many types of houses unaffordable to many segments of the people. To address the drastic increase in house prices, the Government instituted several measures to manage both the demand and supply of houses. Subsequently, the impact of these measures can be seen from the slower rise in house prices at 6% for the period of 2014 2019, slightly lower than the rate of increase in household income at 6.3% on average. FIGURE 1.3.1. Home Ownership in Malaysia by States, 2019MalaysiaJohorKedahKelantanMelakaN. SembilanPahangP. PinangPerakPerlisSelangorTerengganuSabahSarawakKuala LumpurLabuanPutrajayaState02040608010015.160.363.375.986.585.669.784.381.878.975.978.983.584.584.777.576.9Note: Putrajaya has a low home ownership rate as the majority of houses are quarters for civil servantsSource: Department of Statistics, Malaysia% householdFIGURE 1.3.2. The Trend of House Prices and Household Income, 2000 2019% growth Source: Department of Statistics and National Property Information Centre, Valuation and Property Service Department, Malaysia0246810121416HOUSEHOLD INCOMEHOUSE PRICE INDEX20192018201720162015201420132012201120102009200820072006200520042003200220012000economic outlook 202126chapter 1 economic management and prospectsMeasurement of Affordability In assessing home affordability, policy makers and researchers have relied on short-term measures such as the median1 multiple ratio which compares house prices with current incomes. This article applies a similar model. Based on the definition by the World Bank, a home is considered affordable if the median multiple score is 3.0 or less (Table 1.3.1.). It is considered moderately unaffordable for scores of between 3.1 and 4.0, seriously unaffordable (4.1 to 5.0) and severely unaffordable (5.1 and above). table 1.3.1. Housing Affordability Median Multiple Scorescore2description3.0 or lessAffordable3.1 4.0Moderately unaffordable4.1 5.0Seriously unaffordable5.1 and aboveSeverely unaffordableSource: Global Platform for Sustainable Cities (2019), World BankHome affordability has generally improved in Malaysia in the last few years. The overall median house price had fallen by 1% annually on average from RM298,000 in 2016 to RM289,646 in 2019 (Table 1.3.2.). During the same period, the annual median household income had risen by 4% annually from RM62,736 in 2016 to RM70,476 in 2019. Thus, the median multiple score dropped to 4.1 in 2019 compared to 4.8 in 2016. Although it has gradually decreased, the 2019 ratio implies that homes remained seriously unaffordable in general. Nevertheless, the median multiple score may differ across income groups, types of property and states.Home Affordability by StatesIt is interesting to note that home affordability has generally improved even at the state level between 2016 and 2019. In 2016, homes in five states (Putrajaya, Sabah, Kelantan, Pulau Pinang and Pahang) were considered severely unaffordable. By 2019, homes in only two states (Sabah and Sarawak) remained so. Likewise, in 2016 homes in nine states were considered seriously unaffordable, but by 2019 homes in only four states were in the same category. Houses in eight states were considered moderately unaffordable in 2019 compared to just two states in 2016. While there were no states categorised as affordable based on the median multiple scores in 2016, houses in two states (Melaka and Putrajaya) were considered affordable in 2019. A further analysis was conducted on the affordability of homes for the B40 group to own three types of residential houses, namely low-cost flats3, low-cost houses and flats4 across states. The same analysis was conducted on the affordability of the M40 group to own flats, condominiums or apartments and terrace houses. The selection of states for the analysis is based on the following criteria: the highest median house price (Kuala Lumpur), the highest median multiple score (Sabah) and the most populous state (Selangor).1 The median statistic is preferred over the mean as household incomes and house prices variables are typically skewed to the right (positive skewness) such that their mean are typically above their median, thus not representing the population.2 Median multiple score = Median price of houses / Median annual household incomes3 Refers to an affordable housing unit that is self-contained but is part of a larger building with larger units and is low-priced.4 Refers to an affordable housing unit that is self-contained but is part of a larger building with larger units and is priced lower than condominiums or apartments.economic outlook 202127chapter 1 economic management and prospectstable 1.3.2. Housing Median Multiple Score by States, 2016 and 2019statemedian house pricemedian income1median multiple scorelevel of affordability2019201620192016201920162019Malaysia298,000289,64662,73670,4764.84.1Seriously unaffordableJohor330,000350,00067,81877,1244.94.5Seriously unaffordableKedah196,000199,10045,72651,9004.33.8Moderately unaffordableKelantan199,900210,00036,94442,7565.44.9Seriously unaffordableMelaka205,000200,00067,06172,6483.12.8AffordableNegeri Sembilan270,000206,75054,95060,0604.93.4Moderately unaffordablePahang239,000218,00047,75253,2805.04.1Seriously unaffordablePulau Pinang350,000285,00064,90974,0285.43.8Moderately unaffordablePerak218,800216,60048,07251,2764.64.2Seriously unaffordablePerlis227,000220,00050,44455,1284.54.0Moderately unaffordableSelangor405,000380,00086,69598,5204.73.9Moderately unaffordableTerengganu278,000255,00056,33066,5404.93.8Moderately unaffordableSabah278,000300,00049,32550,8205.65.9Severely unaffordableSarawak230,000313,00049,96054,5284.65.7Severely unaffordableKuala Lumpur520,000480,000108,874126,5884.83.8Moderately unaffordableLabuan240,000320,00071,13880,7123.44.0Moderately unaffordablePutrajaya738,650260,00099,300119,7967.42.2AffordableNote: 1 Annual median household income is calculated based on monthly median household income multiplied by 12 months based on data from the Department of Statistics Malaysia, 2019Source: Ministry of Finance, Malaysia (estimate)024681012142019201820172016201502468101214201920182017201620150246810121420192018201720162015THRESHOLD OF AFFORDABILITYFLATSLOW-COST HOUSESLOW-COST FLATSTHRESHOLD OF AFFORDABILITYFLATSLOW-COST HOUSESLOW-COST FLATSTHRESHOLD OF AFFORDABILITYFLATSLOW-COST HOUSESLOW-COST FLATSFIGURE 1.3.3. Median Multiple Scores for B40 by Types of Houses in the Selected States, 2015 2019Source: Ministry of Finance, Malaysia (estimate) Kuala LumpurSelangorSabaheconomic outlook 202128chapter 1 economic management and prospectsBased on the analysis, it was observed that during the period of 2015 2019, the B40 group in Kuala Lumpur has been facing severe unaffordability issue for all three types of housing properties (Figure 1.3.3.). In fact, the median multiple scores for all types of properties remained high above 5.0 throughout the period. Similarly, in Sabah, the B40 group faced similar affordability issue with owning the same types of properties over the same period. However, the severity of unaffordability in Sabah was not as severe as in Kuala Lumpur. Selangor has resolved the issue of unaffordability for the B40 group with low-cost flats since 2016. Nevertheless, the B40 group would find it challenging to upgrade to the other types of housing properties in the state.The issue of housing unaffordability remained severe among the M40 in the three states during the period of 2015 2019 (Figure 1.3.4.). In Kuala Lumpur, the M40 could only afford flats. However, they were not qualified to do so under the public low-cost housing programmes. Even worse, the other two types of properties were beyond their affordability as the median multiple scores for condominiums or apartments and terrace houses were 8.0 and above. The situation in both Sabah and Selangor was similar to Kuala Lumpur. However, the severity of the unaffordability was not as extreme as that in the nations capital. The M40 in both states could only afford low-cost flats but still could not upgrade to the other two types of properties.Based on this evidence, it is observed that some states are facing greater challenges in housing the rakyat. The Government remains committed to addressing home accessibility and affordability issues. Through collaboration with the private sector since 2000, various public housing programmes were implemented to meet the needs of the different segments of the society, particularly the M40 and B40 groups. Among the programmes include 1Malaysia Housing Programme (PR1MA), 1Malaysia Civil Servants Housing Programme (PPAM), MyFirst Home Scheme and MyHome Scheme. ConclusionThe provision of affordable housing to the rakyat is vital to ensure their well-being. The Government has provided various programmes aimed at assisting the low and lower-middle income groups in owning affordable houses. However, as the issue continues to persist, especially among the middle- and lower-income groups across the states, more effective and efficient delivery of these programmes is imperative. Thus, alternative models of social housing programmes should be considered, taking into account new ownership models and innovative ways of financing and pricing mechanisms. THRESHOLD OF AFFORDABILITY02468101214TERRACE HOUSESCONDOMINIUM / APARTMENTFLATSTHRESHOLD OF AFFORDABILITYTERRACE HOUSESCONDOMINIUM / APARTMENTFLATSTHRESHOLD OF AFFORDABILITYTERRACE HOUSESCONDOMINIUM / APARTMENTFLATS2019201820172016201502468101214201920182017201620150246810121420192018201720162015FIGURE 1.3.4. Median Multiple Score for M40 by Types of Houses in the Selected States, 2015 2019Kuala LumpurSelangorSabahSource: Ministry of Finance, Malaysia (estimate) chapter 1 economic management and prospectseconomic outlook 202129Lack of Digital AdoptionThe World Bank (2018) reports that although 62% of businesses in Malaysia were connected to the internet and 46% subscribed to fixed broadband, only 18% have a web presence for e-commerce. This indicates that the potential of the digital economy has yet to be fully leveraged. The adoption of digital technology in businesses is dominated by large companies, particularly in the manufacturing sector. This also signifies a significant digital gap between large companies and SMEs and between the manufacturing and other sectors. According to SME Corporation Malaysia (2018) and Bank Negara Malaysia (2019), the lack of know-how and funding are the key challenges to greater digitalisation of SMEs. Other factors contributing to the gap include the slow adoption rate and low coverage of fixed broadband services as well as limitation in financial and human capital (Bank Negara Malaysia, 2019). Limitation in the Logistics Sector The logistics industry, which includes transportation and storage, accounted for 3.8% of GDP in 2019 and is a crucial enabler for economic development. According to the Logistics Performance Index (LPI), in 2016, Malaysia was ranked at 32nd position out of 160 countries and dropped to 41st in 2018 (World Bank, 2018). Malaysia scored lower in all critical dimensions of the LPI, namely customs, infrastructure, international shipments, logistics quality and competence, tracking and tracing, and timeliness. As the industry is highly integrated across various sectors, poor logistics services hinder trade efficiency and thus, impact economic development. Strategic Initiatives 2021 BudgetGiven the issues and challenges, the 2021 Budget strives to strike a balance between addressing the immediate needs of the people and businesses, laying the foundation for a sustainable recovery and meeting the long-term aspiration of the nation. As 2021 is the first year of the 12MP, the strategic measures in the 2021 Budget will support the overarching aim of the Plan. The Budget emphasises four broad areas - caring for the people, steering the economy, ensuring sustainable living and enhancing public service delivery.Caring for the PeopleWith the impact of the pandemic lingering in 2021, the well-being of the people remains the priority of the Government. In the 2021 Budget, efforts will be streamlined towards addressing employment issues, enhancing social safety net and strengthening human capital. Measures will also be formulated to facilitate the upward mobility of the people. The Government will continue to engage various stakeholders, including the private sector and civil society as development partners in nation-building. In the effort to achieve upward mobility, the focus will be on enhancing reskilling and upskilling programmes. These include, among others, providing coordinated training programmes and improving existing courses to meet the demand of industries and prepare for challenges of the Industrial Revolution 4.0 (IR4.0). In addition, the education system will be enhanced to facilitate online learning. School curriculums will also place greater emphasis on living skills such as entrepreneurship and social skills. chapter 1 economic management and prospectseconomic outlook 202130information box 1.2Social Safety Net in MalaysiaIntroductionSocial safety net is described as non-contributory transfers targeted in some ways to the poor and vulnerable to address chronic poverty and inequality, help the poor invest in developing human capital, and protect the poor and vulnerable from individual and systemic shocks, including during economic reforms (IEG World Bank, 2011). In the context of Malaysia, it is a collection of programmes designed to protect the livelihood and well-being of the poor and vulnerable. It entails programmes such as welfare assistance, cost of living assistance, unemployment benefits, workers compensation, subsidised healthcare and education as well as low-cost housing. Based on Paitoonpong et al. (2008), the safety net analogy is drawn from high-wire walkers who are protected by a safety net if they fall. The net prevents any walker who falls, whether unexpectedly or otherwise, from hitting the floor and incurring injuries. Based on the 2019 Household Income and Basic Amenities Survey, 5.6% of Malaysian households are considered poor at Poverty Line Income (PLI) monthly threshold of RM2,208 (Department of Statistics of Malaysia, 2020). However, unlike many other countries, the PLI in Malaysia measures the minimum income required to maintain a certain quality of life taking into consideration the optimum healthy food intake requirements and access to basic necessities for non-food items. The social safety net in Malaysia may not be as cohesive as that of advanced countries. However, Malaysians are provided with various social support programmes such as cash transfers, subsidised healthcare, education, transport and housing. This article focuses on the social safety net in Malaysia and makes recommendations for improvement. Social Safety Net ProgrammesIn 2019, the Government spent a total of RM26.6 billion1 (Figure 1.2.1.) or 1.8% of gross domestic product (GDP) for various social safety net programmes. The largest portion amounting to RM14 billion (52.6% of the total assistance) was allocated to minimise the impact of the rising cost of living and improve the welfare of the rakyat, particularly the poor and vulnerable. These include subsidies for cooking oil; liquefied petroleum gas (LPG), diesel and petrol; electricity; and flour. Other assistances include the Cost of Living Aid (BSH) as well as allowances and cash transfers to the people with disabilities, aged, and the poor as well as children without guardians and Orang Asli groups. These assistances are necessary as the rising cost of living continues to be a main concern for most of the rakyat, particularly the poor and vulnerable. As education is an essential enabler for social mobility and human capital development, the second-largest amount, RM6.7 billion (25.3%), was allocated for this sector. This includes programmes on food, textbooks and other assistance for school and pre-school children as well as matriculation and higher education students. Other assistances include various scholarships and loans for school and university students.Agriculture is a priority sector, not only due to its linkages to the rest of the economy but also a disproportionate share of B40 households are in this sector. Hence, this sector is a significant beneficiary of assistances amounting to approximately RM1.9 billion (7.2%). Farmers and fishermen are among the beneficiaries through various programmes including paddy price and fertiliser subsidies, paddy production incentives, monsoon season assistances and oil palm re-planting as well as the implementation of Malaysian Sustainable Palm Oil (MSPO) certification. In addition, fishermen receive fish catch incentives. 1 Including assistances provided under development expenditure as well as supplies and services for social safety net programmes.economic outlook 202131chapter 1 economic management and prospectsAssistances were also provided to transportation, health and security sectors amounting to RM1.6 billion (6.0%) to ensure access to quality and affordable services. These include toll compensation as well as subsidies in the transportation sector for RapidKLs unlimited-ride monthly pass, Keretapi Tanah Melayu Berhads uneconomic train subsidy and rural air services in Sabah and Sarawak. Subsidies to the health sector cover Skim Peduli Kesihatan for the B40 group (PeKa B40) and medical treatment for retirees. Other assistances amounting to RM2.4 billion (9.0%) include interest rate subsidies to help reduce the costs of borrowing for students at institutions of higher learning as well as assistance for community and religious affairs. Additional Social Safety Net Programmes during COVID-19 PandemicThe nation was severely impacted as a result of the COVID-19 pandemic and the subsequent implementation of the Movement Control Order (MCO). Businesses were badly hit while unemployment rose. As more people became vulnerable, the Government had to cast a more comprehensive safety net to support them. Hence, the Government announced several economic stimulus packages to protect lives and livelihoods. Under the Prihatin Rakyat Economic Stimulus Package (PRIHATIN) and the PRIHATIN PLUS announced in March and April 2020, various one-off assistances were provided to households to ease their financial burden. This includes cash transfers, benefitting around 5 million households. Cash transfers were also provided to single individuals aged 21 and above with monthly income of not more than RM4,000. In addition, a one-off cash aid of RM200 per person was provided to students at institutions of higher learning with an estimated cost of RM270 million and RM500 per person to 120,000 full-time e-hailing drivers with an allocation of RM60 million.Under the same package, a wage subsidy programme was also implemented to encourage the retention of workers earning less than RM4,000 and employers experiencing more than 50% decrease in their income since 1 January 2020. These subsidies enable employers to be flexible in retaining the workers during the movement control period. The programme involved an allocation amounting to RM13.8 billion, benefitting approximately 4.8 million workers. This has contributed to the moderation of the unemployment rate to 4.7% in August 2020 as compared to 5.3% in May 2020.With the resumption of economic activities, the Government announced the Pelan Jana Semula Ekonomi Negara (PENJANA) in June 2020 to accelerate economic recovery. As a result of the MCO, peoples movements were restricted, spurring the demand for on-line transactions. Hence, many individuals and households engaged in the gig economy, including deliveries, e-hailing and remote or mobile businesses. The stimulus package, among others, provides additional social protection and training for gig workers. A total of 30,000 gig workers are expected to benefit from the programme, involving an allocation of RM75 million. Furthermore, a total of RM200 million was allocated to ease the burden of working parents during the Conditional Movement Control Order (CMCO) through subsidised child care expenses. FIGURE 1.2.1. Percentage of Federal GovernmentExpenditure on Social Safety Net by Categories ofAssistance in 2019 Source: Ministry of Finance, Malaysia 25%COST OF LIVINGAGRICULTUREOTHERSEDUCATIONTRANSPORTATION,HEALTH &SECURITY9%6%7%RM26.6billion53%chapter 1 economic management and prospectseconomic outlook 202132The Government will continue to focus on addressing the needs of the vulnerable group, particularly the B40. In this respect, the Malaysia Social Protection Council was reactivated to coordinate and integrate all social welfare programmes. Thus, the overall mechanism in delivering assistances to target groups will be improved. Steering the EconomyAs Malaysia recovers from the impact of the COVID-19, the economy must return to a more sustainable growth path. The focus will be on increasing foreign direct investment (FDI), enhancing productivity and re-instilling consumer confidence. As such, the Government will prioritise essential areas, such as improving the ease of doing business, The Government also announced the PRIHATIN Supplementary Initiative Package (KITA PRIHATIN) package in September 2020 amounting to RM10 billion. A total of RM7 billion was allocated for Bantuan Prihatin Nasional 2.0, and another RM3 billion for Wage Subsidy Programme 2.0 and Geran Khas PRIHATIN. This package aims at providing continued support for the people, ensuring employment and assisting businesses, particularly the SMEs, in enduring the challenges faced as a result of the pandemic. Strengthening and Sustaining Livelihood of the PeopleBased on an improved methodology, the PLI has been increased from RM980 in 2016 to RM2,208 in 2019 (Department of Statistics of Malaysia, 2020). Under the new PLI, the number of households categorised as poor increased to 405,441 households compared with 24,700 households in 2016 which was based on the PLI 2005 methodology. As more households are considered poor, greater financial resources are required to provide the necessary support. As the existing assistance mechanism involves various ministries and agencies, there is a need to establish an integrated database for effective distribution of assistances. The integrated database will be used for the identification and registration of beneficiaries, effective disbursement and monitoring of programmes and prevent duplication of assistances and exclusion of eligible recipients. Furthermore, the reactivation of the Malaysia Social Protection Council (MySPC) chaired by the Prime Minister will review existing social protection policies and programmes. This would further enhance the social safety net in Malaysia and provide an exit mechanism to reduce over-dependence on Government assistance except for welfare cases.ConclusionThe Government provides various assistance to the rakyat, particularly to the poor and vulnerable but assistance cuts across many ministries and agencies. Thus, an effective and efficient integrated delivery system is needed. The private sector, non-governmental organisations and other stakeholders have an important role in complementing the Government in ensuring that no one is left behind in the national development agenda.enhancing the usage of technology and digitalisation across public and private sectors as well as ensuring a stable labour market. Various initiatives will be formulated to provide a more conducive environment for businesses and FDI to thrive. The 2021 Budget will also introduce measures to increase productivity by enhancing the adoption of technology across the board, including individuals, SMEs and corporates. Efforts will focus on the development of resilient SMEs. As the backbone of the economy, the challenges faced by SMEs during the COVID-19 pandemic signifies the need for adoption and adaptation of new business approaches. The Government will continue to provide the necessary support for SMEs to prosper in the new environment, including the potential for going global.chapter 1 economic management and prospectseconomic outlook 202133The 2021 Budget will focus on enhancing the existing delivery mechanisms in ensuring all assistances and incentives benefit the target groups. In this respect, the National Economic Stimulus Implementation and Inter Agency Coordination Unit (LAKSANA) has been established to monitor the implementation of measures announced in the various economic stimulus packages. LAKSANA also partners with other stakeholders to further improve the effectiveness of the programmes. Moving forward, the Government will review existing enterprise architecture across all Government agencies to sync with the IR4.0. The Government will also collaborate with NGOs and CSOs as development partners in various areas, including forestry, biodiversity, poverty and other social issues. ConclusionOn the back of the COVID-19 pandemic, the Malaysian economy contracted by 8.3% in the first half of 2020. The economy is projected to improve in the second half and, thus, record an overall smaller contraction of 4.5%. In 2021, the economy is projected to expand between 6.5% and 7.5% in tandem with the anticipated improvement in global trade, consumer sentiments and business confidence. The 2021 Budget will implement measures to enhance the well-being of the people, steer the economy towards a sustainable growth path, enable sustainable living and improve public service delivery. As targeted in the 12MP and the 2030 Shared Prosperity Vision, the Budget will lay the foundation for the country to progress towards a developed and inclusive nation.Ensuring Sustainable LivingAs part of the efforts to improve sustainable living, the Government will continue to protect the environment and manage biodiversity more sustainably. A closer collaboration with the respective non-governmental organisations (NGOs) and civil society organisations (CSOs) will be forged and enhanced towards ensuring a more comprehensive and holistic management of the environment and natural resources. In the 2021 Budget, the Government will encourage behavioural shift among the rakyat and businesses towards better management of environment and biodiversity. In addressing the needs for achieving the SDGs, programmes and initiatives will be in line with the 12MP, particularly in terms of allocation for sustainable development. Beginning in 2021, the Government will focus on mapping the financing needs in achieving the SDGs. Enhancing Public Service DeliveryThe role of the public service is crucial in ensuring the development of the nation. Hence, the quality of services will determine whether the goals and outcomes of all plans and programmes formulated are achieved accordingly. As part of the efforts to enhance public service delivery, the Government aims to be more outcome-driven and implementation-focused as well as support the people and businesses in a more targeted manner. chapter 1 economic management and prospectseconomic outlook 202134ReferencesAbdul Hadi Nawi. (2019). Property Talk 2019: Affordable House vs Affordability. Retrieved from https:/www.ikpkt.kpkt.gov.myAllen, J. & Andries de Grip. (2012). Does Skill Obsolescence Increase the Risk of Employment Loss? Retrieved from https:/ Negara Malaysia. (2018). Financial Stability and Payment Systems Report 2018. 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Jurnal Ekonomi Malaysia, 48(2), 3-17.chapter 2Global Economic Outlook41overview 42global economyInformation Box 2.1 - Response to the COVID-19 Pandemic by Selected Multilateral Development Banks59conclusion60referencesCHAPTER 2 SUMMARY: GLOBAL ECONOMIC OUTLOOKNegative Global Growth Anticipated in 2020The Impact ofCOVID-19 Pandemic 2020DISMAL GROWTHRestricted movementForced lockdowns Business closuresDecelerated activitiesEconomic disruptionsFDI declines 40% in 2020World trade plummets 10.4% in 2020Debt crisis-5.8%-3.3VANCEDECONOMIESEMDESUnfavourable performance in advanced economies and EMDEs due to fall in domestic demand, particularly private consumption and investment, coupled with dismal trade growthChina to cushion decline in EMDEs-4.4%-4.4IWORLDTRADE To decline further in 2021 as restrictive investment policy measures affect cross-border M&A activitiesRisks to global economy persists: US-China trade tensionsUncertainties surrounding BrexitGeopolitical tensions Low oil pricesClimate crisisIncrease in governmentdebts Opportunities to institute reforms towards accelerating digitalisation and pursuing sustainable growthGLOBAL ECONOMIC OUTLOOKSilver LiningADVANCEDECONOMIES3.9%EMDEs6%CHAPTER 2 SUMMARY: GLOBAL ECONOMIC OUTLOOKNegative Global Growth Anticipated in 2020Global Economy to Reboundin 2021GLOBALGROWTH2021PROMISING GLOBALPROSPECTS5.2%5.2%INFLATIONADVANCEDECONOMIESEMDES1.6%4.7%GLOBAL3.4fectiveimplementation of fiscal and monetary measuresCOVID-19 vaccine discovery and containment of pandemic-4.4%-4.4%-10.4 208.3 21FDIWORLDTRADE To decline further in 2021 as restrictive investment policy measures affect cross-border M&A activitiesRisks to global economy persists: US-China trade tensionsUncertainties surrounding BrexitGeopolitical tensions Low oil pricesClimate crisisIncrease in governmentdebts Opportunities to institute reforms towards accelerating digitalisation and pursuing sustainable growthSilver Liningeconomic outlook 2021chapter 2 global economic outlook41OverviewA rebound after dismal growthThe global economy is projected to contract by 4.4% in 2020 (2019: 2.8%). This anticipated negative growth is due to unfavourable performance in both the advanced economies and the emerging market and developing economies (EMDEs), mainly resulting from the adverse impact of the COVID-19 pandemic. On the contrary, robust growth in the advanced economies and the EMDEs is expected to spearhead global growth by 5.2% in 2021.chapter 2Global Economic OutlookIn 2020, the gross domestic product (GDP) in the advanced economies is expected to decline by 5.8% (2019: 1.7%), while the GDP in the EMDEs is anticipated to contract by 3.3% (2019: 3.7%). This is mainly due to a fall in domestic demand, particularly private consumption and investment, coupled with dismal trade growth. The decline in the growth of the EMDEs is expected to be cushioned by favourable growth in China. Among the advanced economies, the euro area is anticipated to register the sharpest downturn in comparison with the previous year.In 2021, the advanced economies is forecast to rebound by 3.9%, spurred by improved domestic demand and increased trade activities. Growth in the US is expected to improve by 3.1%, backed by a recovery in private consumption and favourable investment. The GDP in the euro area is anticipated to turn around by 5.2% in 2021, supported by improved domestic demand following accommodative fiscal and monetary policies. The economy of the UK is envisaged to record a stellar growth of 5.9%, driven by a recovery in the services sector. The GDP of Japan is projected to pick up by 2.3%, boosted by an increase in private consumption and a recovery in exports.The GDP of the EMDEs in 2021 is expected to bounce back by 6%, buoyed by solid domestic demand and higher exports. China is envisaged to lead the recovery in the region, with a sturdy growth of 8.2%. Likewise, the economy of India is projected to rebound by 8.8% on the back of strong consumer demand. The GDP of ASEAN-51 is anticipated to turn around by 6.2%, on account of robust domestic consumption, higher investment and a favourable trade environment. 1 ASEAN-5 comprises Indonesia, Malaysia, the Philippines, Thailand and Viet Nam.FIGURE 2.1. Real GDP Growth for Global, AdvancedEconomies, and Emerging Market andDeveloping Economies, 2019 2021(% change)-8-6-4-202468EMERGING MARKET AND DEVELOPING ECONOMIESADVANCED ECONOMIESGLOBAL Real GDP Growth202122020120191 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook(October 2020)2.81.73.74.45.83.35.23.96.0onomic outlook 2021chapter 2 global economic outlook42World trade is set to plummet by 10.4% in 2020 (2019: 1%), owing to subdued demand for goods and services, compounded by the COVID-19 pandemic. Lacklustre demand for goods is expected, despite rising needs for medical equipment and supplies, amid volatile commodity markets as well as escalating trade and trade-related tensions, particularly between the US and China. The demand for services is also anticipated to fall, with cross-border tourism activities adversely affected. Nevertheless, global trade is projected to turn around by 8.3% in 2021 as economic activities gain momentum. Global foreign direct investment (FDI) is expected to decline up to 40% in 2020 (2019: 13%), dragging the FDI below USD1 trillion for the first time since 2005. This drop is due to heightened uncertainties concerning the pandemic, which may continue to slow down the implementation of existing projects and approval of new investments. In 2021, the FDI is projected to further decline by 5% to 10%, as new restrictive investment policy measures affect cross-border merger and acquisition (M&A) activities. Global inflation is expected to be mild at 3.2% in 2020 (2019: 3.5%). Inflation is on a downward trend in advanced economies at 0.8% (2019: 1.4%), while inflation in the EMDEs is anticipated to remain at 5% (2019: 5.1%), resulting from low oil prices. In 2021, global inflation is expected to slightly increase to 3.4%. Inflation in the advanced economies is anticipated to increase to 1.6%. In comparison, inflation in the EMDEs is forecast to be at 4.7%. Risks to the global outlook are mainly due to the impact and severity of the COVID-19 crisis, compounded by the uncertainty in discovering a vaccine. A protracted economic slowdown may result in a vicious cycle, where financial distress may expose borrowers to vulnerabilities. Subsequently, this will drag economies into debt crises and decelerate activities even more. In addition, cross-border spillovers from weaker external demand could further magnify the impact of country- or region-specific shocks on global growth. Strained relationships among the coalition of oil producers of the Organization of the Petroleum Exporting Countries Plus (OPEC )2 and widespread social unrest may pose additional headwinds to the global economy. Furthermore, uncertainties surrounding the Brexit outcomes, rising government debts and unemployment, as well as climate crisis, are among the major factors that could impede future growth. Global EconomyNavigating unprecedented challengesThe US economy contracted by 4.4% in the first half of 2020, resulting from a decline in consumer spending, as the economy struggled with the COVID-19 pandemic. Personal 2 OPEC comprises 13 members of OPEC, namely Algeria, Angola, the Republic of the Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates and Venezuela as well as 10 of the worlds major non-OPEC oil-exporting nations, namely Azerbaijan, Bahrain, Brunei Darussalam, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan.FIGURE 2.2. Inflation Rate for Global, AdvancedEconomies, and Emerging Market and Developing Economies, 2019 2021(% change) Inflation Rate0123456EMERGING MARKET AND DEVELOPING ECONOMIESADVANCED ECONOMIESGLOBAL202122020120191 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook(October 2020)3.51.45.13.20.85.03.41.64.7onomic outlook 2021chapter 2 global economic outlook43consumption expenditure, which contributes 67.1% to total GDP, plummeted by 5%, particularly in the health care as well as food services and accommodation sectors. Private investment fell by 10.6% following a sharp decline in transportation equipment as well as a decrease in mining structures, resulting from subdued oil and gas production activities.In the same period, the US recorded a trade deficit of 7.5%, amounting to USD50.7 billion, as exports declined following subdued demand, particularly in petroleum products and fuel oil. Likewise, imports decreased, as a result of sluggish demand, particularly in automotive vehicles and machinery. The unemployment rate jumped to 8.4%, owing to heavy job losses in the leisure and hospitality sector. Inflation moderated to 1.2% following lower oil prices, despite high food costs. Overall, in 2020, the US GDP is expected to contract by 4.3% (2019: 2.2%), as a result of weakened private consumption and external demand. Private consumption is anticipated to shrink by 4.9% (2019: 2.4%) due to the phasing out of earlier Government stimulus packages as well as a significant rise in household savings. Similarly, the federal balance is expected to worsen, largely due to spending for the stimulus packages, coupled with the presidential election in November. Exports are anticipated to dip, amid the ongoing trade tensions, exacerbated by the pandemic. As of August 2020, four stimulus packages, amounting to USD2.3 trillion, have been announced. These include cash payments and expanded unemployment benefits to households, support to the health care system and assistance to severely distressed sectors. The unemployment rate is expected to spike to 8.9% (2019: 3.7%), with the leisure and hospitality sector being the most affected. Inflation is expected to moderate to 1.5% (2019: 1.8%) following lower oil prices. In March 2020, the US Federal Reserve (Fed) lowered its funds rate target range to between 0.00% and 0.25%. The Fed indicated to maintain the rates at this level until the economy has stabilised. In 2021, the US growth is projected to rebound by 3.1%, driven by domestic demand, particularly private consumption, which is anticipated to surge by 2.8%. Investment is expected to bounce back by 2.8%, underpinned by higher private fixed investment. Both exports and imports are forecast to rebound significantly, on the back of a favourable global trade environment. The unemployment rate is expected to improve to 7.3%, while inflation is anticipated to rise to 2.8%. Risks to the US include a prolonged COVID-19 pandemic as the intensity and duration of the outbreak would further disrupt domestic demand and the global value chain. These deteriorating economic fundamentals may result in financial distress, leading to refinancing difficulties for both corporates and households. In addition, continued low oil prices would lead to subdued investment spending in non-residential structures. Consequently, firms, particularly in the energy sector, may face higher costs with an increased number of bankruptcies. On the trade front, broader protectionist measures, including export controls, may affect business confidence and hamper growth.The GDP for the UK contracted by 11.8% in the first half of 2020, the largest recession on record, resulting from a drastic decline in the services sector. The services sector, which contributes approximately 80% to total GDP, plunged by 11.3%, primarily due to a decline of 48.3% in the accommodation and food services subsector. In addition, the distribution, INDICATOR20192020120212Real GDP (% p.a.)2.2-4.33.1Inflation (% p.a.)1.81.52.8Current Account of BOP (% of GDP)-2.2-2.1-2.1Unemployment Rate (%)3.78.97.31 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)TABLE 2.1. Selected Indicators for the United States, 2019 2021economic outlook 2021chapter 2 global economic outlook44hotels and restaurants subsector declined by 20.9%. Likewise, the production and construction sectors contracted by 11.5% and 21.1%, respectively, following strict lockdowns beginning at the end of March 2020. The unemployment rate remained at 4% following the Governments furlough scheme, which allows workers affected by the pandemic to be absent temporarily from work. Inflation was registered at 1.7%, owing to low oil prices.The economy is projected to decline by 9.8% in 2020 (2019: 1.5%), as the services sector continues to contract following prolonged lockdowns imposed by the Government. Several schemes have been announced to stimulate demand in sectors affected by the pandemic, particularly in hospitality and tourism. The UK announced various stimulus and relief packages since March 2020, including the Coronavirus Job Retention Scheme, which helped pay the wages of people in 9.6 million jobs. In addition, the Eat Out to Help Out Scheme boosted hospitality-related activities. As of September 2020, the Bank of England maintained the policy rate at 0.10%, after reducing the rate twice in March by a total of 65 basis points to bolster the economy. The unemployment rate is projected to register 5.4% (2019: 3.8%) as the Governments furlough scheme is expected to be discontinued by the end of the year. Inflation is anticipated to moderate to 0.8% (2019: 1.8%), mainly due to lower oil and service prices.information box 2.1 Response to the COVID-19 Pandemic by Selected Multilateral Development BanksIntroduction The COVID-19 outbreak began at end-2019 and was declared as a pandemic in March 2020 by the World Health Organization. The pandemic has affected people worldwide, and to date, has resulted in over 1.1 million fatalities out of 40.7 million confirmed cases (World Health Organization, 2020). The rising trend of positive cases, coupled with the uncertainty surrounding the discovery of a vaccine, signal that a protracted pandemic may be probable. In containing the spread of this virus, governments have imposed lockdowns, enforced business closures, limited international travels and restricted individuals from their usual physical and social activities. These containment measures have resulted in severe economic disruptions. Amid an already softening world economic growth and volatile commodity prices, the added economic impact of the pandemic is expected to lead to the worst global economic crisis ever recorded in recent times. To mitigate the socioeconomic impact of the pandemic and the containment measures, governments have implemented stimulus measures to protect lives and livelihoods as well as support businesses to remain afloat. These stimulus measures include additional health expenditure as well as assistance in the form of cash transfers, loan moratoriums, credit guarantees and tax incentives. In 2021, the UKs economic growth is forecast to bounce back by 5.9%, largely contributed by a recovery in the services sector. The resumption of retail- and hospitality-related activities is likely to support the recovery, boosted by stimulus measures aimed at consumers. The conclusion of the negotiation of the Comprehensive Free Trade Agreement (CFTA) between the UK and the EU and a smooth post-Brexit transition are expected to support growth. The unemployment rate is INDICATOR20192020120212Real GDP (% p.a.)1.5-9.85.9Inflation (% p.a.)1.80.81.2Current Account of BOP (% of GDP)-4.0-2.0-3.8Unemployment Rate (%)3.85.47.41 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)TABLE 2.2. Selected Indicators for the United Kingdom, 2019 2021economic outlook 2021chapter 2 global economic outlook45However, the limited fiscal space of many governments may not be able to sustain the provision of the relief and recovery assistance for long due to the existing economic conditions amid the pandemic. The adverse impact of COVID-19 on economies is evidenced in shrinking tax revenues, decreased gross domestic product (GDP) growth, volatile private capital flows, declining exports and falling remittances. Middle- and low-income countries that are constrained by limited financial resources and weak health systems are particularly vulnerable and slow to recover. Projections by the International Monetary Fund (IMF) for 2020 reflects that as GDP contracts and public expenditures expand, the share of gross public debt will generally rise to a record high. This is especially so for the middle-income countries whose debt is projected to rise to 62.2% of GDP (2019: 52.6%) with an expected fiscal deficit of 10.7% of GDP (2019: 4.9%). Likewise, the share of gross public debt in low-income countries is expected to increase to 48.8% of GDP (2019: 43.3%), with their fiscal deficit increasing to 6.2% of GDP (2019: 4%). The Role of Multilateral Development Banks during the COVID-19 Crisis Against this backdrop of uncertainty and vulnerability of the current economic situation, multilateral development banks (MDBs) can play a critical role in the overall global economic recovery. MDBs are generally recognised as international financial institutions that have been commissioned by countries to promote inclusive and sustainable economic development. There are more than 20 MDBs worldwide with various roles and functions. The unique structure of MDBs allows them to tackle challenges that cross national borders, including global pandemics, which demand cross-border solutions (Maasdorp, 2020). Malaysia is a member of five of these institutions, namely the World Bank Group (WBG), the IMF, the Asian Development Bank (ADB), the Islamic Development Bank (IsDB) and the Asian Infrastructure Investment Bank (AIIB).The challenge to manage the impact of the COVID-19 pandemic has triggered an increasing need of many developing countries in seeking financial support from the MDBs. This has led to the MDBs expediting the disbursement of loans and expanding concessional financial assistance through existing resources. The additional obligation is imposed on their existing roles in supporting the reconstruction and development of member countries as well as mobilising resources for infrastructure and sustainable development.COVID-19-Related Assistances by MDBs The COVID-19 response initiatives by the MDBs include expanding the allocation of existing assistance, extending assistance to wider recipients and expediting the process of disbursement. The forms of assistance provided by the five MDBs, of which Malaysia is a member of, are listed in Table 2.1.1. table 2.1.1. COVID-19-Related Assistances Provided by Selected MDBsprogramme/initiativemdbswbgimfadbisdbaiibFinancial Support ProgrammeDebt Relief ProgrammeTrade FinanceGuarantees Technical Assistance/Policy AdviceOther InitiativesTotal Assistance (USD billion)160.0100.020.02.310.0Sources: World Bank Group (2020), International Monetary Fund (2020), Asian Development Bank (2020), Islamic Development Bank (2020) and Asian Infrastructure Investment Bank (2020)economic outlook 2021chapter 2 global economic outlook46(i) Financial Support Programmes The MDBs provide financial support to fund infrastructure and development projects in member countries. The MDBs also allocate special funding, in the form of loans and grants, to help member countries mitigate the impact of health-related crises, especially pandemics, on the economy. Loans are provided on a market or concessional basis, while grants are only provided for limited purposes, based on specific terms and conditions. Details of these programmes are listed in Table 2.1.2. table 2.1.2. COVID-19-Related Financial Support Programmes mdbprogramme/initiativedescriptionamount/sourceWBG1COVID-19 Initial Response PackageFinancing to strengthen health systems and disease surveillance.IBRD and IDA: USD6 billion Fast Track COVID-19 FacilityInvestment Project Financing is prepared on a fast-track basis comprising up to 40% of retroactive financing for physical or social infrastructure to reduce poverty and ensure sustainable development.IBRD: USD2.7 billionIDA: USD1.3 billionProgram-for-Result (PforR) PforR can be restructured for prompt response with funds disbursed directly for the delivery of defined results in the health sector.Financing from IDAContingent Emergency Response ComponentContingent windows to escalate the emergency response for provision of additional financing to existing investment projects after a crisis has or is about to occur.Financing from the IBRD, IDA or trust fundsCatastrophe Deferred Drawdown Option Contingent financing line providing immediate liquidity to address shocks following a natural disaster and/or health-related event.Financing from IDAReal Sector Crisis Response FacilitySupport existing clients in the infrastructure, manufacturing, agriculture and services industries vulnerable to the pandemic by offering loans to companies and investing in equity.IFC: USD2 billionWorking Capital Solutions ProgrammeFunding to emerging market banks to extend credit in helping businesses shore up working capital as well as the pool of funds that firms use to pay their bills and employees salaries.IFC: USD2 billionGlobal Trade Liquidity Programme and Critical Commodities Finance ProgrammeShoring up local banks through funding and risk-sharing support to continue financing companies in emerging markets.IFC: USD2 billionIMFRapid Financing Instrument (RFI) Rapid Credit Facility (RCF)Increase access limits of the emergency financial facilities of RFI and RCF (rapid, low-access and one-off) without the need to have a full-fledged programme in place. RFI is available to all Fund members, while RCF is available to Poverty Reduction and Growth Trust-eligible (PRGT) members only.The amount for both RFI and RCF is close to SDR20 billionShort-term Liquidity Line (SLL)Enhance liquidity through SLL for member countries with strong policies and fundamentals in need of short-term moderate balance of payment support to further strengthen global financial safety.Augmented Lending ProgrammeAugment existing lending programmes to accommodate urgent new needs arising from the COVID-19 crisis.1 The World Bank Group (WBG) consists of five unique agencies the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID).continuedeconomic outlook 2021chapter 2 global economic outlook47table 2.1.2. COVID-19-Related Financial Support Programmes mdbprogramme/initiativedescriptionamount/sourceADBCOVID-19 Response Options Address the social and economic consequences of the pandemic through sovereign and non-sovereign operations.Sovereign:USD18.2 billion Non-Sovereign:USD1.8 billion IsDB2Strategic Preparedness and Response Programme for the COVID-19 PandemicReallocation of existing funds under IsDB in supporting member countries efforts to prevent, contain, mitigate and recover from the impact of the COVID-19 pandemic.USD2.3 billionAIIBCOVID-19 Crisis Recovery FacilityFinancing for both public and private sector entities in member countries to alleviate and mitigate economic, financial and public health pressures arising from adverse impacts of the COVID-19 pandemic.USD10 billionSpecial Fund WindowInterest rate buy-down on sovereign-backed financing for lower-income members.USD10 million per countrySources: World Bank Group (2020), International Monetary Fund (2020), Asian Development Bank (2020), Islamic Development Bank (2020) and Asian Infrastructure Investment Bank (2020)(ii) Debt Relief Programmes Debt relief programmes provided by the MDBs include debt restructuring and debt service suspension. During this challenging period, these programmes are particularly helpful for the poor and vulnerable countries to manage their debt burden and sustain their economies with adequate resources at the same time. Details of programmes are listed in Table 2.1.3.table 2.1.3. COVID-19-Related Debt Relief Programmesmdbprogramme/initiativedescriptionamount/sourceWBGDebt Service Suspension InitiativeAvailable to IDA-eligible countries and the United Nations (UN) least developed countries.Approximately USD5 billion disbursed as of mid-September 2020IMFCatastrophe Containment and Relief TrustProvides grants for the PRGT-eligible member countries to cover IMF debt service. This helps countries channel their financial resources towards vital emergency medical and relief efforts during most catastrophic of natural disasters and public health disasters.SDR700 millionSources: World Bank Group (2020) and International Monetary Fund (2020)(iii) Trade Finance Trade finance provides credit as well as payment guarantees and insurance to businesses. This facility allows businesses to manage fluctuating exchange rates and mitigate other risks. Assistance from the MDBs for companies involved in cross-border transactions is critical, particularly those in low-income countries, especially during crisis periods. Details of this facility are listed in Table 2.1.4.2 The Islamic Development Bank Group (IsDBG) consists of the Islamic Development Bank (IsDB), the Islamic Research and Training Institute (IRTI), the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), the Islamic Corporation for the Development of the Private Sector (ICD) and the International Islamic Trade Finance Corporation (ITFC).economic outlook 2021chapter 2 global economic outlook48table 2.1.4. COVID-19-Related Trade Finance Facilitiesmdbprogramme/initiativedescriptionamount/sourceWBGGlobal Trade Finance ProgrammeCover payment risks of financial institutions by providing additional allocation for trade financing to companies that import and export goods, particularly the small and medium enterprises (SMEs) involved in global supply chains during the pandemic.IFC: USD2 billionIsDBStrategic Preparedness and Response ProgrammeTrade finance to support least developed member countries (LDMCs) and severely affected non-LDMCs to purchase emergency COVID-19 preparedness-related medical equipment and supplies.ITFC:USD300 millionSources: World Bank Group (2020) and Islamic Development Bank (2020)(iv) Guarantees Guarantees by the MDBs are made available to eligible member countries to back financial obligations such as loans and bonds issuance in both domestic and international markets. These guarantees address both political and credit risks. Details of this assistance are listed in Table 2.1.5.table 2.1.5. COVID-19-Related Guarantees mdbprogramme/initiativedescriptionamount/sourceWBGMIGA Fast-Track FacilityIssuance of guarantees through streamlined and expedited procedures through credit enhancement, de-risking solutions and supporting trade finance.MIGA:USD6.5 billionIsDBStrategic Preparedness and Response Programme Provision of credit and political risk insurance to sustain imports of strategic commodities, protect investment and minimise volatility in mitigating negative health and socioeconomic impact.ICIEC:USD150 million for insurance coverage Sources: World Bank Group (2020) and Islamic Development Bank (2020)(v) Technical Assistance and Policy Advice Technical assistance and policy advice are made available to all member countries through capacity building and training as well as consultation and research. These assistances are focused on fulfilling developing countries needs to improve and implement policies as well as strengthen institutions to support further development and growth. In the wake of the COVID-19 pandemic, the MDBs offer policy analyses and recommendations to governments, on request, in formulating measures to mitigate and recover from the impact of the crisis. The MDBs also provide a platform for the sharing of good practices among member countries in addressing the effects of the crisis on respective economies. (vi) Other Initiatives The MDBs also assist member countries in procuring medical equipment and supplies in light of the COVID-19 pandemic. Through this assistance, member countries are able to acquire the equipment and supplies at the earliest possible time and at economical prices. The WBG and ADB facilitate their member countries through a streamlined and fast-track procedure as well as help create a sizeable order volume to support countries procurement in these items.economic outlook 2021chapter 2 global economic outlook49In the period between April and September 2020, the five MDBs have cumulatively approved almost USD132.6 billion in the form of loans, guarantees and grants for debt relief. Approximately 138 countries have received these assistances to implement measures in containing the outbreak, resume development projects and enable local banks to continue supporting businesses. To date, most recipients are the middle- and low-income member countries (Center for Strategic and International Studies, 2020). The MDBs recognise the continued need for assistance by member countries, especially during this challenging period. Presently, their focus is to build the countries resilience once the pandemic subsides. The MDBs remain committed to easing the burden of member countries in their endeavour towards sustainable and inclusive growth. Malaysia fully recognises the importance of the MDBs in providing support to vulnerable countries, particularly during this challenging time and supporting member countries journeys towards sustainable growth. Thus, Malaysia remains supportive of the efforts by the MDBs in aiding countries in need through its existing contributions to the MDBs. The country will continue to benefit from the continuous engagement with the MDBs to formulate policy measures in responding to the COVID-19 crisis.ConclusionThe COVID-19 pandemic has brought about global challenges that have never been experienced before. Governments have had to carry out unprecedented measures in addressing the impacts of the pandemic on their economies. Notwithstanding the various measures undertaken by governments, much remains uncertain regarding a full economic recovery in the near term. The MDBs play an important role in partnering with governments towards achieving a rapid recovery and return to a more resilient and sustainable growth trajectory.forecast to worsen to 7.4%, while inflation is projected to rise to 1.2%. Risks to the UKs GDP forecast include the dual-threat of prolonged COVID-19 infections and Brexit uncertainties. The slow progress of Brexit negotiations will affect the execution of the CFTA, which is scheduled to enter into force at the beginning of 2021.The GDP growth in the euro area contracted by 9% in the first half of 2020 as domestic demand was severely affected by the COVID-19 pandemic. Household consumption plummeted by 9.8% due to lower spending following temporary closures of shops, restaurants and other services-providing businesses, as most European governments imposed lockdowns within the period of March until June 2020. Similarly, business investment plunged by 9.6%, resulting from factory shutdowns, which affected production. The labour market remained stable, with the unemployment rate at 7.5%, largely supported by the implementation of short-term work schemes in many countries to protect jobs. Inflation was lower at 0.7%, owing to significantly low oil prices, despite higher food prices.Growth in the euro area is projected to shrink by 8.3% in 2020 (2019: 1.3%), mainly dragged by weak household consumption and business investment. Household consumption is expected to remain sluggish, primarily due to elevated precautionary savings amid uncertainties concerning job and income prospects. Investment is expected to slump as companies, particularly those with larger debt burdens, are anticipated to suspend their investment plans. The European Commission has announced a package of safety nets amounting to EUR540 billion, which includes providing support for euro area countries in health-related spending. In addition, the package allows the European Investment Bank to finance companies, especially the small and medium enterprises (SMEs) as well as for EU member countries to protect jobs and incomes. The unemployment rate is expected to be higher at 8.9% (2019: 7.6%) following the economic outlook 2021chapter 2 global economic outlook50gradual phasing out of the furlough scheme. Inflation is anticipated to be subdued at 0.4% (2019: 1.2%), reflecting continued low oil prices. Growth in 2021 for the euro area is forecast to rebound by 5.2%, mainly supported by favourable domestic demand. The long-term EU budget plan, totalling EUR1,824.3 billion, is expected to support public investment from 2021 until 2027, with a focus on green and digital transformations. The plan also includes a EUR750 billion recovery package to tackle socioeconomic consequences of the pandemic. The European Central Bank (ECB) has expanded the asset purchase programme by EUR1,350 billion through the Pandemic Emergency Purchase Programme. This programme is set to continue until at least June 2021 to lower borrowing costs and increase lending. The unemployment rate is anticipated to worsen to 9.1%, while inflation is forecast to rise to 0.9%. Growth in the euro area is exposed to several risks. The high cost of fiscal policy measures may lead to a spike in government debts and subsequently, increase the risk of sovereign debt crises in the medium term. On the external front, a disorderly Brexit continues to be a major cause of uncertainty in the region, as the UK and the EU are scheduled to conclude the CFTA before the transition period ends in December 2020. The GDP for Germany contracted by 6.6% in the first half of 2020 as the decline in household consumption, private investment and exports affected growth. Household consumption plummeted by 7.3%, mainly due to lower spending on services following lockdown measures from 23 March to 10 May 2020. Private investment slumped by 4.3%, as a result of a disruption in the supply chains and weak global demand, particularly in the automotive subsector as major car manufacturers temporarily shut down operations. Likewise, exports plunged by 13.4%, largely due to reduced demand for motor vehicles as well as machinery and equipment. The unemployment rate was recorded at 4%, while inflation eased to 1.2%, owing to low oil prices.Growth in Germany is anticipated to contract by 6% in 2020 (2019: 0.6%), weighed down by sluggish domestic demand, despite the announcement of fiscal stimulus packages amounting to EUR130 billion. Household consumption is expected to remain weak following increasing precautionary savings. Private investment is expected to plummet, largely due to a slowdown in manufacturing activities, amid unfavourable external demand. However, various Government measures, including emergency loans, credit guarantees and tax breaks are expected to cushion excessive cutbacks on business investment. Exports are expected to dampen following sluggish demand from major trading partners, particularly the US, France and the UK. The labour market is projected to remain stable, with the unemployment rate at 4.3% (2019: 3.1%), as Kurzarbeit, Germanys short-time work programme, is instrumental in containing further job losses. Inflation is forecast to ease further to 0.5% (2019: 1.3%), owing to falling oil prices. INDICATOR20192020120212Real GDP (% p.a.)1.3-8.35.2Inflation (% p.a.)1.20.40.9Current Account of BOP (% of GDP)2.71.92.4Unemployment Rate (%)7.68.99.11 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)TABLE 2.3. Selected Indicators for the Euro Area, 2019 2021INDICATOR20192020120212Real GDP (% p.a.)0.6-6.04.2Inflation (% p.a.)1.30.51.1Current Account of BOP (% of GDP)7.15.86.8Unemployment Rate (%)3.14.34.21 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)TABLE 2.4. Selected Indicators for Germany, 2019 2021economic outlook 2021chapter 2 global economic outlook51In 2021, growth in Germany is envisaged to expand by 4.2%, primarily supported by a recovery in domestic demand. Household consumption is expected to rebound, attributed to higher disposable income, with increased income tax allowance and reduced social security contribution levels. Private investment is anticipated to turn around, driven by investment in machinery and equipment following improved confidence, amid recovering global demand. Likewise, public investment is expected to increase, with a comprehensive EUR50 billion package focusing on public transport, electric mobility, green technology, digital infrastructure, education as well as research and development (R&D). The unemployment rate is anticipated to slightly improve at 4.2%, backed by favourable outcomes of the Kurzarbeit, which is scheduled to end in December 2021. Inflation is forecast to be higher at 1.1%. Risks to the economy include labour market disruptions, stemming from the acceleration of the automation technologies development and implementation, due to the COVID-19 pandemic. Additionally, unfavourable demographic trends, amid a declining working population, will increasingly constrain productivity and potential economic growth. On the external front, prolonged supply chain disruptions and challenges among main trading partners in curtailing the pandemic may weigh on growth prospects of the export-oriented economy. Additional risks include possible retaliation from the countrys largest trading partner, which will depend on the Governments decision related to partnership in the countrys 5G network infrastructure development. Subsequently, this may also adversely affect trade, particularly auto exports. The economy of France contracted by 12.3% in the first six months of 2020 due to weak domestic demand. Household consumption plummeted by 10.4%, with a significant reduction in spending on energy, engineered goods as well as transportation, accommodation and food services. Private investment slumped by 13.9%, with the suspension of building constructions following lockdown measures from March until May 2020. The unemployment rate improved slightly to 8% as the Government widened the coverage of the short-term activity scheme to include the self-employed and small business owners. Inflation eased to 0.9%, with lower oil prices. Overall, the GDP of France is forecast to shrink by 9.8% in 2020 (2019: 1.5%), mainly dragged by household consumption and private investment. Household consumption is expected to plunge, as a result of lower income levels following a reduction in working hours, coupled with increasing precautionary savings. Private investment is projected to remain sluggish due to decreased profit margins, as businesses are expected to operate below full capacity, amid the pandemic. The labour market outlook remains stable, with the unemployment rate at 8.9% (2019: 8.5%). Inflation is forecast to be lower at 0.5% (2019: 1.3%), owing to falling oil prices.For 2021, growth in France is projected to expand by 6%, mainly supported by a recovery in domestic demand. Household consumption is expected to turn around, backed by higher spending as consumer confidence is restored. Likewise, private investment is anticipated to rebound, spurred by the Governments support in the form of state-guaranteed loans and tax breaks. Public investment is expected to rise, in line with the EUR100 billion recovery plan to support green and digital transitions as well as improve the competitiveness of French companies. In addition, the recovery plan also aims to strengthen the resilience of strategic sectors, particularly aeronautics, INDICATOR20192020120212Real GDP (% p.a.)1.5-9.86.0Inflation (% p.a.)1.30.50.6Current Account of BOP (% of GDP)-0.7-1.9-1.8Unemployment Rate (%)8.58.910.21 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)TABLE 2.5. Selected Indicators for France, 2019 2021economic outlook 2021chapter 2 global economic outlook52automobile, construction and tourism. However, France is anticipated to register a double-digit unemployment rate at 10.2% as the Government is expected to progressively reduce coverage of the short-term activity scheme. Inflation is expected to be at 0.6%. Risks to the economy include widening fiscal deficit, with a reduction in tax revenues and higher social transfer expenditure following a sizeable drop in economic activities, amid the COVID-19 pandemic. The general escape clause in the EU fiscal rules allows more fiscal space for the Government to address the impact of the pandemic. The activation of this clause will lead to a sharp expansion in the countrys fiscal deficit. In addition, possible new tariffs imposed by the US on a broader range of imported items from France, amid re-escalating trade tensions over the digital services tax levied by France and aerospace subsidies, could adversely affect business investment plans and undermine exports.Japans economy contracted by 5.9% in the first half of 2020, mainly due to a decline in private consumption and exports, which were severely affected by the pandemic. Private consumption decreased significantly by 10.9%, as a result of services-related businesses closure and the implementation of voluntary emergency measures. Likewise, exports shrunk by 23.3%, owing to low shipments of transport equipment and machinery, amid deteriorating global demand. The unemployment rate slightly rose to 2.7%, while inflation was lower at 0.1%.Growth in Japan is forecast to decline by 5.3% in 2020 (2019: 0.7%), mainly due to worsening private consumption and exports. Private consumption, which deteriorated in the first few months of the year, is expected to rise gradually with the reopening of businesses in late May. Exports are anticipated to remain sluggish due to the ongoing trade tensions with the Republic of Korea and the US, and uncertainty in the outlook of global demand. In May 2020, the Government announced a second stimulus package amounting to USD1.1 trillion to provide relief to people and businesses affected by the pandemic. Fiscal support of the same amount was earlier rolled out in April. The Government plans to announce additional economic stimulus measures in early 2021 to boost the economy. The unemployment rate is anticipated to be at 3.3% (2019: 2.4%). Meanwhile, deflation is projected to register 0.1% (2019: 0.5%) due to a drop in oil prices. The GDP is forecast to turn around by 2.3% in 2021, supported by a rebound in private consumption, private investment and exports. Private consumption is expected to be buoyed by the Tokyo Olympic Games, scheduled in the summer of the year. Private investment is expected to increase due to higher usage of automation and digitisation, which will enable companies to lower costs and boost productivity. This is in line with the Governments plans to automate 27% of existing work tasks by 2030 to address a shrinking workforce due to the ageing population. The unemployment rate is projected to be lower at 2.8%, while inflation is expected to remain at 0.3%. Risks to the economy include continued recession brought about by the pandemic, escalating trade tensions and an unfavourable fiscal outlook due to the high level of government debts. Risks also stem from macro-financial vulnerabilities and limited monetary policy space, which make the country more vulnerable to shocks. The ageing population may slow down growth and remains one of the major challenges for the economy. INDICATOR20192020120212Real GDP (% p.a.)0.7-5.32.3Inflation (% p.a.)0.5-0.10.3Current Account of BOP (% of GDP)3.62.93.2Unemployment Rate (%)2.43.32.81 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)TABLE 2.6. Selected Indicators for Japan, 2019 2021economic outlook 2021chapter 2 global economic outlook53The GDP of Australia fell by 2.4% in the first half of 2020, mainly due to weak private consumption and exports. Private consumption plunged by 6.5%, as a result of a large decline in household expenditure, particularly in transport services, recreation as well as hotels, cafes and restaurants. Exports plummeted by 6.3%, largely due to significantly lower demand for metal ores and minerals, particularly from China and Japan. The unemployment rate was registered at 5.9% following job losses in the accommodation and food services, retail trade industries as well as arts and recreation services. Inflation was recorded at 1%, with lower oil prices. Overall, Australias GDP growth is expected to contract by 4.2% in 2020 (2019: 1.8%) as private consumption and exports declined. Private consumption is anticipated to shrink following massive job losses and lower income levels, coupled with higher savings. Exports are forecast to fall by 5.4% (2019: 3.1%) due to sluggish demand from China, amid heightening trade tensions between the two nations. Public consumption is projected to increase by 5.4% (2019: 5.3%) following the announcement of four stimulus packages amounting to AUD17.6 billion. These include tax-free cash payments and wage subsidies to support households and small- and medium-sized businesses. The unemployment rate is forecast to register 6.9% (2019: 5.2%) due to job losses in industries affected by movement restrictions, particularly in accommodation and food services. Inflation is anticipated to record 0.7% (2019: 1.6%). The Reserve Bank of Australia reduced its policy rate twice in March, by a total of 50 basis points, from 0.75% to 0.25% to support the economy.Australias economy is forecast to turn around by 3% in 2021, attributed to robust domestic demand and a recovery in exports. Private consumption is expected to gain momentum, with a growth of 5.7%, backed by improved consumer confidence, amid the recovery in employment prospects. Public investment is forecast at 3.3%, with higher spending on transport infrastructure, health care and other essential services. Exports are projected to pick up by 5.1% due to rising demand for liquefied natural gas (LNG). The unemployment rate is anticipated to register 7.7%, while inflation is expected to record 1.3%. Risks to the economy include a resurgence of the COVID-19 pandemic, re-intensification of trade tensions and a cold war over technology with China as well as volatile commodity prices.The Republic of Koreas economy contracted by 1.5% during the first six months of 2020, mainly due to weak private consumption and a plunge in exports, particularly in the second quarter. Private consumption decreased by 4.5%, mainly in services-related activities, owing to a reduction of income and self-isolation measures encouraged by the Government. Exports dropped by 8%, particularly in automotive products and semiconductors, as a result of slower demand from advanced economies and the temporary shutdown of factories. Public consumption, which expanded by 6.4%, has helped the economy from shrinking further. The unemployment rate was registered at 4.3%, while inflation remained at 0.6%. In response to the pandemic crisis, the Government rolled out three stimulus packages amounting to USD222 billion, which focused on urgent relief measures, particularly for the vulnerable sectors, SMEs and the self-employed. Additionally, a five-year New Deal programme, with a total of USD133 billion, was announced in June 2020. The programme aims to create 1.9 million new jobs in the digital and green sectors as well as spur the economy, to cushion the impact of the crisis. Hence, the GDP in 2020 is expected to only contract INDICATOR20192020120212Real GDP (% p.a.)1.8-4.23.0Inflation (% p.a.)1.60.71.3Current Account of BOP (% of GDP)0.61.8-0.1Unemployment Rate (%)5.26.97.71 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)TABLE 2.7. Selected Indicators for Australia, 2019 2021economic outlook 2021chapter 2 global economic outlook54was recorded at 3.8%. Meanwhile, inflation registered 3.9%, with higher prices of food, tobacco and liquor. The economy is expected to expand by 1.9% in 2020 (2019: 6.1%) as economic activities recover in the second half of the year. Private consumption is projected to increase by 0.8% (2019: 7.4%), especially in non-essential items following the distribution of vouchers and coupons for in-store purchases. Private investment is projected to improve by 1.7% (2019: 4.4%), with an expected increase in infrastructure and manufacturing activities as well as real estate development. The Government announced the New Infrastructure plan for 2020 until 2025 to accelerate infrastructure development. The plan comprises seven focus areas, including 5G networks, artificial intelligence and intercity high-speed rail. A fiscal stimulus package totalling USD500 billion was introduced in May 2020 to counter the adverse effects of the pandemic. Measures in the package include tax cuts, lower interest rates, reduced utility prices and employment support. The unemployment rate is expected to record 3.8% (2019: 3.6%), while inflation is anticipated to remain at 2.9% (2019: 2.9%). by 1.9% (2019: 2%), owing to sluggish private consumption and exports. Private consumption is forecast to remain weak at 3.2% (2019: 1.9%), as a result of a decline in household incomes and low consumer confidence. Exports are projected to fall by 5.1% (2019: 1.5%), with slow demand from major trading partners. The unemployment rate is forecast to increase to 4.1% (2019: 3.8%), while inflation is projected to register 0.5% (2019: 0.4%).The economy of Korea is forecast to rebound by 2.9% in 2021, driven by private consumption and exports. Private consumption and exports are expected to turn around as the impact of the pandemic outbreak eases. The unemployment rate is projected to remain unchanged at 4.1%, while inflation is anticipated to record 0.9%. Risks to the economy include a prolonged spread of the pandemic, deepening of the US-China trade dispute, trade tension with Japan and a delay in the recovery of the semiconductor industry. Chinas economy fell by 1.6% in the first half of 2020 due to a drop in both private consumption and investment as well as unfavourable external demand. Private consumption plunged by 11.4% as the lockdown, which was announced on the eve of Chinese New Year, weakened consumer confidence. Similarly, private investment declined by 7.3%, particularly in infrastructure and manufacturing activities following the closure of factories. Exports fell by 3% due to slower demand, mainly in mechanical and electronic products. The unemployment rate In 2021, the growth in China is forecast to lead the recovery in the EMDEs, with a rapid growth of 8.2%, supported by strong domestic demand and favourable exports. The Government is expected to unveil a five-year plan in the first quarter of 2021, which will, among others, set the economic direction for 2021 until 2025. The unemployment rate is projected to moderate to 3.6%, while inflation is expected to be lower INDICATOR20192020120212Real GDP (% p.a.)2.0-1.92.9Inflation (% p.a.)0.40.50.9Current Account of BOP (% of GDP)3.63.33.4Unemployment Rate (%)3.84.14.11 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)TABLE 2.8. Selected Indicators for the Republic of Korea, 2019 2021INDICATOR20192020120212Real GDP (% p.a.)6.11.98.2Inflation (% p.a.)2.92.92.7Current Account of BOP (% of GDP)1.01.30.7Unemployment Rate (%)3.63.83.61 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)TABLE 2.9. Selected Indicators for China, 2019 2021economic outlook 2021chapter 2 global economic outlook55at 2.7%. Risks to the economy emanate from rising asset price inflation, continued supply chain disruptions, broad global recession and heightening trade tensions with the US. A resurgence of the COVID-19 pandemic and emergence of new epidemics may also pose risks to the economy.During the first half of 2020, Indias GDP plummeted by 10.1% due to a decline in the services and manufacturing sectors. The services sector recorded a drop of 8.5% due to a sharp contraction in the trade, hotels, transport, communication and broadcasting-related services subsector. Likewise, the manufacturing sector plunged significantly by 19.8%, largely attributed to a reduction in the production of motor vehicles, trailers and semi-trailers. Inflation, as indicated by the wholesale price index, recorded a deflation of 0.1% due to a fall in the prices of crude petroleum, petrol and high speed diesel. Indias GDP is projected to plunge by 10.3% in 2020 (2019: 4.2%) due to contractions in the services, manufacturing and construction sectors. The services sector is expected to slip due to a decline in travel-, tourism- and hospitality-related activities. Similarly, the manufacturing sector is anticipated to shrink, owing to less production of passenger vehicles. The construction sector is expected to contract, as a result of declining new residential building projects and the impact of the liquidity crunch on construction developers. On 12 May 2020, the Government announced a relief package of around 10% of GDP, amounting to INR20 trillion, which included key direct spending measures such as cash transfers to households. Additionally, the Government announced a stimulus package on 12 October 2020 amounting to INR730 billion. The package included partial advance payments of federal government employees wages and further capital spending on infrastructure projects. The Reserve Bank of India (RBI) reduced its key policy repo rate twice in March and May 2020, by a total of 115 basis points, to 4.00%. This action by the RBI is to revive growth and mitigate the impact of the COVID-19 pandemic, while ensuring inflation remains within the target range of 2% to 6%. Inflation is estimated at 4.9% (2019: 4.8%), achieving the target range.The GDP of India in 2021 is projected to rebound by 8.8%, largely supported by a recovery in the services and manufacturing sectors, coupled with resilient growth in the agriculture sector. The anticipated growth in the agriculture sector is a result of higher Rabi and Kharif crops output as well as the likelihood of a normal monsoon season. Inflation is expected to record 3.7%, still within the target range of the RBI. Growth in India is exposed to several risks. A serious local transmission of COVID-19 to the rural areas, continuing financial and corporate distress, particularly in the non-banking financial sector as well as a prolonged global economic downturn may hamper growth.The GDP of the ASEAN-5 economies recorded a weak growth in the first half of 2020, mainly due to sluggish private consumption and exports, as these economies grappled with the COVID-19 pandemic. The ASEAN-5 is anticipated to contract by 3.4% in 2020 (2019: 4.9%) due to a plunge in private consumption. The decline is mainly due to a fall in household incomes and an increase in precautionary savings. Trade is expected to remain unfavourable due to disruptions in the supply chains among key trading partners, particularly the US and euro area. For 2021, the ASEAN-5 economies are expected to expand significantly by 6.2%, driven by domestic demand and exports. These economies may continue to encounter numerous challenges, including prolonged disruptions in highly integrated regional supply chains, sluggish commodity prices and financial market volatility. TABLE 2.10. Selected Indicators for India, 2019 2021INDICATOR20192020120212Real GDP (% p.a.)4.2-10.38.8Inflation (% p.a.)4.84.93.7Current Account of BOP (% of GDP)-0.90.3-0.9Unemployment Rate (%)1 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)economic outlook 2021chapter 2 global economic outlook56TABLE 2.12. Selected Indicators for Indonesia, 2019 2021INDICATOR20192020120212Real GDP (% p.a.)5.0-1.56.1Inflation (% p.a.)2.82.11.6Current Account of BOP (% of GDP)-2.7-1.3-2.4Unemployment Rate (%)5.38.06.81 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)TABLE 2.11. Selected Indicators for ASEAN-5, 2019 2021INDICATOR20192020120212Real GDP (% p.a.)4.9-3.46.2Inflation (% p.a.)2.11.52.3Current Account of BOP (% of GDP)1.10.80.1Unemployment Rate (%)1 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)Indonesias GDP deteriorated by 1.2% in the first half of 2020 due to a drop in private consumption, private investment and exports. Private consumption fell by 1.3%, owing to reduced spending on restaurant and hotel as well as transportation services, along with a rise in precautionary savings. Similarly, private investment dropped by 3.5% due to a contraction of investment in capital goods, machinery and equipment as well as vehicles. Meanwhile, exports plunged further by 5.7% due to lower demand, particularly for oil and gas, manufactured goods and mining products. Inflation was recorded at 2.6%. Overall, the economy is projected to contract by 1.5% in 2020 (2019: 5%), mainly due to weak domestic demand. Private consumption is projected to decline, as a result of a substantial decrease in spending on restaurant and hotel as well as transportation services. Likewise, private investment is anticipated to fall due to supply and labour disruptions following the implementation of lockdown measures, which has caused major infrastructure projects to be delayed. Public expenditure is expected to increase, resulting from the stimulus measures totalling IDR695.2 trillion, to boost economic growth and strengthen the health care system. Bank Indonesia lowered its key policy rate by 25 basis points, each in March, May, June and July 2020 to 4.00% to support the economy. The unemployment rate is anticipated to rise to 8% (2019: 5.3%), partly due to job losses resulting from the closure of restaurants and hotels, while inflation is forecast to record 2.1% (2019: 2.8%). Indonesias GDP is expected to grow at a fast pace of 6.1% in 2021, led by both private consumption and investment as well as external demand. The increase in private consumption is expected to be supported by higher purchases of durable goods as well as rising confidence in income prospects and job security. Likewise, private investment is expected to improve, particularly in the information and communication sector following the completion of the Palapa Ring Project, which aims to provide 4G internet access nationwide. Exports are anticipated to be higher, supported by robust demand for gold, metal ore as well as iron and steel. The unemployment rate is forecast at 6.8%, while inflation is expected to record 1.6%. Risks for Indonesia include subdued trade and investment activity following ongoing trade tensions between the US and China as well as a prolonged depreciation of the rupiah. The economy of Thailand plunged by 7.1% in the first half of 2020 due to a decline in private consumption, private investment and exports. Private consumption slipped by 2%, owing to lower spending on alcoholic beverages and transportation. Private investment dropped by 7.3% following a decline of investment in machinery and equipment as well as construction. Similarly, exports worsened by 17.8%, mainly due to lower demand for vehicles and disruptions in the production of agricultural goods, particularly rice. The unemployment rate rose to 2% following job losses in the tourism and agriculture industries. Deflation was recorded at 1.9% as oil prices were low. economic outlook 2021chapter 2 global economic outlook57anticipated to record 1.8%. Risks to the economy include weak investor confidence due to uncertainties in the domestic political atmosphere, further disruptions in the supply chains as well as subdued tourism activities. The economy of Singapore plummeted by 6.7% in the first half of 2020 due to a decrease in the services producing industries. The services producing industries contracted by 7.9%, particularly in the wholesale and retail trade, business services as well as accommodation and food services sectors, as a result of weaker global demand and disruptions in supply chains due to the pandemic. The unemployment rate was marginally higher at 2.5%, mainly due to layoffs in the tourism-related services sectors. Deflation was recorded at 0.2%, owing to lower housing and utility prices as well as transport costs. The Government announced four stimulus packages from February until May 2020, namely the Unity Budget, Resilience Budget, Solidarity Budget and Fortitude Budget, with a total of approximately SGD100 billion. In August 2020, the Government announced an additional allocation of SGD8 billion. These budgetary measures are expected to cushion the fall in employment and economic output as well as to support economic, social and public health management. The economy is projected to contract by 6% in 2020 (2019: 0.7%), with a decline in the wholesale and retail trade, business services as well as transport and storage services subsectors. The Government announced four stimulus packages from March until September, amounting to approximately THB2.1 trillion or 14.5% of the GDP, to mitigate the economic impact of the pandemic. The Bank of Thailand also reduced the policy rate four times, amounting to 75 basis points, to 0.50% to sustain the economy. The GDP growth in 2020 is anticipated to contract by 7.1% (2019: 2.4%), as a result of sluggish private consumption and exports. Private consumption is expected to be subdued, mainly due to lower spending in the tourism-related industry and transportation. Exports are anticipated to plunge, resulting from lower demand, particularly in automotive and tourism services. The unemployment rate is expected to remain at 1% (2019: 1%), while deflation is estimated to record 0.4% (2019: 0.7%).TABLE 2.13. Selected Indicators for Thailand, 2019 2021INDICATOR20192020120212Real GDP (% p.a.)2.4-7.14.0Inflation (% p.a.)0.7-0.41.8Current Account of BOP (% of GDP)7.14.24.6Unemployment Rate (%)1.01.01.01 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)The GDP of Thailand is projected to rebound by 4% in 2021, largely supported by robust domestic demand and a recovery in exports. Private consumption is expected to pick up, contributed by higher online spending, particularly on electronics and media as well as digital products. Private investment is forecast to expand as tax incentives offered by the Government are projected to encourage companies to invest in automation in projects, particularly for medical equipment and food security. Similarly, exports are envisaged to improve, with higher demand for manufactured goods, primarily electronics, vehicles and machinery. The unemployment rate is expected to remain steady at 1%, while inflation is TABLE 2.14. Selected Indicators for Singapore, 2019 2021INDICATOR20192020120212Real GDP (% p.a.)0.7-6.05.0Inflation (% p.a.)0.6-0.40.3Current Account of BOP (% of GDP)17.015.014.5Unemployment Rate (%)2.33.02.61 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)economic outlook 2021chapter 2 global economic outlook58In 2020, the economy is expected to decline by 8.3% (2019: 6%), weighed down by a drop in household consumption and exports. Household consumption is projected to weaken following lower spending, particularly on restaurants and hotels as well as transport categories, amid uncertainties over job prospects. Public spending is expected to accelerate as the Government announced programmes, amounting to approximately PHP1.7 trillion, to stimulate the economy. Exports are anticipated to be sluggish due to lower demand for electronic products, particularly semiconductors and electronics. The unemployment rate is forecast to rise to 10.4% (2019: 5.1%) following job losses in the services sector, particularly in wholesale and retail trade as well as repair of motor vehicles and motorcycles services. Inflation is expected to moderate to 2.4% (2019: 2.5%) due to lower oil prices.Likewise, sectors that are reliant on tourism and foreign workers are anticipated to shrink due to the lingering pandemic situation. The expected recovery in the manufacturing and financial services subsectors, in the second half of 2020, is projected to support the economy from a further decline. The unemployment rate is forecast at 3% (2019: 2.3%), while deflation is expected to register 0.4% (2019: 0.6%) due to declining oil prices.The GDP is projected to rebound by 5% in 2021, spearheaded by the services producing industries and manufacturing subsector. The services producing industries are expected to gradually recover, driven by the finance and insurance services subsector. Similarly, the manufacturing subsector is expected to expand, supported by higher production of pharmaceutical and biological products. The unemployment rate is forecast at 2.6%, while inflation is anticipated to record 0.3%. Risks to the economy include uncertainties over the pandemic, which may continue to drag several outward-oriented sectors, particularly manufacturing and wholesale trade. Likewise, domestically-oriented sectors, namely construction and real estate, may be severely affected by a further downturn in the domestic economy.The economy of the Philippines contracted by 9% in the first half of 2020 due to weak household consumption, private investment and exports. Household consumption contracted by 7.8% due to reduced spending on expenditure items services, particularly restaurants and hotels as well as transport. Private investment shrank by 22.3%, resulting from lower investment in durable equipment and construction. Exports plunged by 17.6% due to sluggish demand for electronic products, manufactured goods as well as machinery and transport equipment. Bangko Sentral ng Pilipinas cut its policy rate four times, from 4.00% to 2.25%, between March and June 2020. The unemployment rate increased significantly to 11.5% due to drastic job losses in services-related sectors following business closures and layoffs. Inflation eased to 2.5%, owing to a fall in oil prices. TABLE 2.15. Selected Indicators for the Philippines, 2019 2021INDICATOR20192020120212Real GDP (% p.a.)6.0-8.37.4Inflation (% p.a.)2.52.43.0Current Account of BOP (% of GDP)-0.11.6-1.5Unemployment Rate (%)5.110.47.41 Estimate2 ForecastSource: International Monetary Fund, World Economic Outlook (October 2020)In 2021, growth in the Philippines is expected to rebound by 7.4%, spurred by domestic demand. Household consumption is forecast to recover, backed by an increase in remittance inflows and improved consumer confidence. Public spending is anticipated to increase following the proposed 2021 Budget, amounting to PHP4.5 trillion, to stimulate growth and create jobs. This is coupled with annual spending of PHP1 trillion for its Build, Build, Build programme. The unemployment rate is projected to moderate to 7.4%, while economic outlook 2021chapter 2 global economic outlook59inflation is anticipated to be higher at 3%. Risks to the economy include a widening fiscal deficit. A slower-than-expected global recovery following a prolonged pandemic may also weigh on trade and investment as well as foreign remittances. Conclusion Promising global prospects amid uncertaintiesThe global economy is forecast to record a solid rebound in 2021. The turnaround is expected to be buoyed by robust domestic demand and exports in the advanced economies and the EMDEs. However, risks to the global economy persist. Growth may be hampered by the re-intensification of trade tensions between the US and China, uncertainties surrounding the Brexit outcomes and widespread geopolitical tensions. Continued low oil prices and deepening climate crisis may also derail the recovery. In addition, limited fiscal space and a further spike in government debts may also impede growth. The global economy, however, is envisaged to remain on a positive growth trajectory, with the implementation of fiscal and monetary measures to boost consumer and investor confidence. The successful development of an effective and accessible COVID-19 vaccine, coupled with the containment of the spread of the pandemic in the near term, may further stimulate global growth. While the pandemic poses multifaceted challenges to countries, especially in amplifying existing socioeconomic gaps, the COVID-19 pandemic also presents opportunities for economies to institute reforms, towards accelerating digitalisation and pursuing sustainable growth.economic outlook 2021chapter 2 global economic outlook60ReferencesASEAN 3 Macroeconomic Research Office (AMRO). (2020). Another “Unprecedented” Crisis? This, Too, Shall Pass, September 2020. 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Retrieved from https:/www.wto.org/english/res_e/publications_e/tradefinsme_e.htmchapter 3Macroeconomic Outlook71overview 71sectoralFeature Article 3.1 Gig EconomyFeature Article 3.2 Digitalisation in the Logistics IndustryFeature Article 3.3 Small and Medium Enterprises: Building Resilience to Weather CrisesInformation Box 3.1 The Importance of Commodity Sector to the Malaysian Economy92domestic demandFeature Article 3.4 Shadow Economy in Malaysia97external sector102pricesFeature Article 3.5 Dynamic Relationship between Consumer and Producer Price Indices107labour market108conclusion110referencesMALAYSIASECONOMIC OUTLOOKCHAPTER 3 SUMMARY: MACROECONOMIC OUTLOOKEconomy isExpected to Contract-4.5 19: 4.3onomy isExpected to Rebound6.5%7.5 20:-4.5mand (% p.a.)PRIVATE CONSUMPTION -0.7 19: 7.6%GROSS FIXED CAPITAL FORMATION-11.1%-2.1%EXPORTS-13.4%-1.3%PUBLIC CONSUMPTION 1.6%2.0%IMPORTS-11.9%-2.5%Supply (% p.a.)MANUFACTURINGSERVICESAGRICULTUREMININGCONSTRUCTION-3.0%3.8%-3.7 19: 6.1%-1.2%2.0%-7.8%-2.0%-18.7%0.1mand (% p.a.)PRIVATE CONSUMPTION 7.1 20: -0.7%GROSS FIXED CAPITAL FORMATION9.5%-11.1%EXPORTS8.7%-13.4%PUBLIC CONSUMPTION 2.0%1.6%IMPORTS9.2%-11.9%Supply (% p.a.)MANUFACTURINGSERVICESAGRICULTUREMININGCONSTRUCTION7.0%-3.0%7.0 20: -3.7%4.7%-1.2%4.1%-7.8.9%-18.7%MALAYSIAS ECONOMIC OUTLOOKGDP AT CONSTANT 2015 PRICESRM1,357.7 BILLION RM1,415.7 BILLION GDP AT CURRENT PRICERM1,439.4 BILLION GROSS NATIONAL INCOME AT CURRENT PRICECURRENT ACCOUNT BALANCE OF BOPRM48.5 BILLION CONSUMER PRICE INDEX-1.0% UNEMPLOYMENT RATE4.2%(3.4% OF GNI)MALAYSIASECONOMIC OUTLOOKEconomy isExpected to Rebound6.5%7.5 20:-4.5mand (% p.a.)PRIVATE CONSUMPTION 7.1 20: -0.7%GROSS FIXED CAPITAL FORMATION9.5%-11.1%EXPORTS8.7%-13.4%PUBLIC CONSUMPTION 2.0%1.6%IMPORTS9.2%-11.9%Supply (% p.a.)MANUFACTURINGSERVICESAGRICULTUREMININGCONSTRUCTION7.0%-3.0%7.0 20: -3.7%4.7%-1.2%4.1%-7.8.9%-18.7%GDP AT CONSTANT 2015 PRICESRM1,450.8 BILLION GDP AT CURRENT PRICERM1,568.1 BILLION CONSUMER PRICE INDEX2.5% UNEMPLOYMENT RATE3.5%GROSS NATIONAL INCOME AT CURRENT PRICECURRENT ACCOUNT BALANCE OF BOPRM20.3 BILLION RM1,526.5 BILLION (1.3% OF GNI)economic outlook 2021chapter 3 macroeconomic outlook70economic outlook 2021chapter 3 macroeconomic outlook71chapter 3Macroeconomic OutlookOverviewGradual economic recovery in the second half of 2020 before normalising in 2021The Malaysian economy experienced the full impact of the COVID-19 pandemic in the second quarter of 2020, with the real gross domestic product (GDP) contracting by 17.1%. The contraction was mainly attributed to the imposition of the Movement Control Order (MCO) to contain the outbreak. Though affecting all sectors in the economy, the move was necessary to flatten the COVID-19 curve and save lives. Hence, the Government has announced several stimulus packages totalling RM305 billion to support both households and businesses. Reinforced by the reopening of the economy in phases, growth is expected to improve gradually during the second half of the year, cushioning the significant contraction in the first half. Thus, Malaysias GDP is expected to contract by 4.5% in 2020, before rebounding between 6.5% 7.5% in 2021. With the bold and swift measures undertaken, Malaysia has been recognised as one of the most successful countries in managing the socio-economic impact of the pandemic.Although domestic demand is expected to remain soft throughout 2020, there are signs of recovery in the second half of the year, particularly in private consumption. On the external front, the collapse in global demand and world trade led to a decline in exports during the year. However, current account of the balance of payments is expected to remain in surplus. On the supply side, all sectors are expected to contract, affected by the unprecedented crisis. Nevertheless, the pace of improvement gathered momentum in the third quarter, especially in the services and manufacturing sectors, with the resumption of economic activities. SectoralServices SectorNew norms accelerate the growth of the digital economyThe services sector contracted by 6.7% in the first half of 2020 largely due to worldwide travel bans, domestic movement restrictions and quarantines, which severely affected the tourism-related subsectors and airlines. Among the subsectors that have been severely affected include wholesale and retail trade, food & beverages and accommodation, transportation and storage as well as real estate and business services. Nevertheless, the information and communication subsector expanded as online transactions increased significantly during the MCO. The services sector is expected to record a smaller decline of 1% in the second half of the year, reflecting the gradual resumption of economic activities. Overall, the sector is projected to contract by 3.7% in 2020 before rebounding by 7% in 2021. With the normalisation of economic activities in 2021, all subsectors are projected to record positive growth. TABLE 3.1. GDP by Sector,2019 2021(at constant 2015 prices)SHARE(%)CHANGE(%)2020120192020120212Services58.16.1-3.77.0Manufacturing22.6 3.8-3.07.0Agriculture7.42.0-1.24.7Mining6.9-2.0-7.84.1Construction4.00.1-18.713.9GDP 100.0 4.3-4.5 6.5 7.51 Estimate2 ForecastNote: Total may not add up due to rounding and exclusion of import duties componentSource: Department of Statistics and Ministry of Finance, Malaysiaeconomic outlook 2021chapter 3 macroeconomic outlook72The wholesale and retail trade subsector contracted by 10.8% in the first half of 2020 due to disruptions in the global and domestic supply chains. The subsector is expected to record a smaller decline by 1.9% in the second half of the year with the gradual resumption of business operations, online platforms, cash assistance, sales campaigns and sales tax exemption for the purchase of new cars. For the year, the subsector is projected to contract by 6.1%. The subsector is anticipated to rebound by 8.5% in 2021, supported by all segments. The wholesale segment is expected to be backed by food-related industries. At the same time, the expansion in e-commerce activities will support the retail segment. The growth of the motor vehicles segment will be underpinned by the introduction of new models and higher household disposable income. The information and communication subsector expanded by 5.8% in the first half of 2020, primarily supported by higher usage of internet, particularly online transactions, entertainments, educational and work from home (WFH) activities. The subsector is projected to expand further by 7.1% in the second half of the year buoyed by various Government initiatives. The initiatives include a tax exemption of up to RM5,000 for information, communication and technology (ICT) equipment to support WFH activities and individual income tax relief of up to RM2,500 on the purchase of digital devices. For the year, the subsector is anticipated to accelerate by 6.4% as WFH activities, virtual communication and online businesses become the new normal. In 2021, the subsector is projected to expand by 7.9%, with the fifth-generation cellular network (5G) spectrum facilitating e-commerce and e-learning activities. The roll-out of the National Fourth Industrial Revolution (4IR) Policy and Digital Economy Blueprint in the fourth quarter of 2020 is expected to enhance the productivity and competitiveness of the subsector. The formation of the Malaysian Digital Economy Task Force, which focusses on digital technology, cybersecurity, trade and digital content is expected to support the acceleration of the subsector.The finance and insurance subsector in the first half of 2020 contracted marginally by 0.2%, mainly due to the six-month wide-scale moratorium and slower lending activities. Nonetheless, the better performance of the insurance segment reflects the increase in life insurance subscriptions, which partly cushioned the overall decline of the subsector. The trend is expected to continue in the second half following the extension of moratorium to targeted borrowers. Overall for the year, the subsector is expected to contract marginally by 0.1% with the expansion in the insurance segment, reflecting the net impact of higher premiums amid lower claims. The subsector is projected to rebound by 5.5% in 2021, driven mainly by the finance segment, benefitting from the normalisation of loan repayments and continuation of bank lending amid stronger domestic economic activities. The insurance segment is also expected to grow steadily with the promotion of innovative and risk-based pricing in motor and fire insurance. In addition, the launching of the Financial Sector Blueprint 2021 2025 in the first quarter of 2021 is expected to further boost the growth of the subsector.SHARE(%)CHANGE(%)202020192020 20212Wholesale and retail trade28.8 6.7 -6.1 8.5 Finance and insurance11.8 4.6 -0.1 5.5 Information and communication11.4 6.6 6.4 7.9 Real estate and business services7.7 7.8 -11.6 7.6 Transportation and storage6.0 6.8 -11.9 7.5 Food & beverages and accommodation5.5 9.6 -13.3 10.7 Utilities4.9 6.0 1.7 5.7 Other services8.2 5.5 -8.1 6.2 Government services15.7 3.7 4.0 3.7 Services100.0 6.1 -3.7 7.01 Estimate2 ForecastNote: Total may not add up due to roundingSource: Department of Statistics and Ministry of Finance, MalaysiaTABLE 3.2. Services Sector Performance,2019 2021(at constant 2015 prices)economic outlook 2021chapter 3 macroeconomic outlook731 1 1 201620172018201920202018201920202018201920200.00.30.60.91.21.5AIR CARGO202020192018201720160306090120150PASSENGER TRAFFIC (RIGHT SCALE)061218243036TEUS20202019201820172016010,00020,00030,00040,00050,00060,000SHIP CALLS (RIGHT SCALE)020406080100120TOURIST RECEIPTS20202019201820172016071421283542TOURIST ARRIVALS (RIGHT SCALE)03,0006,0009,00012,00015,00018,000DOMESTIC AND PUBLIC LIGHTINGINDUSTRIAL, COMMERCIAL AND MININGJAJOJAJOJAJ04080120160200INFORMATION AND COMMUNICATIONQ2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1COMPUTER AND INFORMATION SERVICETELECOMMUNICATIONSPUBLISHING AND BROADCASTINGACTIVITIES04080120160200WHOLESALE & RETAIL TRADEJAJOJAJOJAJRETAIL TRADE WHOLESALE TRADE MOTOR VEHICLES MillionMillionRM billionIndexTourist Arrivals and Receipts 1 EstimateSource: Department of Statistics, Malaysia; Malaysia Airports Holdings Berhad; Malaysia Tourism Promotion Board; Senai International Airport; and seven major ports (Bintulu, Johor, Klang, Kuantan, Kuching,Pulau Pinang and Tanjung Pelepas) Container Handling and Ship Calls IndexUnitsMillionAir Passengers and Cargo Million kilowatt-hoursMillion tonneFIGURE 3.1. Selected Indicators for the Services Sector Volume Index of Wholesale & Retail Trade(2015 = 100) Information and Communication Index(2015 = 100) Electricity Consumptioneconomic outlook 202174chapter 3 macroeconomic outlookfeature article 3.1Gig EconomyIntroductionThe gig economy is a free market system, characterised by temporary job positions where corporations tend to engage independent workers for short-term durations. Unlike the traditional economy, the gig economy is characterised by flexible, temporary, or freelance jobs with irregular income and working hours. The primary distinction between the gig economy and traditional working arrangements is the digital element (Burtch et al., 2016). According to Khazanah Research Institute (2019), the benefits of being a freelancer or gigs include having an additional income, more flexible working schedules, more accessibility to the market via the internet and lower cost of doing business. In 2019, the Global Gig-Economy Index revealed that freelancers in the US had the most significant revenue growth at 78%, followed by the UK (59%) and Brazil (48%). Digital service intermediary platform providers in the US, such as Uber, Airbnb and Lyft, are the cornerstone of the gig economy. Furthermore, according to a survey by MBO Partners (2017), nearly 60% of the workforce in the US would be independent professionals and companies will spend up to USD6 billion on improving the rights of gig workers by 2027.table 3.1.1. Comparison between Gig and Traditional Economiescharacteristicgig economytraditional economyDefinitionAn economy characterised by flexible and temporary jobs. Hence companies tend to hire freelancers and independent contractors as opposed to full-time employeesAn economy in which companies tend to employ workers on a full-time basis Type of JobsOffers temporal jobs such as contracts or short-term gigsOffers long-term and permanent jobsFIGURE 3.1.1. Top 10 Countries with the Fastest Growing Earnings for Freelancers, 2019Source: Global Gig-Economy Index, 2019US78%UK59%BRAZIL48%PAKISTAN47%UKRAINE36%INDIA29NGLADESH27%RUSSIA20%SERBIA19%PHILIPPINES35onomic outlook 202175chapter 3 macroeconomic outlookGig Economy in Malaysia A study by the Zurich-University of Oxford (2018) found that 38% of the respondents in Malaysia, who were in full-time employment, would be looking to enter the gig economy in the following 12 months. According to Employees Provident Fund (2019) nearly 40% of the workforce would be gig workers in the next five years, significantly higher than the global average of 20%. The rise of millennials1 and digital technology are the main factors contributing to this surge.Rise of MillennialsMost millennials are no longer interested in the concept of secure and permanent employment. Millennials grew up in the technological era, and so they are more immersed digitally. This means gig economy often occurs due to its online platform element, which provides the facility for millennials to use their talents and abilities (Hershatter & Epstein, 2010). Hence, they account for the major share of employment in the gig economy as it offers greater flexibility. In Malaysia, there are about 15.6 million people in the labour force, and 1.3 million are in the informal sector, with 50.2% in the 25 to 44 age group (2013: 46.5%) (Figure 3.1.2.). This reflects that many millennials are opting out of the traditional workforce as the gig economy offers higher independence and flexibility in line with their aspirations.Rise of Digital TechnologyThe digital economy in Malaysia grew by 18.5% between 2015 and 2019 per annum. In 2020, Malaysia remains ranked 26th out of 63 countries in the IMD World Digital Competitiveness Ranking 2020. With the Government investing heavily on digital technologies, Malaysians are among the most digitally connected in the world and produce some of Southeast Asias most recognisable digital start-ups (World Bank, 2018). As digitalisation is the main enabler for the gig economy, the upsurge in digital platforms encourages more millennials to become gig workers and freelancers. As of August 2020, there were around 140 platforms providing gig and freelance opportunities with an estimated 540,000 gig and active freelance workers in Malaysia. Firms, such as Grab and Foodpanda, continue to record an increasing number of gig workers. Furthermore, there were about 190,000 gig workers providing services as riders and drivers on various logistic and delivery platforms in the country. characteristicgig economytraditional economyFlexibilityHas a high level of work flexibility Does not offer work flexibility with rigid or set hoursEmployee Benefits Employees do not enjoy additional benefitsEmployees enjoy additional benefits, such as health insurance and leave daysCost to EmployersEmployers eliminate unnecessary overhead costs, such as additional benefits, office space and employee training Employers incur overhead costs including the payment of additional benefits, office space and employee trainingWork MonotonyBreaks routine work, hence promoting enthusiasm creativity and innovation Tend to be monotonous, thus could be demotivating, discouraging creativity and innovation Source: DifferenceB, 20201 Refers to anyone born between 1981 and 1996 (Pew Research Centre, 2019).economic outlook 202176chapter 3 macroeconomic outlookIssues and Challenges Facing Gig Workers Despite offering greater work flexibility, gig workers do not have the advantage of a steady job with regular pay and benefits. In addition, there is still no specific regulation, law or guideline to protect the welfare of the gig workers except for provisions under the Self-Employment Social Security Act 2017 Act 789 which require self-employed to register and contribute under this scheme. As they are not formally recognised as employees, they are not legally covered under specific labour provisions, such as the minimum wage, working hours limitation, paid annual and sick leave as well as unfair dismissal. In addition, unlike traditional employees, gig workers do not have financial safety nets, such as pension and savings in the EPF. A survey by The Centre (2019) indicates that nearly 60% from more than 400 of e-hailing and delivery drivers did not have savings for emergencies, and 59% did not have retirement or old age savings. FIGURE 3.1.2. Employment in the InformalSector by Age Group, 2019(% share)FIGURE 3.1.3. Employment in the Informal Sector by AgeGroup, 2013 2019Source: Informal Sector Workforce Survey Report, Department of Statistics, Malaysia, 201905101520253055-6445-5435-4425-3415-24050100150200250300350400201920172015201355-6445-5435-4425-3415-24000 % FIGURE 3.1.4. Financial Security among E-hailing and Delivery Drivers, 2019 Source: The Centre, 2019 Notes: Figure may not add up to 100% due to multiple choices by the respondents Do not insured againstany work-related injuries or accidentsDo not have personalhealthcare insuranceDo not have unemploymentinsurance76W7onomic outlook 202177chapter 3 macroeconomic outlookWay Forward Preparing the Workforce The workforce needs to be equipped with the required skills to support the gig economy as one of the new sources of growth in the country. This includes more training in software development and technology, creative and multimedia work, data entry and analyses as well as writing and translation (Human Resources Development Fund, 2019). Towards this end, Malaysia Digital Economy Corporation (MDEC) has embarked on the Global Online Workforce (GLOW) training programme, with an allocation of RM25 million, to enable Malaysians to earn higher income digitally. The Government also has launched the myGIG Programme on 23 June 2020 to support youths to participate in the gig economy by providing appropriate training and supporting equipment.With the increasing number of graduates joining the gig economy, Institutions of Higher Learning (IHLs) should move away from educating and preparing students for full-time employment. This traditional method does a disservice to graduates who will be ill-equipped and unprepared to succeed as independent workers in the gig economy. To better prepare students as gigs, IHLs should embark on teaching the basic skills to work independently, expanding career services to offer gigs and promoting online courses. Reframing business school syllabus, such as learning how to be self-employed and running a business, will prepare students to work independently. In addition, the use of technology needs to be further accelerated to teach crucial skills, such as self-directed learning, effective communication, critical thinking, problem-solving, collaboration and project management. Providing career services by developing apps and websites will also help students to find short-term projects and assignments. For example, in the US, The DePaul School of Music uses an app called The Gig Connection to help students find a freelance job throughout Chicago. Boston University has developed a Quick Job board, which offers short-term opportunities for students to assist in medical research studies. In addition, IHLs also need to emphasise online courses and programmes that provide options to students to learn at their own pace and location. These approaches will enable IHLs to better prepare students to join the gig economy. Regulating the Gig EconomyThe Government is considering new laws to regulate the gig economy and to protect the welfare of the gig workers. A committee comprising representatives from three ministries2 has been set up to formulate long-term solutions to resolve various issues on the gig economy in the country. The committee will also be looking for ways to create a win-win situation for workers and employers. ConclusionThe emergence of digital platforms connecting freelancers with businesses and the rise of millennials have all played a contributing role to the surge in the gig economy. It offers benefits, particularly in the form of job flexibility for workers. Nonetheless, there are numerous issues and challenges, including the status and welfare of the gig workers, that need to be addressed before the gig economy becomes a source of sustainable growth. Given its importance, the Government has implemented several initiatives to ensure its development. Moving forward, revamping of the syllabus, incorporating project-based learning and upskilling are needed to better prepare graduates for the gig economy. 2 Ministry of Human Resource, Ministry of Youth and Sports, and Ministry of Domestic Trade and Consumer Affairs.economic outlook 202178chapter 3 macroeconomic outlookThe real estate and business services subsector declined by 11.3% in the first half of 2020, attributed to temporarily suspension of construction activities during the MCO. The subsector is expected to continue to decline by 11.9% in the second half and 11.6% for the whole year. This is mainly due to deferred construction projects and subdued business activities. However, with projected economic recovery and the roll-out of delayed infrastructure projects, the subsector is expected to rebound by 7.6% in 2021. The exemption of Real Property Gains Tax (RPGT), launching of the National Affordable Housing Policy and Rent-to-Own (RTO) scheme, extension of Youth Housing Scheme (YHS) and Home Ownership Campaign (HOC) are expected to support the subsector. In addition, higher demand for construction-related services is expected to drive the business services segment.The transportation and storage subsector contracted significantly by 24% in the first half of 2020 with all segments severely affected by the border closure and lower trade activities. However, the subsector is anticipated to decline marginally by 0.5% in the second half following the lifting of interstate travel bans, increasing domestic travellers, improving trade activities and loosening of port restrictions. With prolonged border closure for tourism-related activities and the extension of Recovery Movement Control Order (RMCO) until year-end, the subsector is forecast to record a decline of 11.9% in 2020.The subsector is projected to rebound by 7.5% in 2021, driven by the land transport segment, following operations of new highways, including the Setiawangsa Pantai Expressway (SPE), Damansara Shah Alam Elevated Expressway (DASH) and partial alignment of Pan Borneo Highway. In addition, the launching of seven sets of four-car trains for KL Monorail is expected to increase the daily ridership. Likewise, the air transport segment is anticipated to recover moderately, due to the increase in domestic passenger traffic and cargo movement. The water transport segment is forecast to improve gradually, as world maritime trade recovers.The food & beverages and accommodation subsector declined by 19.9% in the first half of 2020 due to stringent travel restrictions on movement and business operations. With a continuous drop in international tourist arrivals, the subsector is projected to contract by 7.3% in the second half of 2020. For the whole year, the subsector is anticipated to decline by 13.3%, mainly due to the sluggish performance of the accommodation segment following the significant drop in tourist arrivals. Nevertheless, an increase in demand for online food delivery and domestic tourism activities are expected to cushion the subsector. The subsector is expected to expand markedly by 10.7% in 2021, mainly backed by domestic tourism-related activities with support from several initiatives. These initiatives include tax exemptions on tourism and accommodation services as well as an extension of income tax relief of up to RM1,000 on domestic travel services. In addition, attractive packages coupled with promotions, marketing and campaigns via digital platforms to restore public confidence is expected to revitalise the domestic tourism industry. The implementation of the Reciprocal Green Lane and Periodic Commuting Arrangement between Malaysia and Singapore for official cross-border travel for businesses and work purposes will also help to spur the subsector. The Governments effort to promote travel bubbles with more destinations is anticipated to further support the subsector.The utilities subsector declined by 2% in the first half of 2020 following lower usage by the industrial segment. Nevertheless, the subsector is estimated to rebound in the second half of the year by 5.3% attributed to the resumption of industrial activities. Overall, the subsector is expected to expand by 1.7% in 2020, supported by higher demand from both residential and industrial segments. In 2021, the subsector is projected to further grow by 5.7%, primarily supported by higher usage by the industrial segment in line with expansion in economic activities as well as the implementation of renewable energy projects and Rural Electricity Supply Programme.economic outlook 2021chapter 3 macroeconomic outlook79The other services subsector contracted by 9.6% in the first half of 2020 due to lower medical travellers and decline in enrolments in private colleges and universities. The contraction is expected to narrow to 6.6% in the second half of the year following the arrival of registered foreign students and critically ill patients, except those from high-risk countries with more than 150,000 COVID-19 cases. Thus in 2020, the subsector is expected to decline by 8.1%. The subsector is projected to expand by 6.2% in 2021, following aggressive branding and digital marketing for health tourism in targeted countries, such as Cambodia, China, Indonesia and Myanmar. The Government services subsector is projected to maintain its expansion by 4% in 2020 and 3.7% in 2021. feature article 3.2Digitalisation in the Logistics IndustryIntroductionLogistics refer to the process of managing and controlling the flows of goods, energy, information and other resources such as facilities, services and people. It involves the integration of information, transportation, inventory, warehousing, material handling and packaging (Gen et al., 2008). In general, this industry has undergone three phases and is now entering the fourth stage which represents the integration of internet with production processes in line with the emergence of Industrial Revolution 4.0 (IR4.0) (Figure 3.2.1.). This enables the communication between machines and humans in real-time and the use of what is known as “smart products and smart services” as well as the advanced digitalisation within factories (Lasi et al., 2014). In Malaysia, the industry is highly integrated across various sectors. It has been a key enabler for the advancement of industrialisation, international trade and competitiveness. The logistics industry has contributed immensely in the production and distribution processes as well as facilitating trade activities. In 2019, the logistics industry1 expanded by 6.8% contributing RM53.7 billion to the countrys GDP (Department of Statistics Malaysia, 2020). Nevertheless, the industry faces various challenges inhibiting it from reaching its full potential and efficiency. Accordingly, it is imperative to transform the industry with the applications of IR4.0 to improve efficiency and productivity as well as to remain competitive. 1 Proxied by the transportation and storage subsector.FIGURE 3.2.1. Evolution of LogisticsSource: Wang, 2016Using InternetLogistics 4.0System of LogisticsManagementLogistics 3.0Automation ofHandling SystemLogistics 2.0Mechanisation ofTransport17001800Industry 1.0Industry 2.0Industry 3.0Industry 4.0YearDegree of Complexity196920002020Logistic 4.0Logistic 3.0Logistic 2.0Logistic 1.0 Logistics 1.0economic outlook 202180chapter 3 macroeconomic outlookLogistics 4.0Logistics 4.0 is defined as the specific application of connecting machines, products, systems and people that can share information and manage themselves (Bamberger et al., 2017). It uses technologies such as Internet of Things (IoT), wireless sensor network, cloud computing, blockchain, big data as well as robotics and automation. These technologies enable real-time information flows, monitoring of market demand, personalisation of products and autonomous management of global supply chains. Matyushenko et al. (2019) indicate that there are five elements of Logistics 4.0, namely, transparency, smart utilities, adaption to IoT, integration with IR4.0 and collection of analytics. FIGURE 3.2.2. Application of Industrial Revolution 4.0 Technologies in Logistics 4.0Source: Radivojevic & Milosavljevic, 2019Automatic IdentificationReal-time LocatingBusiness ServicesAutomatic Data CollectionData Processing and AnalysisConnectivity and IntegrationLOGISTICS 4.0Wireless SensorsNetworkInternetof ThingsAutomaticGuided Vehicle3D PrintingDroneCloud ComputingBlockchainBig DataRobotics and AutomationAugmented RealityFIGURE 3.2.3. Five Main Elements of Logistics 4.0 Source: Matyushenko et al., 2019LorTransparencyProvides integrity control and quality condition on the products, thus enabling logistics to be much more efficient and comprehensive.Smart UtilitiesAlerts the supplier on the stock level without requiring any human intervention.Adaption to IoTProvides an increased inventory visibility to ensure an environment of sustainability, safety and security which reduces wastage, theft and tampering of products.Integration with IR4.0Refers to the application towards automation and digitalisation creating symbiotic,synergistic relationships between suppliers and end-users.Collection of AnalyticsImproves demand and delivery forecasts while detecting possible improvement or potential risks in their value streams.economic outlook 202181chapter 3 macroeconomic outlookDigital transformation will benefit industries through lower cost and additional revenues. Cost is expected to be reduced by 34.2% while increasing revenue by 33.6% in the logistics services industry through this transformation (Lehmacher et al., 2017). According to the World Economic Forum (2016), digitalisation in the logistics industry could unlock USD1.5 trillion of value for logistics players and a further USD2.4 trillion worth of societal benefits over the next decade. A study across EU countries indicate that a 10-percentage point rise in the share of firms using high-speed broadband internet at the industry level results in an increase in multi-factor productivity of 1.4% after one year and 3.9% after three years (Organisation for Economic Co-operation and Development, 2019).Challenges Facing the Logistics Industry in MalaysiaThe logistics industry in Malaysia is still facing various challenges, such as inadequate infrastructure and limited internet connectivity, low adoption of digitalisation, burdensome regulations, lack of skilled workers, and external factors such as the COVID-19 pandemic. Furthermore, Malaysias information communication and technology (ICT) infrastructure lag behind global standards, especially in rural areas (Ismail & Masud, 2020). At the same time, high cost, unstable internet connectivity and low digitalisation hamper efficiencies and competitiveness of Malaysian logistics firms. In addition, the industry lacks expertise and skilled workers, especially in the design of the supply chain network, integrated warehouse management and information technology application.Given the immense variety of economic goods and the different modes of transportation, there are various regulations concerning the governance of the logistics industry, which slows down the adoption of digitalisation and innovation. External shocks, such as the COVID-19 pandemic, have also disrupted the industry. The ensuing lockdown has restricted export-import activities globally which severely affected the logistics industry in the country.Way Forward The Logistics and Trade Facilitation Masterplan (2015 2020) aims to provide the strategic framework and roadmap to strengthen Malaysias position as the preferred logistics gateway in Asia (Ministry of Transportation, 2017). The masterplan outlines that by leveraging the potential of e-commerce and adopting digitalisation, competitiveness and efficiency in the logistics industry will improve. This will pave the way for new, advanced and automated logistics services. The core aspects of digital infrastructure, such as ICT networks, data infrastructure, digital platforms and devices must be reliable and compatible for logistics firms to invest in digitalisation. For instance, the broader roll-out of the fifth-generation cellular network (5G) internet would provide a convenient way to send and track packages, schedule deliveries and get real-time updates anytime and anywhere. Furthermore, the efficiency of the first and last mile aspects, including keeping the customers informed throughout is vital in ensuring customer delivery experience is achieved efficiently and effectively.With the COVID-19 disrupting the logistics supply chain network, the industry needs to adopt a new business model by accelerating digital transformation. Post COVID-19, consumers have adjusted their behaviours and preferences to use logistics services that provide last-mile deliveries of various sizes of appliances and commercial goods. As a result, many logistics firms are shifting from business-to-business (B2B) to business-to-consumer (B2C) models which increases the demand for couriers and online delivery services platforms. Governments intervention by providing institutional support and initiatives will ease the adoption of digitalisation in the logistics industry. This includes developing skills and technology, reducing unnecessary regulatory burden and ensuring data protection and security.economic outlook 202182chapter 3 macroeconomic outlookConclusionThe adoption of digitalisation enables the logistics players to manage their operations efficiently and provide seamless logistics services to their clients worldwide. This will allow businesses to run with greater resilience and flexibility to remain competitive. The COVID-19 pandemic has precipitated the digital transformation of firms, including those in the logistics sector, which can no longer do business conventionally. With the rise of e-commerce activities, logistics players need to ramp up their performance while adjusting to strict guidelines to keep in pace with the new norms. Therefore, Logistics 4.0 can enhance operational efficiency by reducing time and cost for goods to reach consumers and subsequently increases the competitive advantage of domestic firms. It also accelerates convergence with global supply chains and helps key export industries connect with international markets.Manufacturing SectorEssential segments cushion overall declineThe manufacturing sector contracted by 8.7% during the first half of 2020, as almost all industry operations were temporarily halted, following supply chain disruptions amid the MCO. Within the export-oriented industries, the E&E cluster was severely affected as global demand decelerated sharply. Domestic-oriented industries also recorded sluggish growth, with transport equipment; and non-metallic mineral products, basic metal and fabricated metal products segments registering a double-digit contraction. Nonetheless, the manufacturing sector is expected to improve by 2.4% in the second half of 2020, as industrial activities resume operations in line with the gradual lifting of the MCO. Within the export-oriented industries, the E&E segment is projected to improve following rising demand for computer and electronic products. Chemical and rubber products are anticipated to continue to record high growth, benefitting from higher demand for rubber gloves and pharmaceutical products. Within the domestic-oriented industries, the food products and transport equipment segments are expected to rebound, supported by higher demand. Overall, for the year, the manufacturing sector is expected to decline by 3%.The manufacturing sector is forecast to rebound by 7% in 2021, driven by steady improvement in both the export- and domestic-oriented industries. The E&E segment is projected to accelerate in line with the digital transformation as WFH and virtual communication become part of new business practices. Higher demand for integrated circuits, memory and microchips within the global semiconductor market will further support the segment. The production of chemical and rubber products is expected to expand rapidly in tandem with the increase in demand for disinfectants, sanitisers and rubber gloves. With the economic recovery, consumer-related products will benefit from higher household disposable income, while construction-related products will be supported by major infrastructure and affordable housing projects. 2020192018MANUFACTURING PRODUCTION INDEXJAJOJAJOJAJ-40-35-30-25-20-15-10-50510INDUSTRIAL PRODUCTION INDEXSource: Department of Statistics, MalaysiaFIGURE 3.2. Output of Manufacturing Sector(% change)economic outlook 2021chapter 3 macroeconomic outlook83INDEXCHANGE(%)SHARE(%)201920202019202020192020Export-oriented industries118.6114.53.6-3.569.270.8Electronics and electrical product cluster124.4122.44.0-1.627.228.3Electronics129.0128.73.7-0.215.116.0Electrical products119.1115.14.4-3.412.112.3Primary-related cluster115.1109.83.4-4.742.042.5Chemical and chemical products115.9109.32.3-5.712.812.8Petroleum products112.299.33.0-11.512.912.1Textiles, wearing apparel, leather products and footwear123.8101.05.3-18.42.01.7Wood and wood products119.9100.74.8-16.03.22.8Rubber products122.2175.68.043.83.04.7Off-estate processing109.3110.52.21.15.15.5Paper and paper products118.0108.64.6-8.03.02.9Domestic-oriented industries119.5106.94.8-10.530.829.2Construction-related cluster119.298.64.3-17.313.712.0Non-metallic mineral products118.894.74.7-20.34.43.7Basic metals116.4105.93.8-9.03.43.3Fabricated metal products121.197.24.3-19.75.95.0Consumer-related cluster119.7113.55.2-5.217.117.2Food products125.9132.05.04.86.16.7Transport equipment115.9105.17.2-9.36.66.3Beverages125.5102.53.4-18.31.00.9Tobacco products116.385.96.2-26.10.70.6Others115.4107.51.6-6.82.72.7Manufacturing Production Index118.9112.24.0-5.6100.0100.0Note: Total may not add up due to roundingSource: Department of Statistics and Ministry of Finance, MalaysiaTable 3.3. Manufacturing Production Index, January August 2019 and 2020(2015 = 100) feature article 3.3Small and Medium Enterprises: Building Resilience to Weather CrisesIntroductionSmall and medium enterprises (SMEs) form a vital component of the Malaysian economy, contributing more than a third of total gross domestic product (GDP). It also provides jobs to more than seven million workers (Department of Statistics Malaysia, 2019). Furthermore, SMEs account for 98.5% of total establishments, mainly in the services sector. In Malaysia, an establishment is classified as an SME based on annual sales turnover or the number of employees,1 subject to further conditions stipulated under the guideline of SME definition established by SME Corporation Malaysia (SME Corp. Malaysia) as the secretariat of the National Entrepreneur and SME Development Council (Figure 3.3.1.).1 Endorsed at the 14th National SME Development Council Meeting (now known as the National Entrepreneur and SME Development Council) in July 2013.economic outlook 202184chapter 3 macroeconomic outlookFIGURE 3.3.1. Profile of Malaysian SMEsSource: Department of Statistics Malaysia, 2016 and SME Corporation Malaysia, 20205.3%4.3%1.1%0.1%Malaysian SME DefinitionManufacturingServices and Other SectorsMEDIUMSMALLMICROSERVICESAGRICULTUREMANUFACTURINGMININGCONSTRUCTION693,670 SMEs 192,783 SMEs20,612 SMEsMedium2.3%Small21.2%Micro76.57,065 establishmentsSMEs by SizeSMEs by Sector89.2%Sales turnover:RM15 million RM50 millionOREmployees: From 75 to 200Sales turnover:RM3 million RM20 millionOREmployees: From 30 to 75Sales turnover:RM300,000 RM15 millionOREmployees: From 5 to 75Sales turnover:RM300,000 RM3 millionOREmployees: From 5 to 30Sales turnover: RM300,000OREmployees: 5Sales turnover: RM300,000OREmployees: 5Impact of COVID-19 Pandemic on Malaysian SMEsThe severity of the impact of COVID-19 on the global economy is unprecedented. The International Monetary Fund (IMF) projects that global growth in 2020 would experience the worst recession since the Great Depression in the 1930s and far worse than the 2009 Global Financial Crisis. The crisis is mainly caused by the movement control, lockdowns and physical distancing measures implemented globally to contain the spread of the virus. The cumulative loss to global GDP arising from the pandemic crisis for 2020 2021 is estimated to be around USD9 trillion (International Monetary Fund, 2020). In Malaysia, the impact of demand cut-backs and supply chain disruptions on cash flow, employment and sustainability are the main challenges for most businesses, in particular the SMEs. As the backbone of the countrys economy, the Government has introduced various initiatives to support SMEs during the crisis, including soft loans, grants, wage subsidy, tax exemptions and moratorium. Findings by Omar et al. (2020) highlights the impact of the Movement Control Order (MCO) on SMEs. The effect is characterised as operational problems, such as operation and supply chain disruptions, difficulties in the fore-sighting of future business direction as well as financial-related issues. This is in line with a quick survey by Marketing Insight (2020) on the impact of MCO in Kuala Lumpur and Pulau Pinang, businesses were switching their business conduct into online transactions in line with the changes in consumers purchasing behaviour. An online survey by the Department of Statistics, Malaysia (2020), indicates that 68% of establishments had no source of income during the initial MCO period and 12.3% earned revenue through online sales or services. economic outlook 202185chapter 3 macroeconomic outlookTo assess the impact of the MCO on SMEs, the SME Corp. Malaysia undertook a series of internal surveys between March and May 2020.2 These surveys aimed to understand the challenges faced by SMEs and to assess the effectiveness of Government assistance. More than 1,900 SMEs in various sectors throughout the nation participated in the surveys. Main Findings of SME Corp. Malaysia Surveys The SME Corp. Malaysias surveys indicate that cash flow disruptions were the main challenge to SMEs during the COVID-19 crisis, followed by lower demand, supply chain disruption and legal issues (Figure 3.3.2.). These challenges caused SMEs to halt their business operations temporarily with the possibility of huge losses. This is in line with the findings of Bourletidis and Triantafyllopoulos (2014) that SMEs in a period of prolonged economic crises may suffer disproportionately from economic downturns because of limited financial resources.Cash flow issues arise mainly due to the drop-in sales, insufficient cash-in-hand as well as high overhead costs. The surveys revealed that nearly 60% of SMEs reported not having any sales during the MCO period, while 39% experienced lower sales. SMEs also claimed to have cashflow problems in paying employees salaries and benefits, business loan repayments, rental and utility payments as well as for the purchase of raw materials and packaging. Consequently, more than 90% of SMEs were expected to survive only up to five months with existing cash-in-hand.The global economic fallout from COVID-19 has been devastating, with many losing jobs and business, and unable to pay their commitments (Hakovirta & Denuwara, 2020). SME Corp. Malaysia surveys reveal that only 34% of the SMEs were able to continue operations as essential services providers. Majority of SMEs had to undertake various alternative actions, including negotiating with employees on salary and benefits cut (37%), retrenching employees (34%), limiting business trips (33%) and working from home (33%).3 The surveys also indicate that for SMEs to regain their pre-crisis growth momentum, assistance other than commercial loans are necessary. This include, soft loans, deduction on corporate and business tax as well as a dedicated government agency as SMEs focal point. In addition, advice on 2 The surveys cover the period between the MCO and the reopening of the economy (excluding the initiatives under Pelan Jana Semula Ekonomi (PENJANA) which was announced in June 2020).3 Figure may not add up to 100% due to multiple choices by the respondents.FIGURE 3.3.2. SMEs Top Challenges and State of Business Operations During the Crisis by RankingSource: SME Corporation Malaysia, 2020Top ChallengesCompanys cash flow1Reduced demand2Supply chain disruption3Legal issues4Business Operations During CrisisTemporarily close business operations1Continue operations/Essential services2Business operations conducted online34Continue operations to avoid legal actionfor failure to deliver products/serviceseconomic outlook 202186chapter 3 macroeconomic outlookrestructuring and remodelling of businesses, identifying new business areas and access to online platforms are among assistance needed by SMEs. Hence, of all the initiatives under the stimulus packages, the wage subsidy programme, six-month automatic moratorium on loans, free internet services and special relief facility initiatives were the most impactful measures. Other beneficial programmes include discounts on electricity bills and micro-credit schemes. With the support and assistance, a total of 72% of SMEs are anticipated to rebound within a year. However, the rest would require more than a year to stabilise their businesses. Nonetheless, most SMEs faced challenges to restart their businesses due to lesser demand, insufficient capital, supply chain issues and difficulties in complying with the standard operating procedures (SOPs). Way ForwardWith the significant presences of SMEs in the economy, any crisis will inevitably affect various sectors and overall economic growth. Therefore, it is vital to ensure the sustainability and resilience of SMEs at all times. Moving forward, among the initiatives that will enable SMEs to endure any crisis are accelerating digitalisation, adopting strategic financial planning and enhancing branding capabilities.Accelerating DigitalisationThe adoption of digitalisation is necessary to transform SMEs to be more competitive and resilient. Nonetheless, businesses in Malaysia have adopted digital technologies less readily than the Government and the population in general. Only 62% of companies are connected to the internet, 46% have fixed broadband and 18% have a web presence of some kind (World Bank, 2018). A study by Association of Small & Medium Enterprises, Singapore (2018) found that SMEs which have embraced digitalisation saw revenue growth of 26% on average. The digitalisation helps businesses better understand their customers, gauge the effectiveness of marketing campaigns, increase the efficiency of their business operations, transform products and empower employees.Adopting Strategic Financial PlanningAccording to a survey conducted by Bank Negara Malaysia (2018), more than 70% of SMEs financing needs are sourced internally or from personal savings and the rest obtained from banks as well as development financial and microcredit institutions. It is also found that many SMEs lack awareness and the know-how to conduct effective and efficient budgeting, including alternate financing. Strategic financial planning involves a process by which firms derive a strategy to enable them to anticipate and respond to the dynamic business environment (Kee Luen et al., 2013). Such efforts inevitably improve the competitiveness of business firms and eventually their performances. Thus, the study confirmed that adopting strategic financial planning would improve the business performance and success rate of SMEs.Enhancing Branding CapabilityCurrently, local SMEs contribute only 18% of total exports due to lack of knowledge on market access and readiness in exporting. Insufficient funds for brand and marketing is the top internal challenge for SMEs. In contrast, the high cost in brand communication was the main external challenge (Bizsphere Online Reviews, 2017) (Figure 3.3.3.). The commercialisation process is claimed to be more difficult for SMEs since they lack the presence and resources necessary for broad reach on the marketplace (Walsh et al., 2017). Thus, there is a need for SMEs to adopt cost-effective methods through technology-oriented approaches to commercialise their products.economic outlook 202187chapter 3 macroeconomic outlookConclusionThe COVID-19 pandemic has exposed underlying problems in the way SMEs conduct businesses. The timely intervention by the Government through PRIHATIN dan PRIHATIN SME is expected to sustain SMEs to survive in a challenging business environment. The pandemic has also created a new normal in business practices, which includes adopting digital business models, re-orientation in supply chains and embrace the shift in consumer behaviours. Thus, SMEs need to improve their capability and capacity to be more resilient, agile and flexible to face uncertainties.Agriculture SectorOil palm subsector poise for recoveryThe agriculture sector contracted by 3.9% in the first half of 2020 due to lower growth of oil palm and rubber subsectors following supply disruptions. The oil palm subsector was affected even before the pandemic, attributed to dry weather and cutbacks in fertilisers by smallholders in 2019. The rubber subsector also declined due to unfavourable weather and low rubber prices. The agriculture sector was further affected by the MCO, which led to lower production across most of the subsectors. The sector is anticipated to rebound by 1.4% in the second half of the year driven by the recovery in the oil palm subsector. The output of livestock and other TABLE 3.4. Value-added in the Agriculture Sector,2019 2021(at constant 2015 prices)SHARE(%)CHANGE(%)2020220192020220213Oil palm37.61.5-1.35.9Rubber2.46.1-18.96.0Livestock16.16.34.05.7Other agriculture27.43.94.94.6Fishing11.5-0.7-5.22.9Forestry and logging5.0-8.6-21.8-3.0Agriculture100.02.0-1.24.71 Including paddy, fruits, vegetables, coconut, tobacco, tea, flowers, pepper, cocoa and pineapple2 Estimate3 ForecastNote: Total may not add up due to roundingSource: Department of Statistics and Ministry of Finance, MalaysiaFIGURE 3.3.3. Top Five Challenges to Bring Brand to the Next Level External InternalMARKET MOVING TOO FAST WITHOUT MARKET INTELLIGENCE TO PLANUNABLE TO GET GOVERNMENT ASSISTANCE FOR BRAND AND MARKETINGACCESSING AND EXPANDING TO NEW MARKETSINTENSE PRICE COMPETITIONHIGH COST IN BRAND COMMUNICATIONUNCLEAR ON HOW TO LEVERAGE ON DIGITAL PLATFORMSLACK OF PROFESSIONAL GUIDANCE FROM BRANDING EXPERTSINCREASING COST OF OPERATIONDIFFERENTIATING PRODUCTS AND SERVICESINSUFFICIENT FUND FOR BRAND AND MARKETING53R2236%$&% Notes: Figure may not add up to 100% due to multiple choices by the respondentsSource: Bizsphere Online Review, 2017economic outlook 2021chapter 3 macroeconomic outlook88agriculture subsectors are also expected to expand, supported by stable demand for food items, primarily during festivities. Hence, the agriculture sector is projected to decline by 1.2% in 2020.The agriculture sector is expected to turnaround by 4.7% in 2021, supported mainly by higher production of palm oil and rubber. The oil palm subsector is anticipated to rebound following improvements in global demand, particularly from China and India. The crude palm oil (CPO) price is projected to remain stable with higher demand following recovery in the hotel, restaurant and catering operations as well as higher biodiesel mandate in Indonesia and Malaysia. The rubber subsector is expected to surge as global demand for natural rubber increases in line with the expansion of the automotive industry. The production of livestock and other agriculture and fishing is also expected to improve in line with various Governments initiatives in modernising the agro-food subsector. This include integration of agriculture technologies, such as agro-robotic, sensor, precision farming, drones, agriculture data development and Internet of Things (IoT) applications. In addition, the Governments efforts to increase domestic food production in ensuring food security are expected to continue to sustain the growth of the subsector.information box 3.1The Importance of Commodity Sector to the Malaysian EconomyIntroductionThe commodity sector1 continues to play an important role in the Malaysian economy. However, with the focus shifting from purely upstream to various downstream activities, the contribution of the commodity sector has declined. Furthermore, the sector is vulnerable, mainly due to the volatility in global demand and supply. Using an input-output methodology and a Dynamic Computable General Equilibrium (CGE) model, this article assesses the contribution of the commodity sector to economic growth.Contribution of the Commodity Sector In 1970, the commodity sector accounted for 54.9%2 of gross domestic product (GDP) or RM43.2 billion (in 2015 prices) (Figure 3.1.1.). The commodity sector constituted about 80% of total exports, comprising mainly of rubber and tin (Figure 3.1.2.). However, during the subsequent decades, oil and gas (O&G) and oil palm replaced rubber and tin as the major commodities. In 2019, despite an increase in value to RM203 billion, the share of the commodity sector to GDP had reduced to 14.3%. This was due to the rapid growth of the manufacturing sector during the industrialisation phase of the mid-1980s. The sectors share further declined during the 1990s following the transformation into a services-driven economy. Despite accounting for a smaller percentage of GDP, the sector has cushioned the economy from external shocks, especially during the crises of 1998, 2009 and the recent COVID-19 pandemic. 1 Includes oil palm, rubber as well as oil and gas.2 Backcasting data from Economic Planning Unit, Prime Ministers Department.economic outlook 202189chapter 3 macroeconomic outlookAssessing the Contribution of the Commodity Sector Based on the input-output analysis, there are three notable trends observed in the forward and backward linkages3 for the commodity sector. Firstly, there was a gradual increase in the forward linkages for oil palm and O&G since 2000. This reflects the compositional shift in both commodities as they moved to higher value-added downstream activities in the resource-based industry, which constituted 44.3% of the manufacturing sector. The output of crude palm oil was mainly used by oils and fats as well as manufacturing of animal feeds industries. The output of O&G was consumed by the petroleum refinery, basic chemicals, wholesale and retail trade as well as motor vehicle industries. The evolution of downstream activities was in line with Industrial Master Plans (IMPs), which aimed at ensuring the manufacturing sector, including the resource-based industry, remains an essential source of growth. On the contrary, the forward linkage for rubber industry remained low following increasing usage of synthetic rubber for the production of gloves.02004006008001,0001,2001,4001,600COMMODITIESNON-COMMODITIES201920102000199019801970FIGURE 3.1.1. Value and Contribution of Commodityand Non-Commodity Sectors RM000Source: Economic Planning Unit, Prime Ministers Department54.9F.17.6&.7 .2.3%COMMODITIES (% GDP)020406080100COMMODITIES1NON-COMMODITIES201920102000199019801970FIGURE 3.1.2. Contribution of Commodity andNon-Commodity Sectors to Total Exports 1 Excluding commodity-related downstream activities%Source: Department of Statistics, Malaysia and Malaysia External TradeDevelopment Corporation3 Backward linkage is the interconnection with the industry of upstream industries for inputs. Forward linkage is the interconnection of the industry to downstream industries as markets for its output (Miller & Blair, 2009).FIGURE 3.1.3. Linkages and Multiplier Impacts of Commodity Industries Source: Ministry of Finance, Malaysia (estimates)Backward linkages1.01.52.02.53.03.5CRUDE OIL AND NATURAL GASOIL PALM RUBBER20152010200520001991198719831978Forward linkages1.01.21.41.61.8CRUDE OIL AND NATURAL GASOIL PALM RUBBER20152010200520001991198719831978economic outlook 202190chapter 3 macroeconomic outlookSecondly, all the three commodities have higher backward linkages for the period of 2000 2015 as compared to 1978 1991. This reflects that industries consumed more input as they expanded to meet demand from more diversified downstream industries (Figure 3.1.3.). Thirdly, the commodity sector has more extensive forward linkages as compared to backward linkages as they supply natural raw materials to the economy. This is in line with the study by Valds and Foster (2010), which revealed that agricultural commodities have higher forward linkages rather than backward linkages. Subsequently, the CGE model was applied to assess the contribution of the commodity sector to the economy. The analysis shows that with a 10% increase in productivity of O&G, oil palm and rubber industries, real GDP will increase by 1.5, 0.5 and 0.03 percentage points, respectively (Figure 3.1.4., 3.1.5. and 3.1.6.). In addition, other industries that are associated with the commodity sector, such as civil engineering, oils and fats as well as rubber processing, are also expected to benefit. The CGE results indicate that industries that sell the most to households are expected to gain from higher household disposable income. In comparison to the commodity industry, a 10% increase in productivity of electronics and basic chemicals will increase real GDP by 0.3 and 0.12 percentage points, respectively. The lower contribution to GDP is attributed to the high dependency of these industries on imports of intermediate inputs. ConclusionThe Malaysian economy has experienced a relatively rapid growth during the last four decades and has also undergone a structural transformation. From an agriculture-based economy, diversification has proceeded to the extent that services and manufacturing have become the engine of growth. Nevertheless, the commodity sector continues to play an essential role in the economy through the inter-sectoral linkages, particularly in terms of forward linkages. This is mainly attributed to the emphasis on enhancing resource-based downstream activities. The oil palm and O&G industries also contribute higher to the GDP as compared with electronics and basic chemicals industries which have high import content. Therefore, research and development (R&D) collaborations between the industry and research institutes need to be enhanced to produce more high value-added products. In line with the Industrial Revolution 4.0 (IR4.0), adoption of technology such as usage of robotics, sensors and the Internet of Things (IoT) will increase productivity and ensure the sustainability of the sector. 0.00.20.40.60.81.01.21.41.61.8EMPLOYMENTGDP202120200.00.10.20.30.40.50.6EMPLOYMENTGDP20212020FIGURE 3.1.5. Oil Palm 0.000.010.020.030.040.050.06EMPLOYMENTGDP20212020FIGURE 3.1.6. Rubber Baseline deviation(percentage point)Baseline deviation(percentage point)Baseline deviation(percentage point)FIGURE 3.1.4. Crude Oil andNatural GasSource: Ministry of Finance, Malaysia (estimates)economic outlook 2021chapter 3 macroeconomic outlook91Mining SectorHigher demand to drive growth in 2021The mining sector recorded a double-digit contraction of 11% in the first half of 2020, affected by the slump in global demand due to business closures as well as the reduction in travel and transport activities. The sector was further weighed down by the temporary shutdowns of several oil and gas (O&G) facilities for maintenance purposes. With the COVID-19 pandemic crushing demand, storage facilities filled rapidly, and Brent crude oil price fell to its lowest level at USD17.32 per barrel (pb) on 21 April 2020 before stabilising at about USD40 pb. The sector is expected to continue to decline in the second half of the year due to on-going maintenance works and bearish outlook, following economic and geopolitical uncertainties as well as trade tensions. Against this backdrop, the mining sector is anticipated to contract by 7.8% in 2020. Nonetheless, the sector is expected to rebound by 4.1% in 2021, supported by the recovery in global demand for crude oil and condensate as well as liquified natural gas (LNG). Brent crude oil price is expected to improve in 2021 to an average of USD42 pb and recover to pre-pandemic level in the medium-term.Construction SectorCivil engineering segment to spur recoveryThe construction sector contracted by 25.9% in the first half of 2020 and is expected to shrink by 11.8% in the second half with all segments declining significantly. At the same time, prolonged property overhangs continue to weigh down the performance of the sector. However, civil engineering and specialised construction activities subsectors are expected to improve gradually, cushioned by various measures under the economic stimulus packages. Overall, for the year, the sector is projected to contract by 18.7%.201720182016201920203,0003,5004,0004,5005,0005,5006,0006,500EXISTING STOCK200300400500600700800900PLANNED SUPPLYINCOMING SUPPLYQ2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Units(000)Units(000)RIGHT SCALESource: National Property Information CentreFIGURE 3.3. Supply Indicators of ResidentialProperty 192020201620172018-404812MALAYSIA HOUSE PRICE INDEX KUALA LUMPURSELANGORJOHORPULAU PINANGQ2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1FIGURE 3.4. Malaysia House Price Index(% change)Source: National Property Information Centreeconomic outlook 2021chapter 3 macroeconomic outlook92The construction sector is expected to rebound by 13.9% in 2021 on account of the acceleration and revival of major infrastructure projects, coupled with affordable housing projects. The civil engineering subsector will continue to be the main driver of the construction sector. Among the major infrastructure projects include Mass Rapid Transit 2 (MRT2), Light Rail Transit 3 (LRT3), West Coast Expressway (WCE) and Bayan Lepas Light Rail Transit (LRT) as well as Pan Borneo and Coastal Highways in Sarawak. Utility projects include the Langat 2 Water Treatment Plant, Baleh Hydroelectric Dam and Sarawak Water Supply Grid Programme (Phase 1). The residential subsector is anticipated to improve, supported by various measures taken by the Government to address the property overhang situation. Among the measures include the extension of HOC, exemption of RPGT, the introduction of RTO scheme as well as reduction of foreign ownership threshold. The performance of the non-residential subsector is expected to recover marginally, supported by on-going commercial projects, including Bukit Bintang City Centre, Cyberjaya City Centre, Forest City and Malaysia Vision Valley 2.0.Domestic DemandDomestic demand spearheads the recoveryDomestic demand is expected to contract by 3% in 2020, with private and public sectors spending declining by 3.2% and 2.1%, respectively. In the first half of 2020, domestic demand declined significantly by 7.7%, amid restricted movements to contain the COVID-19 pandemic. Nevertheless, the announcement of various stimulus packages and the gradual resumption of economic activities are expected to restore business and consumer confidence in the second half of the year. Hence, domestic demand is anticipated to turnaround to 1.5% during the period and expand further by 6.9% in 2021. Private consumption declined by 6% during the first half of 2020, affected by the implementation of the MCO. However, household spending is anticipated to pick up during the second half of the year, on the back of various stimulus packages aimed at providing support to households and businesses. The measures include a moratorium on loan repayments, temporary 18201920202016201720182019202020162017020,00040,00060,00080,000100,000INDUSTRIALSHOPSQ2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q106001,2001,8002,4003,000RETAIL SPACESOFFICE SPACES767880828486RETAIL SPACESOFFICE SPACESQ2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1FIGURE 3.5. Supply Indicators of Non-Residential Property Source: National Property Information CentreOccupancy RateIncoming SupplyUnitsSquare meter(000)RIGHT SCALEeconomic outlook 2021chapter 3 macroeconomic outlook93SHARE(%)CHANGE(%)2020220192020220213Domestic demand95.54.3-3.06.9Private expenditure76.66.2-3.27.0Consumption61.17.6-0.77.1Investment15.51.6-11.76.7Public expenditure18.9-2.8-2.16.7Consumption13.02.01.62.0Investment6.0-10.8-9.316.9External sector15.59.7-24.94.1Exports57.8-1.3-13.48.7Imports52.3-2.5-11.99.2GDP100.04.3-4.5 6.5 7.51 Goods and non-factor services2 Estimate3 ForecastNote: Total may not add up due to rounding and excluding change in stocks componentSource: Department of Statistics and Ministry of Finance, MalaysiaTABLE 3.5. GDP by Aggregate Demand,2019 2021(at constant 2015 prices)optional reduction in employees contributions to the Employees Provident Fund (EPF) and discounts on electricity bill as well as low interest rates. As a result, private consumption is projected to rebound by 4.2% in the second half, cushioning overall consumption activities, which is expected to record a marginal decrease of 0.7% in 2020. Private consumption is anticipated to increase by 7.1% in 2021, mainly supported by higher disposable income arising from buoyant domestic economic activities, stronger export earnings, accommodative financial stance, extension of tax relief on childcare and favourable stock market conditions. Better job prospects, following broader improvement in the economy and measures addressing employability, are also expected to contribute to household spending. Furthermore, the expected recovery in the tourism-related industries following tax incentives on domestic tourism expenses for households will also provide additional impetus to private sector spending. As the nation rapidly shifts towards adopting digitalisation, the broader availability of various e-commerce platforms and roll-out of 5G technology will facilitate economic activities. Private investment is expected to contract by 11.7% in 2020, after declining significantly by 15.2% in the first half of the year. The significant decline was due to weak demand and tight liquidity as businesses were closed down for weeks following the MCO and uncertainties in the financial markets. Nonetheless, with various measures taken to revitalise and accelerate businesses, private investment is expected to record a smaller decrease of 7.8% in the second half of the year. Among the measures include the establishment of funds to support digitalisation, especially for SMEs, as well as tax incentives to attract foreign direct investment (FDI) and assistance to sustain businesses. In addition, the MalaysiaMudah (#MyMudah) initiative and the establishment of the Project Acceleration and Coordination Unit (PACU) will reduce bureaucracy to facilitate business operations and boost private investment activities. With these policies in place and coupled with spill-over effects from the fiscal injection, private investment is expected to rebound by 6.7% in 2021. Public investment is projected to decline by 9.3% in 2020 on account of lower capital outlays, especially in the first half of the year. Public investment expenditure, which shrunk by 24.2% during the period, is expected to gradually improve in the second half of 2020. This follows the implementation and acceleration of investment in infrastructure, such as small-scale projects under the economic stimulus packages and the National Fiberisation and Connectivity Plan (NFCP). The Federal Governments development expenditure (DE) continues to prioritise investment with high multiplier impact and value for money. The DE, averaging about RM59 billion between 2020 2021, is mostly targeted at promoting sustainable development and bridging urban-rural infrastructure gap as well as enhancing the living standards of the people. Among major projects, include expansion of several airports as well as construction of hospitals and Klang Valley Double Track Phase 1 (KVDT 1). The continuation of large-scale transport-related projects, such as MRT2, LRT3, Rapid economic outlook 2021chapter 3 macroeconomic outlook94Transit System (RTS) and Pan Borneo Highway, will also provide impetus to public investment. Public corporations are expected to continue investing in new and on-going projects, among others, development of O&G-related projects, upgrading of digitalisation-related activities and construction of energy plants. All these initiatives are expected to support public investment to expand by 16.9% in 2021.Public consumption is anticipated to increase by 1.6% in 2020, with higher expenditure on emoluments mainly to meet the staff requirements in critical sectors. The 3.6% increase in public consumption in the first half of 2020 is mostly attributed to the implementation of stimulus packages. Public consumption is expected to expand by 2% in 2021 with the Government continuing to further improve public services delivery and optimising spending. Gross national income (GNI) in current prices is anticipated to decline by 3.7% in 2020, following slower economic activities. Gross national savings (GNS) is also expected to fall by 11% to RM328.3 billion, with the bulk of savings contributed by the private sector. With total investment declining at a slower rate than savings, the savings-investment gap is forecast to record a surplus of RM48.5 billion. In 2021, GNI is projected to rebound by 7.8% to RM1.53 trillion, while GNS by 2% to RM335 billion. During the year, the savings-investment gap is anticipated to record a lower surplus of RM20.3 billion. However, the surplus will continue to provide ample liquidity to finance domestic economic activities and be mobilised for long-term productive investment. feature article 3.4Shadow Economy in MalaysiaIntroductionShadow economy (SE) exists around the world. However, there is no standard definition and methodology to account for its activities in the official national gross domestic product (GDP), given its hidden nature. Apart from SE, there are many terms used, such as underground economy, non-observed economy, hidden economy and informal economy (Organisation for Economic Co-operation and Development, 2017). The SE includes all market-based legal production of goods and services that are deliberately concealed from public authorities to avoid payment of taxes and social security contributions as well as to avoid complying with labour market standards and administrative obligations (Schneider, 2011). The incentive to be in SE is driven by the higher cost in the hiring of workers, which includes tax burden and social contributions as well as regulations to control economic activities (Schneider, 2011). An increase in the rate of self-employment as a percentage of the labour force also 0481216SAVINGS-INVESTMENT GAP (RIGHT SCALE)20212202012019201820171520253035GROSS NATIONAL SAVINGSTOTAL INVESTMENT3 FIGURE 3.6. Savings-Investment Gap(% of GNI)1 Estimate 2 Forecast3 Including change in stocksRM billion%Source: Department of Statistics and Ministry of Finance, Malaysiaeconomic outlook 202195chapter 3 macroeconomic outlookcontributes to the size of SE (DellAnno, 2004). Although self-employment is high in many countries, they may not enjoy the benefits of formal contracts (Organisation for Economic Co-operation and Development, 2009). Thus, the information on the size of SE is crucial for the government in making policy decisions to reduce tax evasion (Medina & Schneider, 2018). The estimation on SE would also provide insights for governments to enhance social security protection among low-income households and unemployed persons. Many studies have estimated the size of the SE in Malaysia using various methodologies. Using the Multiple Indicators Multiple Causes (MIMIC) model and Currency Demand Approach (CDA), Medina and Schneider (2019) estimated the average size of SE in Malaysia at 31% of GDP between 1991 2017. This article estimates the size of the Malaysian SE between 1990 2019 using a similar method. It also provides some insights on the main causes and best practices in other countries to minimise shadow economic activities. In this context, SE is defined as legal productive economic activities that remain unreported from the official authority to avoid government regulations, tax obligations and social security contributions1. Estimating the Shadow Economy There are two steps in the estimation of SE. Firstly, the MIMIC model is applied to estimate the relative size of the SE. The model is derived from structural equation modelling (SEM) to confirm the influence of causal variables as well as the effect of SE on macroeconomic indicators. Secondly, the CDA is applied to calibrate the relative estimates into the absolute size of SE in Malaysia for the period between 1990 2019. The size of SE depends on various variables. The MIMIC estimation uses causal variables of SE, which include trade openness, real GDP per capita, unemployment rate, size of government and the rule of law. The effect of SE on macroeconomic indicators are reflected in money supply (M1), labour force participation rate and real GDP. The model shows that trade openness, real GDP per capita and size of government are contributors to the larger size of SE. Many research indicate that real GDP per capita and trade openness have an inverse relationship with the size of SE. However, for Malaysia, both variables have a positive relationship with the size of SE, suggesting that an increase in real GDP per capita or trade openness will lead to a larger size of the SE. These relationships are also observed in advanced countries. A positive relationship with real GDP per capita occurs when an economy has reached a certain threshold of real GDP per capita or when an economy is more developed (Wu & Schneider, 2019). In addition, high trade openness indicates minimal trade barriers. As such, businesses or individuals may involve in illegal trading without difficulty (International Chamber of Commerce, 2017). 1 Any undeclared, under-reporting and suppression of income in Malaysia are regarded as tax evasion (Malaysian Income Tax Act, 1967 and Service Tax Act, 1975).FIGURE 3.4.1. Causal and Macroeconomic Indicators of Shadow Economy in MalaysiaSource: Ministry of Finance, Malaysia (estimates)SHADOWECONOMY -Trade OpennessReal GDP Per CapitaUnemployment RateSize of GovernmentMoney Supply (M1)Labour ForceParticipation RateReal GDPRule of Laweconomic outlook 202196chapter 3 macroeconomic outlookIn the labour market, tight regulations have a significant effect on employers costs and workers incentives. In many Organisation for Economic Co-operation and Development (OECD) countries, high labour costs are the leading reason for the rising unemployment rate, and thus, for the expansion in the SE, which employs many unemployed people. As growing numbers of people work in the hidden sector, participation rates in the official economy may fall (Schneider & Enste, 2000). Nevertheless, better job prospects in the labour market are expected to reduce the size of SE. A positive relationship exists between SE and the size of government, which is the proxy for the burden of indirect taxation (Schneider et al., 2010). A bigger government is associated with greater red tape, which induces some firms to operate underground (Goel et al., 2017). On the contrary, the size of SE declines as the overall institutional quality and the rule of law improves. Businesses also have an incentive to go underground, not to avoid high taxes but rather to reduce the burden of the regulation (Friedman et al., 2000). Heightened activities in SE is likely to push up the demand for the currency. This is because SE transactions tend to be in cash or cryptocurrencies, which is difficult to be detected. Hidden transactions are assumed to be carried out in cash to avoid leaving a paper trail for authorities (Tanzi, 2002). Thus, higher M1 reflects the increase in the size of SE.This article estimates the average size of Malaysian SE at 33.7% of GDP from 1990 2019. Figure 3.4.2. indicates that the size of SE has declined over the years fluctuating around 50% of GDP between 1990 1999. The size of SE continued to fall to about 30% between 2000 2009 before averaging about 21% between 2010 2019. In 2019, the size of SE stood at 18.2%. Best Practices to Curb the Shadow EconomyTax administrators globally have strengthened their efforts to identify and reduce the size of SE. Data sharing among agencies are crucial in detecting SE. For instance, New Zealand provides a tax number to every new-born child upon registration of birth. The Australian Taxation Office allows taxpayers to pre-fill their income tax returns with information, such as salary, interest and health insurance, with data sourced directly from employers, banks and insurers. In Singapore, the inland revenue agency sourced information from vehicle records and the Central Provident Fund Board to help determine whether a company is active or dormant (Organisation for Economic Co-operation and Development, 2017).FIGURE 3.4.2. Size of Shadow Economy in Malaysia, 1990 20190102030405060SE (% GDP)201920182017201620152014201320122011201020092008200720062005200420032002200120001999199819971996199519941993199219911990(% GDP) Source: Ministry of Finance, Malaysia (estimates)2000 2009: 30.290 1999: 49.6 10 2019: 21.2.2%AVERAGE OF SE (% GDP)economic outlook 202197chapter 3 macroeconomic outlookIn Nigeria, electronic payments and cashless transactions have been implemented to limit undeclared economic activities by gradually reducing and eliminating unrecorded cash payments (Yusuf & Agbi, 2018). Liberalising the labour market is also among measures implemented to minimise SE. Denmark, for example, has a renowned “flexicurity” model, where businesses are given the “flexibility” in hiring and firing workers. At the same time, the model has increased the “security” for people who have lost their jobs by providing unemployment benefits, retraining and job search assistance (Packard et al., 2012). Way ForwardAdvanced technology can help reduce the size of SE and the incidence of tax evasion. The emergence of the sharing economy and gig economy allows the migration from cash to digital transactions and creates digital footprints. Data sharing among government agencies, for example, registration of properties and vehicles as well as the introduction of tax identification number, will provide information on the expenditure patterns of individual and businesses. Thus, the government could analyse the collected data effectively and enable the identification of fraudulent tax activities. The governments welfare distribution platforms could also be utilised to register business entities in the informal sector. The government will enhance efforts to make working in the formal sector more beneficial, for example, by improving efficiency in the labour market and simplifying tax compliance procedures with greater adoption of technology. Efforts will be continued to enhance and emphasise the rule of law and enforcement rather than increasing the number of regulations.ConclusionAs SE under-values the actual size of the economy, this article applies the MIMIC model and CDA approach to estimate the size of SE in Malaysia between 1990 2019. The results indicate that although the size of SE is on a declining trend, its presence is still significant and deters the development of an inclusive economy. It deprives potential high tax revenue collection to finance development projects, such as healthcare, education and public transportation. Measures to reduce the size of SE include adopting advanced technologies, higher data sharing among government agencies, emphasis on the rule of law and stringent enforcement. External SectorGreen shoots emergingExportsIn 2020, gross exports are projected to decline by 5.2% weighed down by global supply disruptions as a result of the unprecedented crisis. Consequently, exports of manufactured goods are estimated to contract by 3.8% following lower demand for E&E and non-E&E products which are expected to fall by 3.8% and 3.7% respectively. Nonetheless, exports of agriculture goods are anticipated to rise by 0.7%, buoyed by palm oil and palm oil-based agriculture products. Exports of palm oil are projected to increase by 5.6% with higher demand, particularly from China, India and the Netherlands. The exemption of export duties on CPO, crude palm kernel oil as well as refined, bleached and deodorised (RBD) palm kernel oil is also expected to support the exports of palm oil. In contrast, receipts from natural rubber are anticipated to drop by 20.1% in 2020. Exports of mining goods are projected to decrease further by 21.8%, dragged down by exports of crude petroleum and LNG by 27.6% and 15.7%, respectively. The slowdown in demand from global industrial, travel and transportation activities as well as price slump are the main reasons for the downtrend in exports of mining goods. economic outlook 2021chapter 3 macroeconomic outlook98RM MILLIONCHANGE(%) 2019202012021220192020120212Total trade 1,844,483 1,738,477 1,805,749-2.1-5.73.9Gross exports 995,072 943,761 968,793-0.8-5.22.7of which:Manufactured 840,586 808,851 828,8620.4-3.82.5Agriculture 65,958 66,441 69,381-1.60.74.4Mining 81,520 63,771 65,118-9.3-21.82.1Gross imports 849,411 794,716 836,956-3.5-6.45.3of which:Capital goods 100,179 87,642 100,219-10.9-12.514.3Intermediate goods 467,211 437,406 460,2801.1-6.45.2Consumption goods 74,155 74,718 76,9671.50.83.0Trade balance 145,661 149,045 131,83817.72.3-11.51 Estimate2 ForecastNote: Total may not add up due to roundingSource: Department of Statistics, Malaysia External Trade Development Corporation and Ministry of Finance, MalaysiaTABLE 3.6. External Trade,2019 2021RM MILLIONCHANGE(%)SHARE (%)201920202019202020192020Manufactured 553,834 533,378 1.7-3.784.185.9Agriculture 44,212 43,960 -1.6-0.66.77.1Mining 55,591 40,463 -1.9-27.28.46.5Others1 4,940 2,841 -31.9-42.50.80.5Gross exports 658,576 620,642 0.8-5.8100.0100.01 Including gold scrap and waste; worn clothing; and special transaction not classifiedNote: Total may not add up due to roundingSource: Department of Statistics, Malaysia and Malaysia External Trade Development CorporationTABLE 3.7. Gross Exports,January August 2019 and 2020Gross exports are expected to rebound by 2.7% in 2021, benefiting from the recovery in global trade and supply chains. Exports of manufactured goods are anticipated to turnaround by 2.5%, supported by improved demand for E&E and non-E&E products. Higher demand for semiconductor, telecommunication equipment parts as well as automatic data processing equipment in line with the global digital transformation and 5G roll-out is expected to expand the exports of E&E by 3%. Similarly, exports of the non-E&E are expected to improve by 2.1%, contributed by higher demand for chemicals and chemical products, rubber products and manufactures of metal.Exports of agriculture goods are projected to expand by 4.4% in 2021, led by an increase in demand for palm oil and palm oil-based agriculture products as well as natural rubber. In line with the recovery in world economic activities and improvement in crude oil prices, export earnings from mining goods are projected to recover by 2.1%, contributed by higher demand from major markets for crude petroleum (2%) and LNG (2.2%).economic outlook 2021chapter 3 macroeconomic outlook99RM MILLIONCHANGE(%)SHARE (%)201920202019202020192020E&E 247,757 237,847 0.8-4.044.744.6Non-E&E 306,077 295,531 2.4-3.455.355.4Petroleum products 47,072 43,774 -4.4-7.08.58.2Chemicals and chemical products 38,458 32,712 4.6-14.96.96.1Optical and scientific equipment 24,592 25,914 4.55.44.44.9Machinery, equipment and parts 27,723 25,310 0.6-8.75.04.7Rubber products 16,779 23,351 -3.839.23.04.4Manufactures of metal 28,034 22,978 -7.6-18.05.14.3Iron and steel products 14,472 15,706 48.08.52.62.9Palm oil-based manufactured products 16,020 13,769 5.1-14.12.92.6Processed food 14,024 13,719 11.8-2.22.52.6Transport equipment 11,733 13,064 -4.211.32.12.4Wood products 10,101 9,836 -2.5-2.61.81.8Textiles, apparels and footwear 10,406 8,721 5.0-16.21.91.6Manufactures of plastics 9,905 8,554 3.9-13.61.81.6Non-metallic mineral products 5,633 5,081 19.5-9.81.01.0Paper and pulp products 4,071 4,195 29.23.00.70.8Jewellery 4,712 2,286 9.0-51.50.90.4Beverages and tobacco 2,274 1,629 5.5-28.40.40.3Other manufactures 20,067 24,933 0.424.23.64.7Exports of manufactured goods 553,834 533,378 1.7-3.7100.0100.0Note: Total may not add up due to roundingSource: Department of Statistics, Malaysia and Malaysia External Trade Development CorporationTABLE 3.8. Exports of Manufactured Goods, January August 2019 and 2020FIGURE 3.7. Top 10 Trading Partners, January August 2020(% share)Note: Total may not add up due to roundingSource: Department of Statistics, Malaysia and Malaysia External Trade Development CorporationREST OF THE WORLDREPUBLIC OF KOREAVIET NAMTAIWANINDONESIATHAILANDJAPANHONG KONGUSCHINASINGAPOREREST OF THE WORLDINDIAGERMANYINDONESIAREPUBLIC OF KOREATHAILANDTAIWANJAPANUSSINGAPORECHINARM620.6billion10.8%6.8%6.5%4.7.3.9.1%3.2%3.4%3.5%3.8%RM517.7billion20.7%9.3%9.0%4.4%3.2%6.3%3.0%.3%7.4%7.3%4.0%ImportsExportseconomic outlook 2021chapter 3 macroeconomic outlook100ImportsGross imports are projected to contract by 6.4% in 2020 due to lower imports of intermediate and capital goods as a result of slower economic and investment activities. Gross imports are expected to turnaround by 5.3% in 2021, supported by an increase in all types of imports. Imports of intermediate goods are projected to rise by 5.2%, mainly attributed to expansion in the manufacturing and construction sectors. Similarly, imports of capital goods are projected to expand by 14.3%, following improvement in investment activities and the continuation of strategic projects. Imports of consumption goods are expected to increase by 3%, led by higher demand from households as consumers confidence improves and income increases.RM MILLIONCHANGE(%)SHARE(%)201920202019202020192020Capital goods65,521 59,930 -13.4-8.511.711.6Capital goods (except transport equipment)59,712 62,221 -5.34.210.712.0Transport equipment (industrial)5,809 -2,291-53.9-139.41.0-0.4Intermediate goods306,810 278,266 -0.1-9.354.953.8Food and beverages, primary and processed, mainly for industry12,173 13,182 3.58.32.22.5Fuel and lubricants, primary, processed and others39,293 32,403 7.0-17.57.06.3Industrial supplies, primary, processed and n.e.s.1143,404 125,442 1.2-12.525.724.2Parts and accessories of capital and transport equipment 111,940 107,239 -4.2-4.220.020.7Consumption goods 48,486 47,638 0.6-1.78.79.2Food and beverages, primary and processed, mainly for household 20,071 21,464 5.26.93.64.1Transport equipment (non-industrial) 689 562 32.1-18.40.10.1Other consumer goods 27,725 25,611 -3.0-7.65.04.9Durables 6,359 5,800 -6.7-8.81.11.1Semi-durables 8,881 7,980 -12.6-10.11.61.5Non-durables 12,486 11,832 7.5-5.22.22.3Others 24,766 12,871 32.0-48.04.42.5Re-exports 112,961 118,960 -14.45.320.223.0Gross imports 558,543 517,665 -4.0-7.3100.0100.01 Not elsewhere statedNote: Total may not add up due to roundingSource: Department of Statistics, MalaysiaTABLE 3.9. Gross Imports by End Use, January August 2019 and 2020economic outlook 2021chapter 3 macroeconomic outlook101Balance of PaymentsThe current account surplus of the balance of payments narrowed to RM17.1 billion or 2.6% of GNI in the first half of 2020. This is due to a smaller surplus in the goods account and a lower deficit in the income account. In the second half of the year, the current account surplus is projected to widen to RM31.4 billion or 4.1% of GNI following a wider surplus in the goods account and a lower deficit in the income account. Overall in 2020, the current account surplus is expected to narrow to RM48.5 billion or 3.4% of GNI. This is primarily due to the widening deficit in the services account despite a higher surplus in the goods account and a lower deficit in income account. The goods account is anticipated to record a higher surplus of RM130.9 billion as exports are projected to outpace imports. The services account is expected to post a wider deficit of RM50.3 billion, mainly due to the decline in receipts in the travel and transport accounts. The travel account is anticipated to record a deficit of RM10.9 billion for the first time since 1989, on account of a significant decline in tourist arrivals as international borders are closed to contain the COVID-19 pandemic. The deficit in the transport account is projected to reach RM26.8 billion due to lower earnings from freight charges, airline passenger fares, airport and port charges, such as aircraft landing and parking, ship docking and cargo handling provided by domestic companies. The other services account is expected to record a lower deficit due to declining outflow of payments for construction, financial as well as maintenance and repair services.The primary income account is projected to register a lower deficit of RM23.7 billion in 2020, mainly with lower payments accruing to foreign direct investors in Malaysia due to sluggish performance of construction and manufacturing sectors. The investment income payments are expected to record a decline of RM65.6 billion. Compensation of employees is expected to record a smaller deficit following a larger decline in payments, reflecting slower domestic economic activities.20192020120212RECEIPTSPAYMENTSNETRECEIPTSPAYMENTSNETRECEIPTSPAYMENTSNETBalance on goods and services985,283872,871 112,412842,053761,45480,599916,286833,82382,463Goods815,470692,136 123,334750,424619,538 130,886778,135664,804 113,311Services169,814180,735-10,92291,629141,916-50,287138,151169,019-30,868Transport21,66947,572-25,90314,96241,805-26,84320,33352,509-32,176Travel82,11451,29630,81812,41423,283-10,86853,46835,49517,973Other services66,03081,868-15,83764,25276,829-12,57664,35081,015-16,665Primary income64,851105,118-40,26756,51680,202-23,68662,804104,362-41,558Compensation of employees6,78415,906-9,1226,30814,565-8,2576,80915,351-8,542Investment income58,06789,212-31,14550,20865,637-15,42955,99589,011-33,016Secondary income16,89738,191-21,29426,11834,575-8,45817,52238,150-20,628Balance on current account1,067,031 1,016,18150,850924,686876,23148,455996,612976,33520,277% of GNI3.53.41.31 Estimate2 ForecastNote: Total may not add up due to roundingSource: Department of Statistics and Ministry of Finance, MalaysiaTABLE 3.10. Current Account of the Balance of Payments, 2019 2021(RM million)economic outlook 2021chapter 3 macroeconomic outlook102The outflows of secondary income account, which primarily consist of remittances, are expected to decline to RM34.6 billion as the income of foreign workers is affected during the MCO. At the same time, inflows of secondary income account are anticipated to increase to RM26.1 billion following a one-off receipt, contributing to a lower deficit of RM8.5 billion in secondary income account.The financial account registered a net outflow of RM33.1 billion due to higher net outflows in portfolio investment amid lower net inflows in direct investment and financial derivatives accounts. Despite the pandemic, FDI registered a net inflow of RM8.6 billion during the first half of the year and channelled mainly to the manufacturing and mining sectors as well as financial and insurance/takaful segments. Direct investment abroad by Malaysian companies registered a lower net outflow of RM6.5 billion. The outflows were mainly channelled into the mining sector, followed by financial and insurance/takaful as well as information and communication segments.The current account balance is expected to record a lower surplus in 2021 at RM20.3 billion or 1.3% of GNI, in line with the expansion in domestic industrial and investment activities. The surplus in the goods account is estimated to record RM113.3 billion, supported by a gradual recovery in global trade activities. The deficit in the services account is anticipated to narrow to RM30.9 billion amid surplus in the travel account. During the year, the travel account is expected to improve as tourism activities recover gradually. Receipts from travel account are projected to increase to RM53.5 billion driven by higher tourist arrivals and per capita spending, which more than offset residents spending abroad for leisure, business and pilgrimage purposes. Gross payments for transport services are expected to increase to RM52.5 billion, attributed to the continued reliance on foreign transport services amid the expansion in trade activities. Gross receipts are also anticipated to rise to RM20.3 billion, supported by improved earnings from air travel as well as cargo handling and shipping services provided by domestic companies. A wider deficit is expected in the other services account in line with higher payments attributed to expansion in the manufacturing and construction sectors.The primary income account is anticipated to record a larger deficit of RM41.6 billion, following improvements in investment activities. This is in line with higher repatriation of profits and dividends by foreign investors and net outflows of compensation for foreign professionals. Net outflows in the secondary income account are projected to widen to RM20.6 billion as remittances by foreign workers will more than offset inflows, following the anticipated recovery in domestic economic activities. PricesInflationary pressure remains benignThe Consumer Price Index (CPI) shrank by 1% during the first eight months of 2020, and the trend is expected to continue for the rest of the year. The contraction was due to lower pump prices on account of weaker global crude oil prices as well as the discount given on electricity bills as part of the stimulus measures. However, the core index increased by 1.2%, indicating sustained domestic demand along with the gradual resumption of economic activities. In 2021, inflation is expected to normalise at 2.5% in line with better economic prospects and higher crude oil prices. 201820192020INTERNATIONAL RESERVESJAJOJAJOJAJ01002003004005000246810RESERVES/SHORT-TERM EXTERNAL DEBTMONTHS OF RETAINED IMPORTSFIGURE 3.8. International ReservesSource: Bank Negara Malaysia RM billionMonths/TimesRIGHT SCALEAs at 30 September 2020, Malaysias international reserves amounted to RM436.5 billion or USD105.0 billion, adequate to finance 8.4 months of retained imports and 1.1 times the short-term external debt (end-December 2019: RM424.1 billion; USD103.6 billion; 7.5 months; 1.1 times).economic outlook 2021chapter 3 macroeconomic outlook103WEIGHT1CHANGE(%)CONTRIBUTION TO CPI GROWTH(PERCENTAGE POINTS)2019202020192020CPI100.00.5-1.00.50-1.00Food and non-alcoholic beverages29.51.61.20.510.39Alcoholic beverages and tobacco2.41.60.20.050.01Clothing and footwear3.2-2.4-1.0-0.06-0.02Housing, water, electricity, gas and other fuels23.81.9-1.00.44-0.24Furnishings, household equipment and routine household maintenance4.11.30.30.050.01Health1.90.31.20.010.02Transport14.6-3.6-10.0-0.51-1.37Communication4.80.01.60.000.06Recreation services and culture4.80.60.70.030.03Education1.31.31.20.020.02Restaurants and hotels2.91.20.70.040.02Miscellaneous goods and services6.7-0.62.7-0.040.171 Based on Household Expenditure Survey 2016Note: Total may not add up due to roundingSource: Department of Statistics, MalaysiaTABLE 3.11. Consumer Price Index, January August 2019 and 2020(2010 = 100)WEIGHT1CHANGE(%)CONTRIBUTION TO PPI GROWTH(PERCENTAGE POINTS)2019202020192020PPI100.000-2.0-2.4-1.96-2.39Agriculture, forestry and fishing6.730-10.312.5-0.660.74Mining7.927-3.8-32.7-0.30-2.50Manufacturing81.571-1.1-0.2-0.92-0.16Electricity and gas supply3.4421.6-0.20.06-0.01Water supply0.330-2.1-0.6-0.010.00PPI by stage of processing100.000-2.0-2.4-1.96-2.39Crude materials for further processing16.410-5.7-12.4-0.97-2.04Intermediate materials, supplies and components56.119-1.6-0.3-0.89-0.16Finished goods27.4710.20.30.050.081 Based on Economic Census 2016Note: Total may not add up due to roundingSource: Department of Statistics, MalaysiaTABLE 3.12. Producer Price Index, January August 2019 and 2020(2010 = 100)economic outlook 2021chapter 3 macroeconomic outlook104The Producer Price Index (PPI) by local production declined by 2.4% during the first eight months of 2020 and is expected to remain stable due to low input costs. This is attributed to weaker global commodity prices, particularly that of crude oil and natural gas. The PPI by sector was weighed down, particularly by a significant contraction in the mining sector (-32.7%) followed by a contraction in other sectors, namely water supply (-0.6%), manufacturing (-0.2%) and electricity and gas supply (-0.2%). In contrast, the index for agriculture, forestry and fishing sector rose by 12.5%. The PPI is expected to improve in 2021 following the projected recovery of the domestic and global economy.feature article 3.5Dynamic Relationship between Consumer and Producer Price Indices IntroductionThe Consumer Price Index (CPI) measures the percentage change in the cost of purchasing a constant “basket”1 of goods and services which represents the average pattern of purchases by a particular population during a specified period. Changes in the costs of items in the basket are therefore due only to “pure” price movements, not associated with changes in the quantity and quality of the set of consumer goods and services in the basket. On the other hand, the Producer Price Index (PPI) for local production is an output-based index, which measures the change in the price of commodities sold to the domestic market valued at the ex-factory price. The PPI for local production measures the average change in the prices charged by producers of goods of an industry in a reference month compared with the base period. Thus, it is an important macroeconomic indicator used for monitoring the price movements of local outputs and is often viewed as a leading indicator of CPI (Department of Statistics Malaysia, 2020). 1 The “basket” is of an unchanging or equivalent quantity and quality of goods and services, consisting of items for which there are continually measurable market prices over time.201920202018201920202018% % % % -15-12-9-6-3036912CPIJAJOJAJOJAJ-25-20-15-10-505101520TRANSPORTHOUSING, WATER, ELECTRICITY,GAS AND OTHER FUELSFOOD AND NON-ALCOHOLIC BEVERAGESPPIJAJOJAJOJAJ-30-25-20-15-10-50510152025-60-50-40-30-20-1001020304050AGRICULTURE, FORESTRY AND FISHINGMININGMANUFACTURING RIGHT SCALERIGHT SCALEFIGURE 3.9. CPI and PPI Trends(% change)Source: Department of Statistics, MalaysiaProducer Price IndexConsumer Price Indexeconomic outlook 2021105chapter 3 macroeconomic outlookAccording to Clark (1995), PPI can be transmitted to CPI via the pass-through effect. Meanwhile, research on the developing economies (Sidaoui et al., 2010) and advanced economies (Woo et al., 2018) revealed that there is a long-run relationship between CPI and PPI, which helps to forecast inflation. This article analyses the relationship for the period from January 2011 to July 20202, which provides an insight on inflation expectation for better management of the macroeconomic policy. CPI measures the price changes in a fixed basket of goods and services and used as a proxy for inflation. In Malaysia, the CPI basket consists of 12 main groups of 552 items with fixed weights. Food and non-alcoholic beverages (29.5%), housing, water, electricity, gas and other fuels (23.8%), as well as transport groups (14.6%) form the largest weightage at 67.9% within the basket. In comparison, the PPI is measured by stages of processing and by five sectors. By stages of processing, the PPI is skewed towards intermediate materials, supplies and components, which account for 56.1% of the total weightage, while by sector, manufacturing (81.6%) and mining (7.9%) formed the largest weightage at 89.5%. The CPI trend remained relatively stable and exhibited a smaller variation than PPI from January 2011 to July 2020 period (Figure 3.5.1.). In contrast, the PPI recorded two distinct trends during the same period. From January 2011 until January 2017, the PPI had a wider variation before stabilising and converging with the CPI after the weekly setting of fuel prices.FIGURE 3.5.1. The Trend of CPI and PPI over 10-Year Period Source: Department of Statistics and Ministry of Finance, Malaysia-15-10-5051015AVERAGE CPIPPICPIJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJMonthly settingof fuel prices(Dec 2014 - Feb 2017)Weekly settingof fuel prices(Mar 2017 - Aug 2018)Weekly settingof fuel prices(Jan 2019)Monthly settingof fuel prices(Sept - Dec 2018)Brent crude oil price aboveUSD100 per barrelImplementation period of Goods andServices Tax (GST) (Apr 2015 - June 2018)Average CPI = 2 11201220132014201520162017201820202019% 2 Base year index set at 2010 = 100.By and large, the inflation rate has remained low and stable. The CPI hovered around 2% on average, while the PPI at 0.6% during the analysis period. However, there were periods of high inflation rate. The highest rate recorded for CPI was 4.9% in March 2017 following the shift from a monthly to a weekly setting of fuel prices. CPI recorded its largest decline in April and May 2020 at -2.9%, attributed to the weaker private consumption during the second quarter of 2020 economic outlook 2021106chapter 3 macroeconomic outlookfollowing the implementation of the Movement Control Order to stem the transmission of COVID-19 pandemic. Meanwhile, the PPI recorded its maximum rate increase of 15% in July 2011, which coincided with the surge in global crude oil prices averaging USD116.46 per barrel. In May 2015, the PPI reached the deepest trough at a rate of -9.4% following the slump in global crude oil prices to an average of USD64.56 per barrel. MethodologyThe relationship between the CPI and PPI in the period under review was examined using the Threshold Vector Error Correction Model (TVECM) with Momentum Threshold Autoregressive (MTAR) adjustment (Enders & Granger, 1998; Woo et al., 2018). Both CPI and PPI variables were transformed into natural logarithms. Within the relevant time series, the MTAR cointegration model was deployed, followed by the TVECM to measure the asymmetric adjustments to equilibrium. FindingsThe analysis indicates the existence of a bidirectional relationship between the CPI and PPI. Thus, price changes can be transmitted from producers to consumers and vice versa. Therefore, different approaches are needed to address inflation, depending on the sources of price variation. Other than that, the downward reversion of CPI to its long-run equilibrium will take approximately 9.1 months compared to PPI at approximately 15.5 months. This implies that more efforts are needed to soften the impact on PPI as it takes a longer time for the PPI to return to its long-run equilibrium. Recommendations Based on the findings, the lengthy downward adjustment of PPI is a primary concern in Malaysia. Therefore, effort should be focused on addressing this issue which in turn will contribute to a lower cost of doing business and reduce the pass-through effect. Lowering barriers to entry for new firms, especially small and medium enterprises, will increase the total number of domestic producers while ensuring a highly competitive market environment. It is also imperative to strengthen market competition and enhance domestic production capacity to increase aggregate supply (Benkovskis, 2017). In addition, the existing rules and regulations could be strengthened and strictly enforced. This is to prevent anti-competitive practices and ensure the prices of essential goods remain reasonable for consumers. table 3.5.1. Estimation of TVECM with MTAR Adjustmentchange of cpi (cpi) change of ppi (ppi)Speed of adjustmentCPI adjust downward to reach equilibrium in approximately 9.1 months.PPI adjust downward to reach equilibrium in approximately 15.5 months.CPI adjust upward to reach equilibrium in approximately 11.6 months.PPI adjust upward to reach equilibrium in approximately 6.2 months.Source: Ministry of Finance, Malaysia (estimates)economic outlook 2021107chapter 3 macroeconomic outlookConclusionThe analysis has established bidirectional properties between the CPI and PPI during the period under review. It also indicates that the time taken for prices to adjust to long-run equilibrium varies between both price indices, implying there are imperfections in the market. Thus, there is a need for a more effective supply management policy to contain the transfer of impact between the two indices. At the same time, cost-push factors in PPI should be identified to weaken the pass-through effects from producers to consumers. Labour MarketLabour market showing signs of recoveryThe labour market deteriorated in the first half of the year as economic activities were severely disrupted by COVID-19 pandemic. Although employment was still recording a positive performance with 71,300 new jobs generated, the increase was marginal at 0.5%, which is lower than the growth of the labour force of 1.5%. During the period, the services sector was the largest source of employment, accounting for 63.3% of total employment, followed by manufacturing (16.8%) and agriculture (11%) sectors. The labour force participation rate remained encouraging at 68.4%. However, the closure of business operations and cost-cutting measures undertaken by firms due to the MCO have weakened aggregate demand. As a result, lesser employment opportunities were created as compared with the pre-COVID-19 period. This has caused a spike of 30% in unemployed persons, which led the unemployment rate to soar to 4.3% or 670,200 persons. The negative impact of the pandemic was also reflected in other labour market indicators. Job vacancies declined significantly by 50.8% to 251,944. In comparison, the number of active job seekers rose by 16.9% to 277,840 persons, of which 2% were new registrants. Retrenchment also increased considerably by 76.2% to 36,196 persons, mainly in the manufacturing and tourism-related industries amid the closing down of businesses, downsizing exercises and financial difficulties. Nevertheless, the labour market condition is anticipated to progressively recover during the second half of the year. With the expectation of a more favourable economic outlook, the unemployment rate is expected to fall to overall 4.2% in 2020, with more job opportunities in the economy. Meanwhile, total employed persons are projected at 15.1 million in 2020 and further expand to 15.3 million in 2021, supported by stronger domestic demand amid the sharp recovery in economic growth. Of the 15.3 million employed persons, 9.7 million or 63.3% will be recruited in the services sector, 17.4% in the manufacturing and 10.2% in the agriculture sectors.Labour productivity, as measured by value-added per worker, dropped sharply by 8.4% to RM84,138 in the first half of 2020, attributed to productivity contraction in all economic sectors, especially construction. Nonetheless, the decline in labour productivity is expected to moderate by 3.2% to reach RM90,900 for the whole year. This follows from the wide-range of skills enhancement programmes and initiatives to encourage technology adoption in industries under the economic stimulus (000)CHANGE(%)H112020220213H112020220213Labour force15,691.3 15,737.4 15,910.5 1.5 1.0 1.1 Employment15,021.1 15,084.0 15,347.9 0.5 0.1 1.8 Unemployment 670.2 653.5 562.6 (4.3)(4.2)(3.5)1 January to June 20202 Estimate3 ForecastNote: Figures in parentheses refer to unemployment rateSource: Department of Statistics and Ministry of Finance, MalaysiaTABLE 3.13. Labour Market Indicatorseconomic outlook 2021chapter 3 macroeconomic outlook108TABLE 3.14. Employed Persons by Sector(000)SHARE(%)H122020320214H122020320214Agriculture, forestry and fishing1,655.9 1,644.3 1,565.5 11.0 10.9 10.2 Mining and quarrying94.9 90.5 92.1 0.6 0.6 0.6 Manufacturing2,529.4 2,564.2 2,670.5 16.8 17.0 17.4 Construction1,227.2 1,236.9 1,304.6 8.2 8.2 8.5 Services9,513.7 9,548.1 9,715.2 63.3 63.3 63.3 Total115,021.1 15,084.0 15,347.9 100.0 100.0 100.0 1 Total includes Activities of extraterritorial organisations and bodies2 January to June 20203 Estimate4 ForecastNote: Total may not add up due to roundingSource: Department of Statistics and Ministry of Finance, Malaysiapackages. The productivity of the agriculture sector is projected to record an increase of 0.6%, with a decline in manufacturing (-1.4%) and services (-3.6%) sectors. In 2021, labour productivity is projected to rebound by 4.9% to reach RM95,400, supported by strong economic growth, particularly in services, manufacturing and construction sectors.Foreign workers continued to represent a substantial part of the Malaysian labour market, thus, they were not spared from the effects of the COVID-19 pandemic. As at end-August 2020, registered low-skilled foreign workers fell to 1.7 million persons and is expected to remain at this level throughout the year, due to the temporary halt in new employment in most sectors. The foreign workers were mainly from Indonesia (34%), Bangladesh (28.3%) and Nepal (15.3%). The manufacturing sector employed the highest number of foreign workers with a share of 35.5%, followed by construction (21.3%) and services (15.2%) sectors. Nevertheless, the share of low-skilled foreign workers at 11.1% is still below the threshold of 15% to total employment. Meanwhile, the number of expatriates fell by 17.9% to reach 100,373 persons. The majority of expatriates were from India (23.8%), followed by China (18.9%) and the Philippines (7.4%). They were mainly employed in the services (50.5%), information technology (34.5%) and construction (5.9%) sectors. The Government will continue to undertake initiatives to reduce the dependency on migrant workers by ensuring the employment of migrant workers, particularly low-skilled foreign workers, is based on the actual needs of the economy. This will allow for more high-income job opportunities for the local workforce and the opportunity for industries to automate.ConclusionAfter a dismal economic performance in 2020 due to the COVID-19 pandemic, the Malaysian economy is expected to rebound firmly in 2021, in line with the expectation of a more synchronised global recovery. At the same time, domestic demand is projected to record a steady growth, supported by improvements in labour market conditions, low inflation and favourable financing conditions as well as the revival of major infrastructure projects. All sectors in the economy are expected to turnaround, with services and manufacturing sectors continuing to spearhead growth.economic outlook 2021chapter 3 macroeconomic outlook109Nevertheless, downside risks to the growth outlook remain, arising from the resurgence of COVID-19 cases and the duration of containment measures domestically and globally. Geopolitical tensions, volatility in financial and commodity markets as well as prolonged trade and tech war may dampen the recovery pace. Against this background, the Government will continue to promote resilient and sustainable economic growth, while safeguarding the welfare of the people. 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Agile Workforce Study: Gig Economy Rises in Malaysia, Income Protection Lags. Retrieved from https:/.my/en/about-zurich/zurich-in-the-news/2020/2020-01-16chapter 4Monetary and Financial Developments119 overview 119 monetary developments120 performance of ringgit120 banking sector performance Feature Article 4.1 Digital Banks in Malaysia126 capital market performance Information Box 4.1 Key Capital Market Measures131 islamic banking and capital market performance132 conclusion133 referencesVibrant Monetary Operations & Sound Financial SystemResilient Monetary & Financial Conditionsthroughout COVID-19 pandemic period supportedeconomic recoveryMonetary policy cushioned the adverse effects of measures implemented to contain the spread of COVID-19 virus on the economy.Monetary policy also provided additional stimulus to sustain the pace of economic recovery.The Overnight Policy Rate (OPR) was reduced successively by 125 basis points (bps) during the first seven months of 2020 to a historic low of 1.75%.The Statutory Reserve Requirement (SRR) was reduced by 100 bps from 3.00% to 2.00%.Banking institutions were also given the flexibility to use Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII) to fully meet SRR compliance.Monetary DevelopmentsRisks to Capitaland FinancialMarketPerformancePace of global economic recoveryProlonged US-China trade tensionsWeak commodity pricesVolatile global financial marketsCHAPTER 4 SUMMARY: MONETARY AND FINANCIAL DEVELOPMENTSBankingSector PerformanceRMFEBRUARY JANUARYPerformanceof RinggitVibrant Money & Foreign Exchange Marketsand intermediation activities supported monetary operationsIn January 2020, the ringgit appreciated against the US dollar mainly due to non-resident portfolio inflows. This was supported by improved investors risk sentiment attributed to positive development in the US-China trade negotiation.In February and March, the local note, along with regional currencies, faced significant depreciation against the US dollar. The downward trend of the ringgit was contributed by geopolitical uncertainties, declining commodity prices and rapid escalation of the COVID-19 pandemic.The growth is primarily contributed by household sector financing, which increased by 8.7% to RM490.9 billion, mainly for the purchase of residential properties.The Islamic Capital Market (ICM) continues to thrive with Malaysia being among the largest issuer of sukuk and Islamic equity in the world. As at end-July 2020, the domestic size of ICM was valued at RM2.2 trillion, accounting for 66.2% of RM3.3 trillion of Malaysias total capital market size. Sukuk issuances amounted to RM130.8 billion or 60.2% of total bonds issuances. Sukuk outstanding was valued at RM986.9 billion or 62.6% of total bonds outstanding. Despite the challenging economic climate, the prospect for ICM remains promising.Islamic Banking & Capital Market PerformanceCapitalisation of banking sector remained strong, supported by the accumulation of high-quality loss-absorbing instruments.Islamic banking industry expanded with total assets valued at RM1,038.2 billion and market share at 33% as at end-July 2020. Total Islamic financing outstanding increased further by 10% to RM787.8 billion.Islamic financing is expected to expand further supported by the recovery in economic activity and continuous promotion of Shariah-compliant products.The demand for Shariah-compliant products is expected to be stronger in the future, supported by its appeal to a broader group of investors. Ongoing promotion of Shariah-compliant products and digitalisation of services will provide the impetus for the country to position itself as a prominent international centre for Islamic financial services.As at end-July 2020, excess total capital buffer remained high at RM121.6 billion.BankingSector PerformanceRMFEBRUARY JANUARYRMGOING FORWARDRobust & Orderly Banking Sector ample liquidity & strong capital buffersResilient Capital Market well-developed infrastructure & instrumentsEND-SEPTEMBERPerformanceof RinggitFrom the second quarter onwards, recovery in global investor sentiments amid monetary and fiscal stimulus measures deployed to combat the pandemic led the ringgit to appreciate by 3.5% against the US dollar, in line with the appreciation of regional currencies. As at end-September, the ringgit recorded a depreciation of 1.6% against the US dollar.Going forward, the expected recovery in the global and domestic economy will provide some support for the ringgit.SECOND QUARTER economic outlook 2021chapter 4 monetary and financial developments119OverviewThe financial sector remains soundMonetary and financial conditions have been resilient throughout the COVID-19 pandemic period and supportive of economic recovery. Monetary operations will be supported by vibrant money and foreign exchange markets as well as intermediation activities. The banking sector is expected to remain robust and orderly, underpinned by ample liquidity and strong capital buffers. The capital market will continue to be resilient, driven by well-developed infrastructure and instruments. Nevertheless, concerns over the momentum of global economic recovery due to the pandemic, continued US-China trade tensions, weak commodity prices, and volatile global financial markets may affect financial and capital market performance.Monetary DevelopmentsMonetary policy mitigates the impact of the pandemicMonetary policy cushioned the adverse effects of measures implemented to contain the spread of COVID-19 virus on the economy. The policy also provided additional stimulus to sustain the pace of economic recovery. The Overnight Policy Rate (OPR) was reduced successively by 125 basis points (bps) during the first seven months of 2020 to a historic low of 1.75%. Similarly, the Statutory Reserve Requirement (SRR) was reduced by 100 bps from 3.00% to 2.00%. Banking institutions were also given the flexibility to use Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII) to fully meet SRR compliance. The measures were implemented to ensure sufficient liquidity and to support the orderly functioning of the domestic financial market. The interest rate in the banking system was lowered in line with the OPR adjustment since January 2020. In the first seven months of 2020, the average lending rate and weighted base rate of commercial banks were reduced consecutively to 3.70% and 2.43%, respectively. During the same period, the average interest rate on savings deposit of commercial banks was lowered to 0.48% while fixed deposits of 1-month to 12-month maturities moderated to between 1.53% and 1.79%. With accommodative monetary policy, monetary aggregates expanded rapidly during the first seven months of 2020. M1 rose by 15.7% to RM497.2 billion, supported by higher currency in circulation and demand deposits which increased by 18.5% and 14.9%, respectively. Similarly, M3 expanded by 6.1% to RM2,029.7 billion, mainly due to higher net chapter 4Monetary and Financial DevelopmentsFIGURE 4.1. Monetary Aggregates(% change)% 1 End-July 2020Source: Bank Negara Malaysia2018201920200369121518M3M1J1JMDSJMDSJMeconomic outlook 2021chapter 4 monetary and financial developments120Performance of RinggitPeriods of volatility in the exchange rate In January 2020, the ringgit appreciated against the US dollar mainly due to non-resident portfolio inflows. This was supported by improved investors risk sentiment attributed to positive development in the US-China trade negotiation. However, in February and March, the local note, along with regional currencies, faced significant depreciation against the US dollar. The downward trend of the ringgit was contributed by geopolitical uncertainties, declining commodity prices and rapid escalation of the COVID-19 pandemic.From the second quarter onwards, recovery in global investor sentiments amid monetary and fiscal stimulus measures deployed to combat the pandemic led the ringgit to appreciate by Banking Sector PerformanceResilient banking sector The capitalisation of the banking sector remained strong, supported by the accumulation of high-quality loss-absorbing instruments. As at end-July 2020, excess total capital buffer1 remained high at RM121.6 billion. The banking sector remained well-capitalised with Common Equity Tier 1 Capital, Tier 1 Capital and Total Capital Ratios at 14.6%, 1 Excess total capital buffer refers to the total capital above the banks regulatory minima, which also includes the capital conservation buffer (2.5% of risk-weighted assets) and bank-specific higher minimum requirements. CHANGE(RM BILLION)20192020M318.868.1Net claims on Government-10.962.8Claims on Government18.381.9Less: Government deposits29.219.1Claims on private sector37.639.3Loans26.729.4Securities10.99.9Net foreign assets111.235.9Bank Negara Malaysia10.822.0Banking system0.413.9Other influences-19.1-69.91 Includes exchange rate revaluation losses/gainsNote: Total may not add up due to roundingSource: Bank Negara MalaysiaTABLE 4.1. Factors Affecting M3,January July 2019 and 2020claims on the Government and extension of credit to the private sector, primarily through securities. The money supply is expected to expand further backed by higher demand for loans and securities by the private sector.3.5% against the US dollar, in line with the appreciation of regional currencies. As at end-September, the ringgit recorded a depreciation of 1.6% against the US dollar. Going forward, the expected recovery in the global and domestic economy will provide some support for the ringgit. However, lingering uncertainties over the COVID-19 pandemic, global political and policy environment could lead to periods of heightened exchange rate volatility.100 PHILIPPINE PESOEURO100 JAPANESE YENCHINESE RENMINBIAUSTRALIAN DOLLARUS DOLLAR100 KOREAN WONSINGAPORE DOLLARPOUND STERLING100 THAI BAHT100 INDONESIAN RUPIAH -8-6-4-202468End-2019 End-September 2020FIGURE 4.2. Performance of Ringgit against SelectedCurrencies(% change)Source: Bank Negara Malaysiaeconomic outlook 2021chapter 4 monetary and financial developments12115.1% and 18.3%, respectively. The ratios are well above the Basel III minimum regulatory levels of 4.5%, 6% and 8%, of risk-weighted assets. The pre-tax profit of the banking sector fell by 11.7% to RM20.5 billion in the first seven months of 2020. Despite the challenging environment, domestic banks remain strong, supported by orderly financial markets and sustained confidence in the banking sector. As a result, returns on assets and equity continued to be stable at 1.2% and 10.5%, respectively.The loan quality and liquidity of the banking sector also remain sound. As at end-July 2020, the net impaired loans ratio and loan loss coverage ratio (including regulatory reserves) remained healthy at 0.91% and 121%, respectively. Similarly, the Liquidity Coverage Ratio was at 152%, well above the 100% minimum requirement. Notwithstanding uncertainties and heightened risks from global financial markets following the fallout from the COVID-19 pandemic and ongoing geopolitical tensions, the banking sector liquidity remains sufficient and stable in the near term.Lending activities slowed down, reflecting cautious sentiment on the global and domestic growth outlook. In the first seven months of 2020, loan approvals and disbursements fell by 22% and 7.3% to RM185.5 billion and RM657.1 billion, respectively. This was mainly due to financial institutions taking precautionary measures to approve new loans following restricted economic activities. However, total loans outstanding expanded by 4.5% to RM1,806.1 billion as at end-July 2020.FIGURE 4.3. Banking System: Impaired Loans andNet Impaired Loans Ratio(End-period) 1 End-July 2020Source: Bank Negara MalaysiaIMPAIRED LOANSJ1JMDSJMDSJMDSJMDSJM09182736 16201720182019202001234NET IMPAIRED LOANS RATIO (RIGHT SCALE)RM billionRM BILLIONCHANGE(%)2019202020192020Total1Loans applications501.3447.9-1.7-10.6Loans approvals237.9185.55.8-22.0Loans disbursements709.0657.13.2-7.3Loans outstanding2,31,728.8 1,806.13.94.5of which:BusinessesLoans applications203.8200.9-0.6-1.4Loans approvals92.280.72.7-12.5Loans disbursements450.2430.71.0-4.3Loans outstanding3609.2633.32.64.0HouseholdsLoans applications276.3225.9-1.6-18.2Loans approvals127.088.94.1-30.0Loans disbursements197.4165.31.6-16.3Loans outstanding3 981.1 1,024.04.84.41 Includes foreign entities, other domestic entities, Government and others2 Includes loans sold to Cagamas3 As at end-periodNote: Total may not add up due to roundingSource: Bank Negara MalaysiaTABLE 4.2. Banking System: Loan Indicators,January July 2019 and 2020economic outlook 2021chapter 4 monetary and financial developments122Loan approvals to businesses decreased by 12.5% to RM80.7 billion as at end-July 2020. Total disbursements to businesses fell by 4.3% to RM430.7 billion, representing 65.5% of total loans disbursed. The bulk of loans were channelled into manufacturing (22.2% of total loans), wholesale and retail trade, restaurants and hotels (19.4%) as well as construction (6.6%) sectors. At the same time, total loans outstanding to the business sector increased by 4% to RM633.3 billion, accounting for 35.2% of total loans outstanding. Household borrowings slowed down with loan approvals declining by 30% to RM88.9 billion. Loans disbursed to households also declined by 16.3% to RM165.3 billion, mainly for consumption credit (13.1% of total loans), purchase of residential properties (6.3%) and securities (2.7%). As at end-July 2020, total household loans outstanding rose by 4.4% amounting to RM1,024 billion, which accounts for 56.8% of total loans outstanding in the banking sector. The overall household debt increased by 4% to RM1,265.9 billion, accounting for 87.5% of Gross Domestic Product (GDP) as at end-June 2020. The increase was mainly due to the sharp contraction in GDP during the first half of the year. The bulk of the debt comprises of loans for the purchase of residential properties (55.9%), followed by personal use (14.2%) and passenger cars (12.3%). Total household assets were valued at RM2,751.9 billion with growth in household financial assets continuing to outpace that of debt. Although household debt has risen, it is expected to remain manageable, supported by programmes to rein in the debt level and measures enacted to cushion the impact of the COVID-19 pandemic on the economy. RM BILLIONSHARE(%)2019202020192020Businesses 609.2633.335.335.2Non-SMEs1326.9351.519.019.5SMEs 282.3281.816.415.6Selected sectorsPrimary agriculture34.434.72.01.9Mining and quarrying7.99.00.50.5Manufacturing2115.0122.36.76.8Electricity, gas and water supply13.014.70.80.8Wholesale and retail trade, restaurants and hotels127.6134.47.47.5Construction91.991.65.35.1Real estate117.1119.06.86.6Transport, storage and communication37.239.82.22.2Finance, insurance and business activities42.243.82.42.4Households981.11,024.056.956.8of which:Purchase of residential properties551.6594.432.033.0Purchase of non-residential properties80.480.54.74.5Purchase of passenger cars145.1146.28.48.1Consumption credit133.5135.47.77.5of which:Credit cards38.335.32.22.0Personal use95.2100.15.55.6Purchase of securities68.966.14.03.7Others0.40.40.00.0Other sectors 134.2144.17.88.0Total31,724.4 1,801.4 100.0 100.01 Non-SMEs refers to large corporations, including foreign entities, other domestic entities, Government and others2 Including agro-based3 Total = Businesses Households Other sectors Note: Total may not add up due to roundingSource: Bank Negara MalaysiaTABLE 4.3. Banking System: Loans Outstanding by Sector,End-July 2019 and 2020economic outlook 2021chapter 4 monetary and financial developments123feature article 4.1Digital Banks in MalaysiaIntroductionThe banking industry has experienced multiple transformations to suit customer demands and keep up with technological advancements, such as secure digital ledger transactions and artificial intelligence (AI). Moreover, the COVID-19 pandemic has forced societies to favour cashless transactions, all of which enable a faster shift towards the establishment of digital banks. A digital bank is essentially a virtual bank, which operates in a digital environment and is devoid of brick-and-mortar presence of a traditional bank. However, digital banks offer similar services to that of traditional banks, such as savings and current accounts, withdrawals and transfers. As such, digital banks are expected to revolutionise the financial landscape by offering financial services through digital and automated platforms (Deloitte, 2020). Currently, Australia, Brazil, Canada, China, Germany, Hong Kong SAR, Republic of Korea, South Africa, Taiwan, the Philippines, the UK and the US have established their own digital banks (PricewaterhouseCoopers, 2020). Singapore is expected to issue its digital bank licences in 2020. Meanwhile, Bank Negara Malaysia (BNM) is at the stage of finalising the updated Exposure Draft on Licensing Framework for Digital Banks issued on 3 March 2020. With this development, Malaysia looks forward to establishing several digital banks in the near future, paving the way for a more vibrant financial services landscape.How Does Digital Bank Work?A digital bank works differently from mobile or online platforms as it requires full digitalisation of banking services. The bank makes use of high-end technology called middleware solution to connect the nodes between front- and back-end processes. The middleware solution bridges the operating systems or databases with other applications while adopting other technologies in its processes (Figure 4.1.1.). Digital banks demand high-end technologies such as Application Programming Interface (APIs), AI Machine Learning, Cloud Computing, Big Data, Cybersecurity, Data Visualisation, User Interface (UI) User Experience (UX) Design and Blockchain. These technologies allow multilayer processes to be conducted simultaneously across all its delivery channels (Figure 4.1.2.).FIGURE 4.1.1. Process Workflow of a Digital BankBack EndCore Banking SystemValue-Added FunctionalitiesAPIMiddlewareFront EndSource: ATKearneyBranchesand call centreWeb and mobileThird-party appseconomic outlook 2021chapter 4 monetary and financial developments124FIGURE 4.1.3. Advantages and Disadvantages of Digital BanksAdvantages of Digital Banks Data Protection and Security IssuesWorkforce related ChallengesReduceOperational CostThe virtual features of digital banks allow the reduction and banking services fees through automation and self-serve technology(Bertrand, 2020). ElevateTechnologies Digital banking benefits from investments in new technologies, such as data analytics, open APIs, blockchain andcognitive banking. Enhance FinancialProcessesThe seamless operation of digital banking will enable multiple products to be integrated as a one-time process,which allows forautomation of coreprocesses andeliminatesduplication. Improve Customer ProcessesThe intelligent feature of AI enables banks to understand customers requirements bybeing more responsive towardscustomers needs and preferences. IncreaseRevenuesThe loweroperational costs of digital banking will generate higher revenue through customer-centric experiences by providing custom-made products and services. FIGURE 4.1.2. Key Aspects of a Digital BankSource: FintalentCloud Computing Practice of using a network of remote servers hosted on the Internet to store,manage and process data.UI/UX Design Human-computer interaction,user interface.Data Visualisation Describes any effort to help people understand the significance of data by placing it in a visual context.AI Machine Learning The theory and development of computer systems able to perform tasks normally requiring human intelligence. Cybersecurity State of being protected against criminal or unauthorised use of electronic data.Big Data Extremely large data sets that are analysed computationally to reveal patterns, trends,and associations, especially relating to human behaviour and interactions.economic outlook 2021chapter 4 monetary and financial developments125The Future of Digital Banks in MalaysiaDigital bank holds a promising future in Malaysia. The journey towards establishing digital banks will become a reality with digital transformation in the Malaysian financial landscape subjected to three key elements:Effective Regulatory EcosystemThe establishment of an effective regulatory ecosystem for digital banks in Malaysia is still in progress. The updated draft by BNM on 3 March 2020 has proposed a balanced approach to enable the admission of digital banks with strong value propositions while safeguarding the integrity and stability of the financial system (BNM, 2020).1 Through the framework, up to five licences may be issued, subject to applicants ability to meet the requirements of the Financial Services Act 2013 and the Islamic Financial Services Act 2013. Strong Technology Backup Digital banks should adopt and innovate the latest technologies, which leverage cloud systems, APIs, automation and AI Machine Learning. Malaysia is not far off when it comes to digital maturity, as most traditional banks are now adopting the digital approach as part of their business models (TM & Akamia Netalliance, 2020). According to a survey by F conducted in March 2020, there will be a rise in digital bank adoption in Malaysia with an estimated 8.4 million people likely to open up a digital bank account by 2025 (Cruz, 2020). Similarly, a study conducted by PricewaterhouseCoopers in November 2019 indicated that 74% of Malaysian respondents are interested in becoming a digital bank customer (PricewaterhouseCoopers, 2019).2 The move towards complete digitalisation in the financial sector is supported by the National Fiberisation Connectivity Plan. This is also in line with the Communications and Multimedia Blueprint (2018 2025) to accelerate the development of a digital economy.1 New applicants for digital banks are referred to as challenger banks or entrants (PricewaterhouseCoopers, 2020). 2 1,517 respondents from Malaysia were surveyed for the study (PricewaterhouseCoopers, 2019).Disadvantages of Digital BanksData Protection and Security IssuesWorkforce related Challenges The complete dependency on online services will expose customers with issues such as breach of confidential data as well as cybersecurity threats (Chauhan, 2018). Nevertheless, technologies to solve these threats include cloud-based digital banking platforms which have a built-in functionality for constant security upgrades will provide data security for customers. In line with increasing digitalisation within the financial sector, the automation feature of digital banking will reduce the need for human intervention since some of its essential procedures are conducted digitally. While some roles may become obsolete in the future, the real concerns would be on tackling the change management, particularly on talent availability issue, which requires a small yet succinct team force with technical knowledge (TM & Akamia Netalliance, 2020). According to Comfort (2019), approximately 77,780 jobs were cut by 50 financial regulators globally in 2019 to accommodate for the transition to digital banks. It is also estimated that another 200,000 positions will be displaced in the next decade based on the global trend (Zujev, 2020). economic outlook 2021chapter 4 monetary and financial developments126Cultural AdaptationThe road towards digital bank requires digital transformation, mastering new skills, adopting new processes, and changing the way business is being done. Thus, all interested parties need to reform their business models and culture and emphasise on innovation as well as greater adoption of big data analytics to create a customer-centric orientation. The transition to digital banks may not be straightforward, and it could disrupt financial services (Sharko et al., 2017). Traditional banks may also form new ventures and apply for a digital bank licence as part of efforts to reform their business model. The models must also cater to the underserved and unserved segments of society, such as low-income individuals, early income millennials, start-ups as well as small and medium enterprises (SMEs).3ConclusionThe journey towards the establishment of digital banks is an expected progression in the Malaysian financial market as the country evolves into a digital economy. For the transformation to materialise, a whole new wave of digital products and solutions must be in place. This has to be supported by a robust regulatory ecosystem, innovative technology and cultural adaptation to accelerating economic growth and financial inclusion in Malaysia. Furthermore, the COVID-19 pandemic, which accelerated remote and contactless transactions, provides the impetus for the establishment of digital banks. 3 Refers to groups such as the bottom 40% of household income group (B40) as well as micro enterprises and SMEs, including those in rural and remote areas (Raj, 2020). They are typically underserved due to high servicing cost and low revenue potential.Capital Market PerformanceFundraising activities to recoverGross funds raised in the capital market declined by 14.4% to RM143.7 billion during the first seven months of 2020. The lacklustre performance was due to lower fundraising activity in the private sector, which fell significantly by 48.6% to RM45.8 billion. Gross funds raised by the private sector through the domestic equity market declined from RM5 billion to RM0.3 billion. The sharp decline was due to cautious investors sentiment during the lockdown period.During the same period, funds raised through new corporate bond issuances also fell by 45.9% to RM45.6 billion. The bulk of issuances were medium-term notes, accounting for 92.1% of total corporate bonds. The majority of funds were raised by finance, insurance, real estate, and business services sector, accounting for 72% of new corporate bond issuances. The funds were mainly allocated for infrastructure projects, working capital and business activities. On the back of global economic uncertainties and rising geopolitical risks, fundraising in the domestic capital market remains promising buoyed by ongoing and resumption of strategic projects.Gross funds raised by the public sector increased further by 24.5% to RM97.9 billion during the first seven months of 2020. The expansion was contributed by strong demand for Government papers to support the various stimulus packages. The issuance of MGS rose to RM50 billion, while MGII expanded to RM47.9 billion. During the same period, foreign holdings of MGS and MGII stood at 38.2% and 5.8%, respectively. The holding portfolios indicate that Malaysias debt market remains attractive to institutional and foreign investors, attributed to its deep, liquid and investor-friendly nature.During the first seven months of 2020, MGS and corporate bond yields were broadly on a declining trend across all tenures. The lower MGS yields were influenced by the easing of domestic monetary stance given the slower-economic outlook 2021chapter 4 monetary and financial developments127than-expected economic growth. Yields on MGS 1-year, 3-year, 5-year, and 10-year declined within the range of 76 and 119 bps. Yields for the corporate bond on the 5-year AAA-rated, AA-rated and A-rated securities also fell between 75 and 77 bps. 1720162018201920201.52.02.53.03.54.04.55.010-YEAR5-YEAR3-YEAR1-YEARJ1JMDSJMDSJMDSJMDSJMFIGURE 4.4. Malaysian Government Securities (MGS)Indicative Yields(End-period)1 End-July 2020Source: Bank Negara MalaysiaRM MILLION20192020Public SectorGovernment securitiesMalaysian Government Securities 38,797.149,969.9Malaysian Government Investment Issues 39,853.747,916.4New issues of debt securities78,650.897,886.3Less: Redemptions26,093.438,000.0Net funds raised by the public sector52,557.359,886.3Private SectorShares1/WarrantsInitial Public Offers1,570.0292.1Rights Issues3,466.7-Warrants-New issues of shares/warrants5,036.8292.1Debt securities2Straight bonds3,090.0386.5Convertible bonds-Islamic bonds2,944.33,200.0Medium-term notes78,137.841,966.7New issues of debt securities84,172.145,553.2Less: Redemptions41,630.029,073.9Net issues of debt securities42,542.116,479.2Net funds raised by the private sector47,578.916,771.3Total net funds raised 100,136.276,657.61 Excludes funds raised by the exercise of Employee Share Option Scheme, Transferable Subscription Rights, Warrants and Irredeemable Convertible Unsecured Loan Stocks2 Excludes short-term papers in conventional and Islamic principlesNote: Total may not add up due to roundingSource: Bank Negara MalaysiaTABLE 4.4. Funds Raised in the Capital Market,January July 2019 and 2020RM MILLIONSHARE(%)201920202019 2020Agriculture, forestry and fishing 50.0 -0.1-Manufacturing 670.0 306.0 0.80.7Construction 1,724.3 4,639.5 2.010.2Electricity, gas and water 4,600.0 3,185.0 5.57.0Transport, storage and communication 32.0 1,120.0 0.02.5Finance, insurance, real estate and business services70,263.5 32,791.7 83.572.0Government and other services 5,354.9 3,301.0 6.47.2Wholesale and retail trade, restaurant and hotels 1,477.5 210.0 1.80.5Total84,172.1 45,553.2 100.0 100.0Note: Includes corporate bonds issued by Cagamas and non-resident corporationsTotal may not add up due to roundingSource: Bank Negara MalaysiaTABLE 4.5. New Issuance of Corporate Bonds by Sector,January July 2019 and 2020economic outlook 2021chapter 4 monetary and financial developments128At the beginning of the year, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) and other regional indices fell into bearish territory. The local bourse was dragged down below 1,600 points in the second week of January 2020, following the rising geopolitical tensions between the US and Iran. Despite the improvement in the US and China trade deal on 15 January 2020, the FBM KLCI along with major and regional bourses remained on a softer note.The FBM KLCI was subdued on the back of global economic uncertainties, rising geopolitical tensions, low commodity prices and the spread of the COVID-19 pandemic, which dampened investors risk appetite. Furthermore, the enforcement of the Movement Control Order (MCO) beginning 18 March 2020 led to panic selling in the equities market. The MCO tapered investors risk appetite, resulting in the local bourse to hit its decade-low of 1,219.72 points on 19 March 2020. Nevertheless, the subsequent relaxation of lockdown measures and gradual resumption of economic activities supported the recovery of the local bourse. The FBM KLCI rebounded to 1,575.27 points on 10 June 2020 in tandem with regional markets optimism amid the upward performance of the Wall Street. In addition, the improvement of the local index was also attributed to the launching of the various stimulus packages announced by the Government to mitigate the impact of COVID-19 pandemic on the economy.The FBM KLCI started to decline again to 1,488.14 points on 26 June 2020. This was due to the announcements by the Fed, IMF and World Bank on downside risks to global and domestic growth following mounting concerns over the second wave of COVID-19 pandemic. However, the local bourse elevated to reach 1,504.82 points at end-September 2020 upon investors positive sentiment towards the Governments effort to contain the pandemic despite fresh lockdowns by several countries.There has been a significant improvement in trading activities in the first nine months of 2020. Total volume and total market transacted value rose by 162.2% to 1,272 billion units and 90% to RM749 billion, respectively. Market velocity was sustained at 62.4%, while market 260300340380420460TOTAL MGS OUTSTANDINGJ1JMDSJMDSJM303642485460SHARE OF FOREIGN HOLDINGS (RIGHT SCALE)201920182020FIGURE 4.5. Share of Foreign Holdings in Total MGSOutstanding(End-period) 1 End-July 2020Source: Bank Negara MalaysiaRM billion 16201720182019202024681012BBBAAAAAAJ1JMDSJMDSJMDSJMDSJMFIGURE 4.6. 5-Year Corporate Bond Yields(End-period)1 End-July 2020Source: Bank Negara Malaysiaeconomic outlook 2021chapter 4 monetary and financial developments12920192020IndicesFBM KLCI1,583.911,504.82FBM EMAS11,203.7110,831.56FBM 10011,037.8310,660.70FBM SCAP12,978.0812,835.21FBM ACE4,495.129,914.01Total turnover1Volume (million units) 485,046.82 1,271,710.10Value (RM million)394,266.47749,007.22Average daily turnover1Volume (million units) 2,694.706,911.47Value (RM million)2,190.374,070.69Market capitalisation (RM billion)1,673.531,638.72Total number of listed companiesMain Market773765ACE Market127133LEAP Market2534Market liquidityTurnover value/market capitalisation (%)23.645.7Market concentration 10 highest capitalised stocks/market capitalisation (%)33.832.01 Based on market transactions and direct business transactions between January and SeptemberSource: Bursa MalaysiaTABLE 4.6. Bursa Malaysia: Selected Indicators,End-September 2019 and 2020FIGURE 4.7. Performance of Bursa MalaysiaPointsBillion1 As at end-periodSource: Bursa Malaysia0200400600800VALUE OF TRANSACTION (RM)TOTAL TRANSACTION (UNITS)Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1COMPOSITE INDEX1 (RIGHT SCALE)1,2001,4001,6001,8002,0002,20020192018201720162020PHILIPPINESSINGAPORE INDONESIAUKTHAILANDHONG KONG INDIAVIET NAMMALAYSIAUS (DOW JONES)JAPANCHINA (SHANGHAI) REPUBLIC OF KOREAUS (NASDAQ)-30 -25 -20 -15 -10 -50510 15 20 25 30FIGURE 4.8. Performance of Selected Stock Markets(% change)Source: BloombergEnd-2019 End-September 2020volatility at 36.3%. Foreign holdings based on market capitalisation in the local bourse remained stable at 12.6% as at end-September 2020. Nevertheless, the market capitalisation declined by 2.1% to RM1,638.7 billion as at end-September 2020. The domestic equity market is expected to regain traction following investors optimistic outlook on the pace of global market recovery and domestic economic growth supported by various strategic projects.economic outlook 2021chapter 4 monetary and financial developments130information box 4.1Introduction of the US Dollar Denominated Refined, Bleached and Deodorised (RBD) Palm OleinOptions Contract (OPOL) The worlds first options contracton palm olein to broaden the array of possible risk management toolsfor palm oil industry players.Amendments to the Main Market and ACE Market Listing RequirementsProvides securities holders with theoption to subscribe for rights shares,exercise convertible securities and participate in a Dividend Reinvestment Scheme (DRS) electronically.Key Capital Market Measures Several measures were undertaken in the first eight months of 2020 to enhance liquidity and efficiency in the capital market. The measures include:Implementation of ISO 20022 Messaging Standards forCorporate AnnouncementsAllow seamless and timely corporate announcements with innovativedata-carrying capability.Launching of One-stop e-LearningBursa AcademyEducates and enhances financial literacy among retail investors across theSecurities Market, Derivatives Market and Islamic Capital Market. Enhancing Initial Public Offering (IPO) Framework for the Main MarketPromotes greater shared responsibility among key stakeholders involved in the IPO submission for listing on theMain Market of Bursa Malaysia.13-Jan21-Feb24-Apr3-June31-Mar15-Apr18-May10-July21-July13-Aug$MOUIPOLiberalisation of the PrivateRetirement Schemes (PRS)Enhances the competitiveness of the industry by providing more flexibilityin asset allocation for PRS funds.The funds are also allowed to beinvested in foreign markets and exchange-traded-funds based on physical gold to increase asset diversification into alternative investments.Memorandum of Understandingbetween Bursa Malaysia and the Shenzhen Stock Exchange Broadens opportunities in investmentand facilitates cross-border collaboration. These include the display of mutual benchmark indices in the respective markets and joint promotion of the indices and its constituents. Memorandum of Understanding between Taiwan Futures Exchange (TAIFEX) and Bursa Malaysia Derivatives Berhad (BMD)Promotes a mutually beneficial business partnership between both parties. Thisentails information sharing, exchangingbest practices about product andmarket development, and exploringcommon areas of interest.Temporary Revisions to Static and Dynamic Price Limits, and theCircuit BreakerProvides added stability and enhances confidence in the marketplace withrevised market management andcontrol mechanisms.Amendments to Main Market andACE Market Listing Requirements in Relation to New Issues of Securitiesand Other AreasEnhances disclosure requirements in connection with the new issue of securities and address gaps for greater shareholder protection and confidence.ISOISOeconomic outlook 2021chapter 4 monetary and financial developments131Islamic Banking and Capital Market PerformanceIslamic banking and capital market to persevereThe Islamic banking industry expanded with total assets valued at RM1,038.2 billion2 and market share at 33% as at end-July 2020. Meanwhile, the total Islamic financing outstanding increased further by 10% to RM787.8 billion. The growth is primarily contributed by household sector financing, which increased by 8.7% to RM490.9 billion, mainly for the purchase of residential properties. Islamic financing is expected to expand further supported by the recovery in economic activity and continuous promotion of Shariah-compliant products.The Islamic Capital Market (ICM) continues to thrive with Malaysia being among the largest issuer of sukuk and Islamic equity in the world. As at end-July 2020, the domestic size of ICM was valued at RM2.2 trillion, accounting for 66.2% of RM3.3 trillion of Malaysias total capital market size. Meanwhile, sukuk issuances amounted to RM130.8 billion or 60.2% of total bonds issuances. Sukuk outstanding was valued at RM986.9 billion or 62.6% of total bonds outstanding. While Malaysia continued to account for the largest share of global sukuk outstanding at 45.6% as at end-June 2020, the turmoil in the global market has affected the performance of the ICM. This was reflected in the subdued performance of corporate sukuk issuances during the initial MCO period. Nevertheless, the reopening of almost all economic sectors in the middle of the year led to the improvement in corporate sukuk performance.Bursa Malaysia continued to promote Shariah-compliant securities products. As at end-July 2020, a total of 716 or 76.8% of the 932 listed companies was Shariah-compliant. The market 2 Includes Development Financial Institutions (DFIs).capitalisation of Shariah-compliant securities stood at RM1.18 trillion or 69.5% of the total market capitalisation.RM BILLIONCHANGE(%)2019202020192020Assets806.5857.611.16.3Financing594.8650.38.29.3Primary agriculture16.318.67.613.8Mining and quarrying3.74.2-28.115.4Manufacturing227.530.319.410.2Electricity, gas and water supply3.45.426.361.5Wholesale and retail trade, restaurants and hotels28.032.018.014.2Construction35.235.33.80.3Real estate28.831.68.79.5Transport, storage and communication17.420.06.515.2Finance, insurance and business activities31.933.8-10.36.0Education, health and others20.233.7-4.666.8Households367.3399.610.78.8Others15.15.71.6-62.1Liabilities748.6794.011.26.1Deposits and Investment Account610.3633.113.63.7Investment 0.70.6-16.1-19.7Savings44.258.18.131.4Demand82.799.711.220.5Investment account80.697.16.020.5Others482.6474.714.6-1.61 Excluding DFIs2 Including agro-basedNote: Total may not add up due to roundingSource: Bank Negara MalaysiaTABLE 4.7. Islamic Banking: Key Indicators1,End-July 2019 and 2020economic outlook 2021chapter 4 monetary and financial developments132Despite the challenging economic climate, the prospect for ICM remains promising. The demand for Shariah-compliant products is expected to be stronger in the future, supported by its appeal to a broader group of investors. The ongoing promotion of Shariah-compliant products and digitalisation of services will provide the impetus for the country to position itself as a prominent international centre for Islamic financial services. ConclusionMonetary policy will continue to support economic recovery. The economy is anticipated to improve during the second half of the year and register a sharp turn-around in 2021. The positive outlook will be backed by favourable global growth projection along with a revival in domestic economic activities. In turn, this will bode well for financial market performance. However, the resurgence of COVID-19 cases, geopolitical tensions and weak commodity prices may pose downside risks to the encouraging outlook. In this regard, various initiatives are being undertaken to ensure the financial market continues to be resilient. These initiatives include promoting green financing instruments, supporting financial platforms driven by digital technology, enhancing knowledge and awareness among investors, and fostering greater collaboration with market players at domestic and international levels.3.1.7%7.2%4.4%OTHERS1TURKEYUNITED ARAB EMIRATESINDONESIASAUDI ARABIAMALAYSIAOTHERS1TURKEYINDONESIAUNITED ARAB EMIRATESSAUDI ARABIAMALAYSIAFIGURE 4.9. Global Sukuk Outstanding by Country(% share)Note: Total may not add up due to rounding Source: Malaysia International Islamic Financial Centre1 Others include Bahrain, Bangladesh, Brunei, Gambia, Hong Kong SAR, Ivory Coast, Jordan, Kuwait, Luxembourg, Maldives, Mauritius, Nigeria, Oman,Pakistan, Qatar, Senegal, Singapore, South Africa, Turkey, the UK and the US 47.4%7.7!.7%7.5E.6.0#.6%8.2%USD532.3 billionEnd-June 2020USD551.4 billionEnd-2019economic outlook 2021chapter 4 monetary and financial developments133ReferencesATKearney. (2015). Going Digital: The Banking Transformation Road Map. Retrieved from https:/ Negara Malaysia. (2020). Annual Report 2019. Kuala Lumpur. Retrieved from https:/www.bnm.gov.myBank Negara Malaysia. (2020). Exposure Draft on Licensing Framework for Digital Banks. Retrieved from https:/ Negara Malaysia. (2020). Economic and Financial Developments in the Malaysian Economy in the Second Quarter of 2020. Retrieved from https:/www.bnm.gov.myBank Negara Malaysia. (2020). Economic and Financial Developments in the Malaysian Economy in the First Quarter of 2020. Retrieved from https:/www.bnm.gov.myBank Negara Malaysia. (2020). Financial Stability and Payment Systems Report 2019. Kuala Lumpur. Retrieved from https:/www.bnm.gov.myBank Negara Malaysia. (2020). Monthly Highlights and Statistics July 2020. Retrieved from https:/www.bnm.gov.myBank Negara Malaysia. (2020). Monthly Highlights and Statistics June 2020. Retrieved from https:/www.bnm.gov.myBank Negara Malaysia. (2020). Monthly Highlights and Statistics May 2020. Retrieved from https:/www.bnm.gov.myBank Negara Malaysia. (2020). Monthly Highlights and Statistics April 2020. Retrieved from https:/www.bnm.gov.myBank Negara Malaysia. (2020). Monthly Highlights and Statistics March 2020. Retrieved from https:/www.bnm.gov.myBank Negara Malaysia. (2020). Monthly Highlights and Statistics February 2020. Retrieved from https:/www.bnm.gov.myBank Negara Malaysia. (2020). Monthly Highlights and Statistics January 2020. Retrieved from https:/www.bnm.gov.myBertrand, M. (2020). The Impact of COVID-19 on Malaysias Looming Digital Banking Revolution. Retrieved from https:/ Malaysia. (2020). Bursa Malaysia Amends Main and ACE Market Listing Requirements to Facilitate Application of Specified Corporate Exercises via Electronic Means. Retrieved from https:/ Malaysia. (2020). Bursa Malaysia Amends Main Market and ACE Market Listing Requirements in Relation to New Issues of Securities and other Areas. Retrieved from https:/ Malaysia. (2020). Bursa Malaysia Introduces Worlds First Options Contract on US Dollar Denominated Palm Olein Futures. Retrieved from https:/ Malaysia. (2020). Bursa Malaysia Launches Bursa Academy for a Unique Experience in Elevating Financial Literacy and Investor Education. Retrieved from https:/ Malaysia. (2020). Bursa Malaysia Successfully Implements ISO 20022 Messaging Standards for Corporate Announcements. Retrieved from https:/ Malaysia. (2020). Collaboration between Bursa Malaysia and Shenzhen Stock Exchange to Broaden Opportunities in Investment. Retrieved from https:/ Malaysia. (2020). SC and Bursa Malaysia Implement Temporary Revisions to Market Management and Control Mechanisms. Retrieved from https:/ Malaysia. (2020). Taiwan Futures Exchange and Bursa Malaysia Derivatives Berhad Sign Memorandum of Understanding. Retrieved from https:/ outlook 2021chapter 4 monetary and financial developments134Chauhan, Y. (2018). How Important is Digital Banking? Retrieved from https:/ N. (2019). Banks Set for Biggest Job Cull Since 2015 as Morgan Stanley Cuts. Retrieved from https:/ P. (2020). The Rise of Digital Banks. Retrieved from https:/ (2020). Banking on Digital. Retrieved from https:/ (2020). Future-Enabled Digital Banking Skill Sets You Need to Have. Retrieved from https:/ (2020). Digital Banking: Malaysian Banks at a Crossroads. Retrieved from https:/ (2019). Virtual Banking: Malaysian Customers Take Charge. Retrieved from https:/ A. P. (2020). Is Focus on Underserved Worthwhile for Digital Banks? Retrieved from https:/ Commission Malaysia. (2020). Annual Report 2019. Kuala Lumpur. Retrieved from https:/.mySecurities Commission Malaysia. (2020). SC Introduces Enhanced IPO Framework for Main Market. Retrieved from https:/ Commission Malaysia. (2020). SC Liberalises Regulation on Private Retirement Schemes (PRS) to Enhance Competitiveness of the Industry. Retrieved from https:/ A. D., Meka, E., Sharko, G. and Baholli, I. (2017). Digital Banking the Wave of the Future. International Conference Proceedings, ISTI-2016.TM and Akamai Netalliance. (2020). Transforming Digital Banking in Malaysia: More than a Channel Strategy. Retrieved from https:/ A. (2020). The Road to True Digital Bank. Retrieved from https:/ outlook 2021135statistical tablesStatistical Tableseconomic outlook 2021137statistical tablesLIST OF STATISTICAL TABLES Table No.I. Socioeconomic Indicators Selected Socioeconomic Statistics 1.1II. International Economy Key Economic Data of Selected Countries 2.1 Key Economic Data of ASEAN Member Countries 2.2III. Macroeconomy National Accounts Gross Domestic Product by Kind of Economic Activity at Constant 2015 Prices 3.1 Index of Services 3.2 Industrial Production Index 3.3 Gross National Income by Demand Aggregates 3.4 Private Consumption Indicators 3.5 Private Investment Indicators 3.6 External Sector Malaysias Trade with Major Trading Partners 3.7 External Trade Indices 3.8 Production, Exports Volume and Value of Major Primary Commodities 3.9 Direction of Major Exports 3.10 Exports of Manufactured Goods 3.11 Source of Major Imports 3.12 Balance of Payments 3.13 Prices Consumer Price Index by Region 3.14 Consumer Price Index by Stratum 3.15 Consumer Price Index by State 3.16 Core Index 3.17 Producer Price Index - Local Production 3.18 Labour Market Labour Force 3.19 Employment by Industry 3.20 Active Registrants 3.21 Vacancies and Placements 3.22IV. Financial and Capital Markets Interest Rates 4.1 Broad Money (M3) 4.2 Key Exchange Rates 4.3 Commercial Banks: Loans Outstanding by Purpose and Sector 4.4 Government and Corporate Bond Yields 4.5 Bursa Malaysia: Selected Indicators 4.6 Islamic Banks: Loans Outstanding by Purpose and Sector 4.7economic outlook 2021138statistical tablesSTATISTICAL ANNOTATIONThe Statistics Appendix provides time series data on the economic variables. Each table contains current selected economic data. Percentage changes are provided for important variables as an indication of economic trends. In addition, percentage of totals and footnotes are also provided where necessary. The sum of the component figures may not tally with the subtotal or total due to rounding. In some series, historical figures have been revised. Estimates for 2020 are based on six to eight months of data and forecasts for 2021 have been provided where appropriate. Unless otherwise stated, the source of data is from the Ministry of Finance, Malaysia.The Determination of Poverty Line Income (PLI)The PLI measurement model used in Malaysia was reviewed in depth in 2005 by the Economic Planning Unit, Prime Ministers Department, and DOSM in collaboration with United Nations Development Programme (UNDP). The Cost of Basic Needs method that takes into account three basic components i.e. food items, non-food items and the characteristics of the household. In 2019, the calculation of the PLI was reviewed and updated. The updating of PLI involves the process of updating of food items by the Ministry of Health while the non-food items in the non-food component are updated based on the latest household expenditure survey conducted by the Department of Statistics Malaysia in 2019.The new methodology in determining the food item emphasises the intake of healthy foods at an optimal rate as compared to the 2005 methodology that emphasised on consuming food to meet minimum health requirements. The re-evaluation of the optimal food calorie requirement is based on the Recommended Nutrient Intake (RNI) 2017 and the Malaysian Diet Guide (PDM) 2020. Therefore, food needs are calculated based on individual caloric needs and converted to total meals according to food groups in PDM 2020. The total serving of these food items will be converted to weight (grams) / quantity and then adjusted to the price data from the Consumer Price Index (CPI).The Non-Food PLI takes into account the minimum requirements for a decent quality of life required by a person including clothing, housing, transportation and other non-food needs according to ones gender and age. The Non-Food PLI component is calculated based on the pattern of low-income households identified through the household expenditure survey. As a result of the study that includes food and non-food items, the determination of the item of goods for the calculation of PLI is made and adjusted to the current price based on the CPI. The PLI is constantly updated in line with the implementation of the household income survey and basic amenities. It also takes into account the needs of national planning and price changes that occur as well as changes in the lifestyle of the Malaysian society.Acronyms and Abbreviations NPISHs Non-profit institutions serving households US United States ASEAN Association of Southeast Asian Nations IMF International Monetary Fund GDP Gross Domestic Product FBM-KLCI Financial Times Stock Exchange (FTSE) Bursa Malaysia Kuala Lumpur Composite Index MSIC Malaysia Standard Industrial Classification SITC Standard International Trade Classification PT3 Pentaksiran Tingkatan 3 PMR Penilaian Menengah Rendah SRP Sijil Rendah Pelajaran LCE Lower Certificate of Education SPM Sijil Pelajaran Malaysia MCE Malaysian Certificate of Education STPM Sijil Tinggi Pelajaran Malaysia MHSC Malaysian Higher School Certificate n.a. Not available contd Continued n.e.c. Not elsewhere classified etc. et ceteraeconomic outlook 2021139statistical tablesIndicator201620172018201910202011Demographic StatisticsPopulation1 (000)Total31,63432,02332,38232,52332,657Male16,34616,54316,72116,76516,806Female15,28715,48015,66115,75815,852Sex ratio2107107107106106Population density (per square kilometre)9697989899Dependency ratio (%)Total344.043.643.443.443.5Young age435.334.734.133.733.4Old age58.79.09.39.710.1Life expectancy at birthTotal74.474.474.674.774.9Male72.172.172.372.472.6Female77.077.177.277.477.620152016201720182019Education Primary school enrolment rate6 (%)97.297.297.997.998.1Secondary school enrolment rate7 (%)88.390.091.191.192.5Higher education institutions enrolment8 1,236,1641,346,8581,325,6991,343,8301,323,449Pupil-teacher ratioPrimary schools11.511.611.611.611.6Secondary schools 12.012.612.012.011.0Literacy rate9 (%)95.195.695.995.996.01 Data refers to mid-year population estimates based on the adjusted 2010 Population and Housing Census of Malaysia2 The number of males per 100 females3 The ratio of the number of persons aged 014 years and 65 years and above to the number of persons aged 1564 years4 The ratio of the number of persons aged 014 years to the number of persons aged 1564 years5 The ratio of the number of persons aged 65 years and above to the number of persons aged 1564 years6 Percentage of school aged children between 6 and 11 years at primary level in Government and private schools7 Percentage of school aged children between 12 and 16 years at secondary level in Government and private schools8 Includes public university, private higher education institutions, polytechnic and community college9 Aged 15 years and above with formal education, excluding non-Malaysian citizens10 Preliminary11 Estimate1.1. SELECTED SOCIOECONOMIC STATISTICS Malaysiaeconomic outlook 2021140statistical tables1.1. SELECTED SOCIOECONOMIC STATISTICS (contd) MalaysiaIndicator20152016201720182019HealthPopulation per doctor656632554530482Official beds strength in public sector1245,08745,67846,19446,61146,988Information TechnologyMobile-cellular penetration rateper 100 inhabitants (%)143.8139.9131.2130.2135.4Broadband penetration rateper 100 inhabitants (%)99.799.8117.3121.1131.7InfrastructureRural electricity coverage (% of housing unit)98.395.796.196.497.2Water coverage (% of population)Total95.595.395.596.796.8Rural93.093.493.996.696.7Urban97.297.297.296.896.920122014201420162019Poverty Structure13Incidence of absolute poverty(% of households)Total1.70.60.60.40.2Urban1.00.30.30.20.2Rural3.41.61.61.00.8Incidence of hardcore poverty (% of households)Total0.20.00.00.00.0Urban0.10.00.00.00.0Rural0.60.00.00.00.012 Comprising Ministry of Health (MOH) hospitals (includes special medical institutions) and non-MOh Hospitals (university hospitals and military hospitals)13 Based on 2019 Household Income and Basic Aminities Survey yearSource: Department of Statistics; Malaysian Communications and Multimedia Commission; Ministry of Education; Ministry of Environment and Water, Malaysia. Ministry of Higher Education; Ministry of Health and Ministry of Rural Developmenteconomic outlook 2021141statistical tablesRealGDP(% Growth)GDPPer Capita1(USD)Consumer PriceIndex(%)Unemployment Rate2(%)Current Account Balance(USD billion)Gross International Reserves(USD billion)GrossExports3(USD billion)GrossImports4(USD billion)Advanced Economies20172.550,337.91.75.6480.5-14,138.714,565.120182.252,492.92.05.1392.6-15,442.015,797.220191.754,127.81.44.8339.3-15,186.015,492.220205-5.851,475.70.87.3242.2-13,142.613,437.2202163.954,523.81.66.9314.1-14,641.914,978.2United States20172.360,105.82.14.3-365.3122.22,376.72,953.320183.063,056.02.43.9-449.7125.02,526.43,176.320192.265,253.51.83.7-480.2128.92,519.03,155.820205-4.363,051.41.58.9-441.7139.191,210.271,590.17202163.166,144.12.87.3-463.0-United Kingdom20171.940,406.62.74.4-93.1184.7816.7874.020181.343,114.22.54.1-110.7197.4896.0935.520191.542,378.61.83.8-113.5208.3888.2979.620205-9.839,228.50.85.4-54.0216.68438.67455.17202165.942,235.91.27.4-107.6-Germany20172.644,537.11.73.8286.7208.71,767.81,510.320181.347,832.12.03.4292.4200.11,909.71,656.620190.646,472.61.33.1273.2225.41,835.71,605.220205-6.045,466.10.54.3217.6275.78924.77815.57202164.251,967.31.14.2294.9-France20172.340,134.11.29.4-19.9176.1810.3866.320181.843,083.52.19.0-15.6174.8884.8949.920191.541,896.61.38.5-18.1196.8865.5923.720205-9.839,257.40.58.9-48.9236.68406.07460.37202166.044,769.80.610.2-51.7-Japan20172.238,398.60.52.8203.51,322.4885.2865.220180.339,150.31.02.4176.61,322.0932.5952.020190.740,255.90.52.4184.31,368.9912.9927.220205-5.339,047.9-0.13.3143.51,451.19442.07476.97202162.340,733.00.32.8165.6-2.1. KEY ECONOMIC DATA OF SELECTED COUNTRIESeconomic outlook 2021142statistical tables2.1. KEY ECONOMIC DATA OF SELECTED COUNTRIES (contd)RealGDP(% Growth)GDPPer Capita1(USD)Consumer PriceIndex(%)Unemployment Rate2(%)Current Account Balance(USD billion)Gross International Reserves(USD billion)GrossExports3(USD billion)GrossImports4(USD billion)Australia20172.455,967.92.05.6-35.666.8296.3297.220182.856,453.41.95.3-29.653.6326.6308.720191.854,348.21.65.28.359.1342.0293.420205-4.251,885.50.76.924.643.98171.67139.77202163.057,210.81.37.7-1.3-Republic of Korea20173.231,616.81.93.775.2389.3663.4604.920182.933,422.91.53.877.5403.7708.5668.320192.031,846.20.43.860.0408.8649.9634.020205-1.930,644.40.54.152.5419.08334.17328.57202162.932,305.30.94.157.7-China20176.98,823.51.63.9195.13,421.62,491.42,311.420186.89,919.82.13.825.53,351.92,753.52,660.820196.110,522.32.93.6141.33,388.72,782.52,579.0202051.910,839.42.93.8193.43,473.981,490.471,324.37202168.211,955.62.73.6111.7-India20177.01,981.73.6-48.7411.3465.9548.820186.12,005.93.4-57.2397.8526.1638.920194.22,097.84.8-24.6461.8542.5624.720205-10.31,876.54.9-8.5545.58272.07272.57202168.82,030.63.7-26.4-1 Expressed in current USD price except for Advanced Economies. GDP per capita for Advanced Economies is expressed in Purchasing Power Parity (PPP) dollars per person 2 Composites for the country groups are averages of national unemployment rates weighted by labour force in the respective countries3 Data refer to Exports of Merchandise and Services4 Data refer to Imports of Merchandise and Services5 Estimate6 Forecast7 As at 31 July 20208 As at 31 August 20209 As at 30 September 2020Sources: International Monetary Fund (IMF), World Economic Outlook (October 2020); IMF Database; and World Trade Organization Trade Statisticseconomic outlook 2021143statistical tables2.2. KEY ECONOMIC DATA OF ASEAN MEMBER COUNTRIESRealGDP(% Growth)GDPPer Capita1(USD)Consumer PriceIndex(%)Unemployment Rate2(%)Current Account Balance(USD billion)Gross International Reserves(USD billion)GrossExports3(USD billion)GrossImports4(USD billion)Brunei Darussalam20171.312.1-1.39.32.0-20180.113.61.18.70.9-20193.913.5-0.46.80.9-202050.110.60.36.8-0.0-202163.212.10.56.80.3-Philippines20176.9328.52.95.7-2.183.368.7101.920186.3346.85.25.3-8.880.969.3119.320196.0376.82.55.1-0.589.870.9112.920205-8.3367.42.410.45.9102.6834.1746.17202167.4398.33.07.4-6.0-Indonesia20175.11,015.53.85.5-16.2130.2168.8156.920185.21,042.73.35.3-30.6120.7180.2188.720195.01,120.12.85.3-30.4129.2167.7171.320205-1.51,088.82.18.0-14.2137.0890.1781.47202166.11,167.21.66.8-28.1-Cambodia20177.022.22.9-1.8-20187.524.42.4-3.0-20197.026.72.0-4.2-20205-2.826.32.5-6.7-202166.828.52.9-4.6-Lao PDR20176.817.10.7-1.8-20186.318.12.0-2.2-20195.219.13.3-1.2-202050.218.76.5-1.6-202164.819.34.9-1.5-Malaysia20175.89,965.13.73.48.9102.4217.7194.720184.811,077.41.03.38.0101.4248.7218.020194.311,193.00.73.312.3103.6240.2205.020205-4.510,192.5-1.04.211.4105.08146.47122.17202166.5 - 7.511,378.42.53.54.8-economic outlook 2021144statistical tables2.2. KEY ECONOMIC DATA OF ASEAN MEMBER COUNTRIES (contd) RealGDP(% Growth)GDPPer Capita1(USD)Consumer PriceIndex(%)Unemployment Rate2(%)Current Account Balance(USD billion)Gross International Reserves(USD billion)GrossExports3(USD billion)GrossImports4(USD billion)Myanmar20175.861.34.6-4.2-20186.466.75.9-3.1-20196.568.68.6-1.8-202052.070.96.1-2.5-202165.777.26.2-3.4-Singapore20174.3341.90.62.255.6279.9373.4327.920183.4373.20.42.164.1287.7413.0370.920190.7372.10.62.363.1279.5390.8359.320205-6.0337.5-0.43.050.5327.58233.98214.58202165.0362.50.32.652.7-Thailand20174.1456.40.71.244.0202.6236.6221.520184.2506.41.11.128.5205.7253.0248.220192.4543.60.71.038.4224.4246.3236.320205-7.1509.2-0.41.021.2254.68133.27119.17202164.0536.81.81.024.7-Viet Nam20176.9277.13.52.2-1.7-215.0212.920187.1304.03.52.25.8-243.7236.920197.0329.52.82.211.3-264.3253.9202051.6340.63.83.34.0-175.38161.68202166.7369.54.02.76.2-1 Expressed in current USD price except for Advanced Economies. GDP per capita for Advanced Economies is expressed in Purchasing Power Parity (PPP) dollars per person2 Composites for the country groups are averages of national unemployment rates weighted by labour force in the respective countries3 Data refer to Exports of Merchandise only4 Data refer to Imports of Merchandise only5 Estimate6 Forecast7 As at 31 August 20208 As at 30 September 2020Sources: International Monetary Fund (IMF), World Economic Outlook (October 2020); IMF Database; and World Trade Organization Trade Statisticseconomic outlook 2021145statistical tablesKind of Economic Activity20172018201922020320214Agriculture 99,50999,579101,549100,344105,086(5.9)(0.1)(2.0)(-1.2)(4.7)Mining and quarrying105,838103,512101,43893,56897,404(0.4)(-2.2)(-2.0)(-7.8)(4.1)Manufacturing 290,464304,843316,320306,845328,215(6.0)(5.0)(3.8)(-3.0)(7.0)Construction63,52266,19466,26653,85961,340(6.7)(4.2)(0.1)(-18.7)(13.9)Services723,361772,685820,069789,379844,554(6.3)(6.8)(6.1)(-3.7)(7.0)Utilities34,39636,07938,25438,89441,130(2.9)(4.9)(6.0)(1.7)(5.7)Wholesale and retail trade209,885227,166242,341227,625247,011(7.2)(8.2)(6.7)(-6.1)(8.5)Food & beverages and accommodation 41,74845,49449,88043,23947,846(7.5)(9.0)(9.6)(-13.3)(10.7)Transportation and storage47,21250,21953,65047,27750,840(6.2)(6.4)(6.8)(-11.9)(7.5)Information and communication73,11379,21084,42689,85696,946(8.6)(8.3)(6.6)(6.4)(7.9)Finance and insurance84,53289,08093,21193,08798,171(4.7)(5.4)(4.6)(-0.1)(5.5)Real estate and business services59,13263,60968,56560,60565,209(7.6)(7.6)(7.8)(-11.6)(7.6)Other services163,64967,14570,87065,13569,165(5.1)(5.5)(5.5)(-8.1)(6.2)Government services109,694114,682118,871123,661128,236(4.8)(4.5)(3.7)(4.0)(3.7)( ) Import duties18,07616,00215,81213,73614,231(13.0)(-11.5)(-1.2)(-13.1)(3.6)GDP at purchasers prices1,300,7691,362,8151,421,4541,357,7311,450,830(5.8)(4.8)(4.3)(-4.5)(6.5 - 7.5)1 Community, social and personal services, private non-profit services to households and domestic services of households2 Preliminary3 Estimate4 ForecastNote: Figures in parentheses are annual percentage changesSource: Department of Statistics and Ministry of Finance, Malaysia3.1. GROSS DOMESTIC PRODUCT BY KIND OF ECONOMIC ACTIVITY at constant 2015 prices, Malaysia RM millioneconomic outlook 2021146statistical tables3.2. INDEX OF SERVICES 2015 = 100, MalaysiaWeights (%)201620172018201920201Annual Change (%)Services100.05.76.77.36.4-9.7Wholesale & retail trade,food & beverages and accommodation45.26.17.07.86.6-12.6Wholesale and retail trade37.96.07.07.76.1-11.1Food and beverages5.76.47.49.310.2-14.5Accommodation1.65.85.86.36.8-41.7Business services and finance26.84.35.96.46.1-4.9Finance and insurance16.02.64.85.34.60.9Professional, scientific & technical andadministrative & support services7.28.08.79.19.3-17.0Real estate3.65.05.35.15.24.6Information & communication and transportation & storage21.96.87.47.46.5-6.2Information and communication12.98.08.48.36.55.5Transportation and storage9.05.15.96.06.5-24.5Other services6.15.66.26.76.4-21.2Arts, entertainment & recreation and personal services & other activities2.65.16.48.18.0-40.8Private education1.96.56.35.34.9-4.4Private health1.65.45.66.05.5-8.61 January to June 2020Source: Department of Statistics, Malaysiaeconomic outlook 2021147statistical tables3.3. INDUSTRIAL PRODUCTION INDEX 2015 = 100, MalaysiaSubsectorWeights (%)201620172018201920201Annual Change (%)Total Industrial Production 100.004.1 4.43.12.3-6.4Mining25.142.4 0.4-2.1-2.0-9.4Electricity6.618.5 2.63.73.3-5.0Manufacturing68.254.3 6.14.83.6-5.6Export-oriented industriesPetroleum, chemical, rubber and plastic products20.604.14.04.02.9-3.1Coke and refined petroleum products9.363.13.53.32.7-11.5Chemicals and chemical products6.376.04.34.41.8-8.6Basic pharmaceutical products, medicinal chemical and botanical products0.384.44.85.94.212.4Rubber and plastic products4.493.64.64.64.920.3Electrical and electronics products18.237.57.36.03.0-1.1Computer, electronics and optical products13.898.17.56.82.9-1.2Electrical equipment2.205.86.42.73.4-1.3Machinery and equipment n.e.c.2.145.56.64.33.50.2Wood products, furniture, paper products and printing4.565.54.84.75.4-12.1Wood and wood products1.443.33.55.64.9-17.6Paper and paper products1.154.55.64.24.3-6.9Printing and reproduction of recorded media0.935.34.63.94.2-9.4Furniture1.0410.06.14.68.1-12.8Textiles, wearing apparel, leather products and footwear1.336.88.04.35.3-18.4Textiles0.584.84.42.94.4-18.2Wearing apparel0.608.311.75.66.1-17.5Leather and related products0.158.56.43.85.1-22.7Domestic-oriented industriesNon-metallic mineral products, basic metal and fabricated metal products9.114.14.94.94.1-17.4Other non-metallic mineral products2.974.44.55.54.5-20.3Basic metals2.352.15.44.24.0-9.0Fabricated metal products, except machinery and equipment3.795.04.94.93.7-20.2Food, beverages and tobacco8.552.110.83.22.9-0.2Food products7.391.411.63.32.83.3Beverages0.659.99.13.12.8-18.4Tobacco products0.523.22.11.85.8-26.1Transport equipment and other manufactures5.87-2.75.66.05.9-10.8Motor vehicles, trailers and semi-trailers3.17-4.74.86.67.0-8.1Other transport equipment1.19-2.83.73.94.8-17.0Other manufacturing0.74-2.85.35.25.3-13.0Repair and installation of machinery and equipment0.765.911.27.23.9-11.21 January to August 2020Source: Department of Statistics, Malaysiaeconomic outlook 2021148statistical tablesType of Expenditure20172018201932020420215Current PricesA.Final consumption expenditurePublic167,320172,951176,673179,779183,713Private760,146831,334903,720899,102987,240B.Gross fixed capital formationPublic1109,422104,54694,37485,546100,337Private234,520245,842252,471222,026239,853C.Changes in inventories and valuables26,647-4,327-28,957-27,679-25,502D.Exports of goods and services960,778992,511985,283842,053916,286E.Imports of goods and services866,524895,405872,871761,454833,823F.Gross Domestic Product at purchasers prices (A B C D-E)1,372,3101,447,4511,510,6931,439,3741,568,104G.Balance of primary income-38,658-45,082-40,267-23,686-41,558H.Gross National Income (F G)1,333,6521,402,3691,470,4261,415,6881,526,546Constant 2015 PricesA.Final consumption expenditurePublic164,450169,631173,077175,931179,387Private718,702775,851835,065828,998887,563B.Gross fixed capital formationPublic1105,499100,26389,38581,08394,789Private225,594235,351239,027210,952225,029C.Changes in inventories and valuables21,032-9,050-14,649-13,951-13,689D.Exports of goods and services900,064917,462905,807784,656852,856E.Imports of goods and services814,571826,694806,258709,940775,105F.Gross Domestic Product at purchasers prices (A B C D-E)1,300,7691,362,8151,421,4541,357,7311,450,830G.Balance of primary income-19,050-28,237-22,533-13,288-22,867H.Gross National Income (F G) 1,281,719 1,334,578 1,398,921 1,344,4431,427,9631 Includes investment of public corporations 2 Includes statistical discrepancy arising from balancing3 Preliminary 4 Estimate5 ForecastSource: Department of Statistics and Ministry of Finance, Malaysia3.4. GROSS NATIONAL INCOME BY DEMAND AGGREGATES Malaysia RM millioneconomic outlook 2021149statistical tablesIndicator20162017201820192020Imports of consumption goods1 (RM million)66,97771,03773,03174,15547,6382Bursa Malaysia (end-period)FBMKLCI1,641.731,796.811,690.581,588.761,504.823Market capitalisation (RM billion)1,667.371,906.841,700.371,711.841,638.723Sales number (units)Passenger cars514,594514,675533,202550,179 310,0084Motorcycles396,343 434,850 471,782 546,813 332,7414Production of televisions (000 units)7,74511,44612,6099,9358,1882Outstanding balance of credit card(RM million, end-period) 37,149 38,659 39,920 41,192 36,3755Banking systems consumption credit(RM million, end-period) 265,380 267,666 294,548 297,187 300,86451 Refers to imports by broad economic categories published by the Department of Statistics, Malaysia2 January to August 20203 End-September 20204 January to September 20205 End-August 2020Source: Bank Negara Malaysia, Bursa Malaysia, Malaysian Automotive Association, Motorcycle & Scooter Assemblers and Distributors Association of Malaysia and Department of Statistics, Malaysia3.5. PRIVATE CONSUMPTION INDICATORS Malaysiaeconomic outlook 2021150statistical tablesIndicator20162017201820192020Imports (RM million)Capital goods1100,245115,566112,453100,17959,9303Intermediate goods1399,033478,933462,212467,211278,2663Loan disbursements by banking system (RM million)Manufacturing202,550213,738236,624258,602164,7703Construction67,34977,67489,88590,04748,6193Housing loans (RM million, end-period)Government248,51855,88263,46480,67585,9144Banking system477,988 519,631563,031603,988632,6754Production of construction materialsCement roofing tiles (000 units)38,24136,07335,47243,48433,0973Ready-mixed concrete (000 cubic metres)28,58930,32332,04734,06723,9973Iron and steel bars and rods (000 metric tonnes)2,0641,6981,8531,4041,0563Sales of commercial vehicles (units)65,49161,95065,51254,10831,48151 Refers to imports by broad economic categories published by the Department of Statistics, Malaysia 2 Based on principal amount3 January to August 20204 End-August 20205 January to September 2020Source: Bank Negara Malaysia, Department of Statistics Malaysia, Malaysian Automotive Association and Public Sector Home Financing Board3.6. PRIVATE INVESTMENT INDICATORS Malaysiaeconomic outlook 2021151statistical tables3.7. MALAYSIAS TRADE WITH MAJOR TRADING PARTNERS RM million201620172018201920201RMmillionRMmillionRMmillionRMmillionshare(%) RMmillionshare(%) TotalTotal Trade1,485,7831,771,3491,883,3911,844,483 100.0 1,138,307 100.0 Exports786,964934,9271,003,587 995,072 53.9 620,642 54.5 Imports698,819836,422879,804 849,411 46.1 517,665 45.5 Net88,14598,505123,783 145,661 - 102,977 -ChinaTotal Trade240,965290,402314,564 316,598 100.0 206,301 100.0 Exports98,578125,957139,147 140,931 44.5 98,983 48.0 Imports142,387164,445175,417 175,667 55.5 107,317 52.0 Net-43,809-38,488-36,269 -34,735 - -8,334 -SingaporeTotal Trade186,840228,357243,320 226,574 100.0 136,890 100.0 Exports114,442135,628140,249 137,078 60.5 88,622 64.7 Imports72,39892,729103,071 89,497 39.5 48,268 35.3 Net42,04542,89937,178 47,581 - 40,353 - United StatesTotal Trade135,891153,955155,758 165,220 100.0 113,509 100.0 Exports80,23388,68090,811 96,542 58.4 66,768 58.8 Imports55,65865,27564,947 68,678 41.6 46,741 41.2 Net24,57523,40625,864 27,863 - 20,027 - JapanTotal Trade120,725139,208134,242 129,592 100.0 78,751 100.0 Exports63,74375,59770,385 65,998 50.9 40,387 51.3 Imports56,98263,61163,858 63,594 49.1 38,364 48.7 Net6,76111,9866,527 2,403 - 2,023 - TaiwanTotal Trade 63,057 78,716 96,390 94,077 100.0 59,597 100.0 Exports 21,243 23,962 32,814 37,032 39.4 22,031 37.0 Imports 41,814 54,755 63,576 57,046 60.6 37,566 63.0 Net -20,571 -30,793 -30,762 -20,014 - -15,535 -Republic of KoreaTotal Trade 59,580 67,705 73,521 73,058 100.0 56,433 100.0 Exports 22,905 28,586 34,237 34,230 46.9 23,566 41.8 Imports 36,675 39,119 39,284 38,828 53.1 32,868 58.2 Net -13,769 -10,532 -5,047 -4,599 - -9,302 -Hong KongTotal Trade50,31161,72489,972 80,688 100.0 51,072 100.0 Exports37,64147,71374,831 66,624 82.6 42,241 82.7 Imports12,66914,01115,141 14,064 17.4 8,832 17.3 Net24,97233,70359,690 52,561 - 33,409 - ThailandTotal Trade 86,421 98,649 105,685 100,595 100.0 49,957 100.0 Exports 44,092 50,508 57,061 56,318 56.0 29,209 58.5 Imports 42,328 48,141 48,624 44,277 44.0 20,748 41.5 Net 1,764 2,367 8,437 12,042 - 8,461 -IndonesiaTotal Trade57,43271,51072,397 70,226 100.0 43,361 100.0 Exports27,94533,63131,907 31,328 44.6 20,826 48.0 Imports29,48637,87940,490 38,898 55.4 22,536 52.0 Net-1,541-4,249-8,583 -7,570 - -1,710 -IndiaTotal Trade48,70161,38462,840 62,872 100.0 33,931 100.0 Exports31,99934,53136,343 38,587 61.4 17,252 50.8 Imports16,70226,85326,497 24,285 38.6 16,678 49.2 Net15,2977,6789,846 14,303 - 574 - 1 January to August 2020Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporationeconomic outlook 2021152statistical tablesCommodity SectionWeights1 (%)201620172018201920202Annual Change (%)Export Unit Value IndicesTotal100.0-2.07.21.60.8-1.7Food3.55.66.93.22.53.3Beverages and tobacco0.66.57.66.67.54.0Crude materials, inedible2.7-2.614.2-6.9-0.7-1.3Mineral fuels, lubricants, etc.16.1-24.727.816.40.1-20.5Animal and vegetable oils and fats6.07.713.3-14.6-9.721.0Chemicals7.85.511.53.9-0.7-0.1Manufactured goods9.7-0.54.81.4-2.8-1.6Machinery and transport equipment42.30.61.2-0.82.51.5Miscellaneous manufactured articles10.93.33.21.62.20.6Miscellaneous transactions and commodities0.416.712.32.2-5.1-7.5Import Unit Value IndicesTotal100.01.46.12.0-0.3-2.4Food6.80.98.92.62.52.6Beverages and tobacco0.61.93.62.62.71.7Crude materials, inedible3.3-3.316.8-6.0-0.3-1.0Mineral fuels, lubricants, etc.12.9-19.632.521.7-10.1-23.1Animal and vegetable oils and fats1.118.925.8-13.9-12.012.5Chemicals10.50.24.12.40.3-0.8Manufactured goods13.4-1.45.01.80.4-0.8Machinery and transport equipment41.85.02.0-0.71.7-0.3Miscellaneous manufactured articles7.64.02.2-1.00.40.2Miscellaneous transactions and commodities2.017.04.7-6.310.223.41 Weights based on values of Malaysia imports and exports of merchandise during 20152 Annual changes are calculated based on average unit value index from the period January to August 2020Source: Department of Statistics, Malaysia3.8. EXTERNAL TRADE INDICES 2010 = 100, Malaysiaeconomic outlook 2021153statistical tables3.9. PRODUCTION, EXPORTS VOLUME AND VALUE OF MAJOR PRIMARY COMMODITIES MalaysiaMajor Commodities201620172018201920201Palm oilProduction (000 tonnes)17,319 19,91919,51619,85814,5872Volume (000 tonnes)15,310 15,188 15,36417,42910,192Value (RM million)41,443 46,086 38,65639,12927,415Natural rubberProduction (000 tonnes)674 746603640326Volume (000 tonnes) 642 616 639631344Value (RM million)3,614 4,726 3,774 3,773 1997 Crude petroleumVolume (000 tonnes)15,907 15,736 16,49612,4528,649Value (RM million)22,319 28,255 36,649 26,346 13,056 Liquefied natural gas (LNG)Volume (000 tonnes)24,868 26,794 23,9552549816,166Value (RM million)32,709 41,417 42,32242,48421,1481 January to August 20202 January to September 2020Source: Bank Negara Malaysia, Department of Statistics Malaysia and Malaysian Palm Oil Boardeconomic outlook 2021154statistical tablesExports20162017 000 tonnes RM millionshare (%) 000 tonnes RM millionshare (%)Electrical and electronic productsTotal287,810100.0343,070100.0Singapore47,18916.461,41717.9Hong Kong29,26010.235,93410.5United States46,64616.249,16914.3China42,88414.950,38814.7European Union38,97913.547,80513.9Non-E&ETotal357,958100.0422,788100.0China38,09710.653,75712.7Singapore59,44116.664,51815.3United States30,1068.435,5758.4European Union31,6988.937,0498.8Indonesia22,0346.227,4026.5Palm oilTotal15,31041,443100.015,18846,085100.0China1,8674,83511.71,6134,5829.9European Union1,9005,19312.51,7705,43611.8India2,8227,16217.31,9425,64912.3Pakistan8102,2215.47792,3625.1Turkey6411,7564.27032,0194.4Natural rubberTotal6423,614100.06164,726100.0China3011,65645.82972,22547.1European Union15891525.31581,25226.5United Arab Emirates2120.33220.5United States231313.6241793.8Iran442376.6332505.3Crude petroleumTotal15,90722,319100.015,73628,255100.0Australia4,4226,29428.24,5458,26629.3India3,7345,26423.63,2205,65620.0Thailand3,2494,63420.83,6516,56523.2Japan6358713.97261,3374.7China3684712.14577882.8Liquefied natural gas (LNG)Total24,86832,709100.026,79441,417100.0Japan15,24920,09661.414,84324,14458.3Republic of Korea4,0055,67117.33,8215,82614.1China2,8703,1429.64,3555,64213.6Thailand000.03744811.2Taiwan2,5573,59811.02,9444,82711.71 January to August 2020Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation3.10. DIRECTION OF MAJOR EXPORTS Malaysiaeconomic outlook 2021155statistical tables2018201920201 000 tonnes RM millionshare (%) 000 tonnes RM millionshare (%) 000 tonnes RM millionshare (%)381,545100.0 373,118 100.0 237,847 100.0 64,13516.8 60,424 16.2 41,797 17.6 58,57915.4 54,786 14.7 35,465 14.9 47,27712.4 49,651 13.3 32,032 13.5 55,47314.5 51,060 13.7 33,153 13.9 46,91212.3 46,866 12.6 24,431 10.3 455,527100.0 467,468 100.0 295,531 100.0 60,30113.2 65,625 14.0 41,703 14.1 64,37314.1 66,421 14.2 52,980 17.9 40,1958.8 42,753 9.1 31,891 10.8 42,6609.4 41,783 8.9 22,439 7.6 25,0925.5 26,175 5.6 17,846 6.0 15,36438,655100.017,429 39,128 100.0 10,192 27,414 100.0 1,6953,93210.22,368 5,057 12.9 1,691 4,342 15.8 1,8294,72312.21,990 4,525 11.6 1,248 3,499 12.8 2,1835,10413.24,2448,91522.81,0492,5859.49642,4746.4971 2,207 5.6 670 1,723 6.3 6171,5674.1695 1,588 4.1 441 1,211 4.4 6393,774100.0631 3,773 100.0 344 1,997 100.0 3121,79647.6309 1,812 48.0 173.4 969 48.5 15996625.6143 880 23.3 67.8 407 20.4 11651.711 66 1.7 15.1 90 4.5 171052.825 150 4.0 12.7 77 3.9 352075.527 166 4.4 12.1 71 3.6 16,49636,649100.012,452 26,346 100.0 8,649 13,056 100.0 5,03411,39731.13,266 6,890 26.2 2,139 3,625 27.8 3,6077,96021.73,177 6,604 25.1 1,924 2,706 20.7 2,7506,10516.72,559 5,535 21.0 1,411 2,087 16.0 5461,1893.2509 1,071 4.1 859 1,347 10.3 3327041.940 86 0.3 685 807 6.2 23,95542,322100.025,498 42,484 100.0 16,166 21,148 100.0 11,20720,78149.19,352 16,804 39.6 7,396 10,049 47.5 3,3455,78013.74,805 7,767 18.3 3,200 4,435 21.0 5,7898,87421.07,130 10,265 24.2 3,933 4,428 20.9 5418061.91,251 2,194 5.2 831 1,185 5.6 2,8115,62713.32,431 4,869 11.5 590 885 4.2 economic outlook 2021156statistical tables 2016 2017 2018 2019 20202share (%)Electrical and electronic products 287,810 343,070 381,545 373,118 237,847 44.6 Petroleum products 54,662 71,813 76,161 71,511 43,774 8.2 Chemicals and chemical products 41,396 47,138 57,715 57,477 32,712 6.1 Optical and scientific equipment 28,747 32,395 36,563 39,905 25,914 4.9 Machinery, equipment and parts 37,498 40,133 40,668 41,599 25,310 4.7 Rubber products 20,253 26,308 26,491 25,841 23,351 4.4 Manufactures of metal 33,352 37,937 44,664 41,490 22,978 4.3 Iron and steel products 6,935 12,562 15,504 21,691 15,706 2.9 Palm oil-based manufactured products 19,552 23,785 22,783 23,338 13,769 2.6 Processed food 18,958 19,713 19,414 21,773 13,719 2.6 Transport equipment 13,476 15,605 18,033 19,143 13,064 2.4 Wood products 15,680 16,369 15,944 15,777 9,836 1.8 Textiles, apparels and footwear 13,884 15,329 14,901 15,531 8,721 1.6 Manufactures of plastics 13,066 14,504 14,538 14,9788,554 1.6Non-metallic mineral products 5,562 5,996 7,273 9,079 5,081 1.0 Paper and pulp products 4,263 4,691 4,950 6,405 4,195 0.8 Jewellery 7,185 6,714 6,656 6,974 2,286 0.4 Beverages and tobacco 4,650 4,213 3,435 3,452 1,629 0.3 Other manufactures1 18,838 27,584 29,835 31,233 24,933 4.7 Total 645,768 765,858 837,071 840,586 533,378 100.0 1 Includes animal feed, printed matter, miscellaneous manufactured articles, etc2 January to August 2020Note: Total may not add up due to roundingSource: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation3.11. EXPORTS OF MANUFACTURED GOODS Malaysia RM millioneconomic outlook 2021157statistical tablesImports201620172018201920201share (%)share (%)share (%)share (%)share (%)Electrical and electronic productsTotal209,936100.0252,922100.0262,623100.0245,538100.0162,723100.0China50,91824.361,29324.265,68825.064,09026.143,03526.4Taiwan26,27512.537,75614.945,90717.540,49716.527,76617.1United States25,48612.131,16612.329,54911.327,18011.120,00012.3Chemicals and chemical productsTotal63,757100.074,507100.082,934100.081,589100.047,333100.0China11,01317.313,02217.514,26817.213,97617.18,55918.1United States5,0607.95,6197.56,2427.59,17311.25,71112.1Singapore7,30111.58,77411.88,93410.87,6959.44,2128.9Petroleum productsTotal52,534100.075,360100.086,015100.077,480100.040,828100.0Singapore21,54541.028,48737.838,25244.529,33437.912,37030.3China4,9589.47,99410.67,4148.610,50613.65,51213.5Republic of Korea5,52510.54,5776.16,1067.17,2849.44,22110.3Machinery, equipment and partsTotal65,054100.078,575100.073,778100.069,638100.038,144100.0China15,83324.319,43624.720,30627.519,96428.711,50330.2United States5,7138.87,5809.67,52810.27,18210.34,49011.8Japan8,82213.610,58313.58,91812.17,81611.24,46411.7Manufactures of metalTotal39,212100.043,649100.046,148100.047,132100.029,024100.0China10,69427.311,27425.812,54227.211,76325.06,05420.9India2,5576.53,6358.33,4737.54,98710.64,90416.9Japan4,65811.95,17011.85,29211.54,86610.33,11710.71 January to August 2020Source: Department of Statistics, Malaysia and Malaysia External Trade Development Corporation3.12. SOURCE OF MAJOR IMPORTS Malaysia RM million economic outlook 2021158statistical tables3.13. BALANCE OF PAYMENTS Malaysia RM millionComponents20162017Credits( )Debits(-)NetCredits( )Debits(-)NetBalance on goods and services834,491751,36383,128960,778866,52494,255Goods686,896584,850102,046801,394684,281117,113Services147,596166,513-18,917159,384182,243-22,859Transport17,25140,710-23,45919,25648,878-29,622Travel74,98043,46531,51578,94446,47532,470Other services55,36582,339-26,97461,18386,890-25,707Primary income47,45282,045-34,59253,70692,365-38,658Compensation of employees6,64812,254-5,6067,08211,929-4,848Investment income40,80569,791-28,98646,62580,435-33,811Secondary income15,98834,617-18,62916,79734,097-17,300Balance on current account897,932868,02429,9071,031,281992,98538,296% of Gross National Income2.52.9Capital account102-26Financial account-249-4,730Direct investment13,79216,171Assets-42,246-24,234Liabilities56,03840,405Portfolio investment-14,203-15,358Financial derivatives-802-197Other investment964-5,346Balance on capital and financial accounts -148-4,756Net errors and omissions-23,899-17,132Overall balance5,86016,4091 January to June 2020Note: Total may not add up due to roundingSource: Department of Statistics, Malaysiaeconomic outlook 2021159statistical tables2018201920201Credits( )Debits(-)NetCredits( )Debits(-)NetCredits( )Debits(-)Net992,511895,40597,106985,283872,871112,412407,318372,95634,362830,137715,516114,621815,470692,136123,334355,819301,03954,780162,375179,889-17,515169,814180,735-10,92251,49971,916-20,41720,52448,212-27,68821,66947,572-25,9037,16220,305-13,14379,17848,96130,21882,11451,29630,81812,28413,283-99862,67282,717-20,04566,03081,868-15,83732,05238,329-6,27660,414105,496-45,08264,851105,118-40,26729,95739,902-9,9456,79314,450-7,6576,78415,906-9,1223,1297,265-4,13653,62191,046-37,42658,06789,212-31,14526,82832,637-5,80915,60235,330-19,72916,89738,191-21,2948,41815,775-7,3581,068,5271,036,23232,2951,067,0311,016,18150,850445,693428,63317,0602.33.52.6-89331-14311,430-33,796-33,10110,1035,5782,147-23,431-31,908-3,18133,53537,4865,328-49,396-29,026-19,107981-4783,09249,742-9,870-19,23111,341-33,465-33,243-35,878-8,9691,1537,7588,416-15,031economic outlook 2021160statistical tablesGroupsWeights1 (%)201620172018201920202Annual Change (%)Malaysia Total100.02.13.71.00.7-1.0Food and non-alcoholic beverages29.53.94.01.61.71.2Alcoholic beverages and tobacco2.417.20.2-0.11.50.2Clothing and footwear3.2-0.4-0.3-2.0-2.0-1.0Housing, water, electricity, gas and other fuels23.82.42.22.01.9-1.0Furnishings, household equipment and routine household maintenance4.12.42.10.31.40.3Health1.92.72.50.80.71.2Transport14.6-4.613.21.6-3.1-10.0Communication4.8-1.5-0.4-1.70.41.6Recreation services and culture4.82.51.9-0.40.70.7Education1.32.11.71.11.41.2Restaurants and hotels2.92.82.51.61.20.7Miscellaneous goods and services6.72.91.2-1.40.42.7Peninsular MalaysiaTotal100.02.24.01.00.7-0.9Food and non-alcoholic beverages29.04.14.11.71.81.3Alcoholic beverages and tobacco2.417.30.20.11.60.2Clothing and footwear3.3-0.4-0.2-2.0-2.0-1.0Housing, water, electricity, gas and other fuels23.62.62.42.22.0-0.9Furnishings, household equipment and routine household maintenance4.22.52.20.51.60.4Health1.92.82.60.70.71.2Transport14.7-4.413.21.5-3.1-9.8Communication4.9-1.5-0.3-1.80.41.6Recreation services and culture4.92.52.0-0.40.70.8Education1.42.21.61.21.51.2Restaurants and hotels3.02.72.61.51.20.7Miscellaneous goods and services6.73.01.2-1.30.42.81 Based on Household Expenditure Survey 20162 January to August 2020Source: Department of Statistics, Malaysia3.14. CONSUMER PRICE INDEX BY REGION 2010 = 100, Malaysiaeconomic outlook 2021161statistical tables3.14. CONSUMER PRICE INDEX BY REGION (contd) 2010 = 100, MalaysiaGroupsWeights1 (%)201620172018201920202Annual Change (%)Sarawak Total100.01.53.00.60.1-1.6Food and non-alcoholic beverages33.53.12.61.61.00.6Alcoholic beverages and tobacco2.713.7-0.1-1.90.60.3Clothing and footwear2.8-1.0-1.2-2.2-2.5-1.1Housing, water, electricity, gas and other fuels21.92.50.80.80.9-1.3Furnishings, household equipment and routine household maintenance3.81.42.2-0.90.70.0Health1.52.42.32.11.31.4Transport14.0-5.815.21.8-4.1-13.2Communication4.6-2.6-0.6-1.60.40.9Recreation services and culture4.81.50.6-0.10.3-0.2Education0.91.91.11.20.52.7Restaurants and hotels2.42.42.01.62.10.6Miscellaneous goods and services7.13.01.6-1.8-0.42.4Sabah and Federal Territory of LabuanTotal100.00.73.00.70.2-1.7Food and non-alcoholic beverages31.31.53.61.60.50.4Alcoholic beverages and tobacco2.117.80.2-0.51.20.1Clothing and footwear2.9-0.1-0.9-2.3-1.9-1.1Housing, water, electricity, gas and other fuels28.11.21.01.11.2-1.7Furnishings, household equipment and routine household maintenance3.60.51.1-0.10.4-0.4Health1.12.31.71.10.71.2Transport13.7-5.311.71.6-3.2-10.9Communication4.6-2.0-0.2-1.00.10.5Recreation services and culture3.72.72.0-0.80.50.0Education0.80.91.21.20.90.3Restaurants and hotels2.02.71.31.51.20.5Miscellaneous goods and services6.11.50.6-2.40.31.51 Based on Household Expenditure Survey 20162 January to August 2020Source: Department of Statistics, Malaysiaeconomic outlook 2021162statistical tables3.15. CONSUMER PRICE INDEX BY STRATUM 2010 = 100, MalaysiaGroupsWeights1 (%)201620172018201920202Annual Change (%)RuralTotal100.01.73.70.80.3-1.3Food and non-alcoholic beverages35.62.93.61.00.90.8Alcoholic beverages and tobacco3.018.60.1-0.11.60.1Clothing and footwear3.60.0-0.1-0.9-0.5-0.5Housing, water, electricity, gas and other fuels19.92.61.81.41.8-1.8Furnishings, household equipment and routine household maintenance3.71.41.80.20.70.1Health2.02.41.70.60.61.7Transport14.6-5.513.81.5-3.6-11.0Communication4.4-2.5-0.1-0.90.51.4Recreation services and culture3.61.71.7-0.41.01.2Education0.92.11.20.50.50.6Restaurants and hotels2.41.71.51.11.00.8Miscellaneous goods and services6.32.61.1-1.20.82.2UrbanTotal100.02.13.81.00.7-0.9Food and non-alcoholic beverages28.44.14.01.81.81.3Alcoholic beverages and tobacco2.316.70.2-0.11.50.3Clothing and footwear3.2-0.6-0.4-2.4-2.2-1.1Housing, water, electricity, gas and other fuels24.52.42.42.01.8-0.9Furnishings, household equipment and routine household maintenance4.22.52.30.31.60.4Health1.82.92.80.80.71.1Transport14.6-4.313.01.5-3.1-9.9Communication4.9-1.4-0.3-1.90.41.6Recreation services and culture5.02.61.9-0.40.60.6Education1.42.11.71.21.51.3Restaurants and hotels3.02.92.71.51.30.7Miscellaneous goods and services6.72.91.2-1.50.42.81 Based on Household Expenditure Survey 20162 January to August 2020Source: Department of Statistics, Malaysiaeconomic outlook 2021163statistical tables3.16. CONSUMER PRICE INDEX BY STATE 2010 = 100, MalaysiaStates201620172018201920201Annual Change (%)TotalMalaysia2.13.71.00.7-1.0Kedah and Perlis1.73.90.30.2-1.6Pulau Pinang2.54.00.91.1-0.7Perak1.43.30.70.6-1.1Selangor and Federal Territory of Putrajaya2.23.91.10.9-0.4Federal Territory of Kuala Lumpur2.83.71.41.2-0.4Melaka2.04.10.80.1-1.7Negeri Sembilan1.94.21.20.7-1.4Johor2.84.21.10.6-1.2Pahang1.83.10.60.3-1.0Kelantan1.53.50.70.4-1.4Terengganu1.43.10.40.1-1.3Sabah and Federal Territory of Labuan0.73.00.70.2-1.7Sarawak1.53.00.60.1-1.6Food and Non-Alcoholic BeveragesMalaysia3.94.01.61.71.2Kedah and Perlis3.34.30.41.00.7Pulau Pinang4.84.41.71.81.4Perak3.13.31.11.51.5Selangor and Federal Territory of Putrajaya4.24.21.61.91.9Federal Territory of Kuala Lumpur4.24.54.03.50.6Melaka4.64.81.41.30.6Negeri Sembilan4.33.61.61.51.1Johor4.94.61.71.91.6Pahang3.62.51.10.91.1Kelantan3.03.41.01.00.6Terengganu3.22.81.11.21.3Sabah and Federal Territory of Labuan1.53.61.60.50.4Sarawak3.12.61.61.00.61 January to August 2020Source: Department of Statistics, Malaysiaeconomic outlook 2021164statistical tables3.17. CORE INDEX 2010 = 100, MalaysiaGroupsWeights1 (%)201620172018201920202Annual Change (%)Total100.02.42.41.01.11.2Food and non-alcoholic beverages26.53.13.61.82.11.2Alcoholic beverages and tobacco-Clothing and footwear4.5-0.4-0.3-2.0-2.0-1.0Housing, water, electricity, gas and other fuels26.52.62.72.42.11.6Furnishings, household equipment and routine household maintenance5.52.42.10.31.40.4Health2.62.72.50.80.71.2Transport6.53.92.7-0.8-3.10.2Communication6.5-1.5-0.4-1.70.41.5Recreation services and culture6.62.51.9-0.40.70.7Education1.82.11.71.11.41.2Restaurants and hotels3.92.82.51.61.20.7Miscellaneous goods and services9.12.91.2-1.40.42.71 Based on Household Expenditure Survey 20162 January to August 2020Source: Department of Statistics, Malaysiaeconomic outlook 2021165statistical tables3.18. PRODUCER PRICE INDEX - LOCAL PRODUCTION 2010 = 100, MalaysiaSectors and Stage of ProcessingWeights1 (%)201620172018201920202Annual Change (%)Sector (MSIC 2008)Total100.0-1.16.7-1.1-1.4-2.4Agriculture, forestry and fishing6.716.37.0-13.9-4.012.5Mining7.9-15.324.717.5-3.7-32.7Manufacturing81.6-1.25.3-1.8-0.9-0.2Electricity and gas supply3.4-0.91.91.11.5-0.2Water supply0.33.5-0.10.3-2.2-0.6Producer Price Index byStage of ProcessingTotal100.0-1.16.7-1.1-1.4-2.4Crude materials for further processing16.43.414.82.6-3.9-12.4Intermediate materials, supplies and components56.1-3.26.7-1.9-1.4-0.3Finished goods27.5-0.40.9-2.40.60.31 Based on Economic Census 20162 January to August 2020Source: Department of Statistics, Malaysiaeconomic outlook 2021166statistical tables3.19. LABOUR FORCE Malaysia 201620172018201920204Labour force (000)14,667.814,980.115,280.315,581.615,691.3Employment (000)14,163.714,476.814,776.015,073.415,021.1Unemployment rate (%)3.43.43.33.34.3Labour force participation rate1 (%)Total67.768.068.368.768.4Male80.280.180.480.880.5Female54.354.755.255.655.4Number of collective agreements signed in the current year230826929429881Number of workers covered (thousands)133.760.646.3-Labour productivity33.13.82.32.1-8.4Agriculture1.82.2-0.20.4-3.7Mining and quarrying5.9-4.84.0-1.6-8.7Manufacturing3.83.92.41.7-8.8Construction8.86.83.43.3-22.3Services2.04.33.52.9-7.5Foreign workers (000)1,866.41,797.42,015.81,999.61,678.951 The ratio of the labour force to the working age population (15-64 years), expressed as percentage2 Based on the information in the Collective Agreement and the feedback from the employer for which has been given cognisance by the Industrial Court for the year3 Annual change (%)4 January to June 20205 As at end-August 2020Source: Department of Statistics, Ministry of Home Affairs and Ministry of Human Resources Malaysiaeconomic outlook 2021167statistical tables3.20. EMPLOYMENT BY INDUSTRY 000 persons, MalaysiaIndustry1201620172018201920203share(%)share(%)Total employment214,163.714,476.814,776.015,073.4100.015,021.1100.0Agriculture, forestry and fishing1,609.91,635.01,570.31,541.110.21,655.911.0Mining and quarrying96.397.290.891.00.694.90.6Manufacturing2,390.62,513.32,499.92,681.517.82,529.416.8Construction1,251.71,258.91,257.81,276.48.51,227.28.2Services8,814.38,970.99,355.29,481.562.99,513.763.3Electricity, gas, steam and air conditioningsupply77.962.268.871.40.5101.40.7Water supply; sewerage, waste management and remediation activities76.481.088.688.80.692.70.6Wholesale and retail trade; repair of motorvehicles and motorcycles2,428.52,485.42,544.62,594.517.22,637.817.6Transportation and storage630.4658.2697.9667.64.4691.04.6Accommodation and food and beverageservice activities1,260.71,323.21,473.41,549.710.31,393.39.3Information and communication208.7220.3216.4213.91.4231.81.5Financial and insurance/takaful activities346.9369.0338.6335.12.2382.12.5Real estate activities82.484.597.292.10.678.30.5Professional, scientific and technicalactivities361.8348.1367.7385.72.6372.62.5Administrative and support service activities657.0677.2747.6806.25.3871.25.8Public administration and defence;compulsory social security748.2742.2720.2737.14.9786.45.2Education928.7880.3988.7962.36.4919.16.1Human health and social work activities570.3588.0551.2527.73.5557.93.7Arts, entertainment and recreation80.984.385.679.00.549.60.3Others service activities230.8260.1264.8266.11.8282.91.9Activities of households as employers124.7106.9103.9104.30.764.80.41 Industry is classified according to the Malaysia Standard Industrial Classification (MSIC) 2008 Ver. 1.02 Total includes Activities of extraterritorial organisations and bodies3 For the first half of 2020Source: Department of Statistics, Malaysiaeconomic outlook 2021168statistical tables3.21. ACTIVE REGISTRANTS Malaysia201620172018201920202share(%)Total Active Registrants (end-period)306,037262,756154,850299,648100.0277,840Age19 and below 33,38627,82920,95936,96612.333,58120 24204,116177,111104,868199,47666.6185,93025 2952,90946,46022,03949,08016.445,99630 and above15,62611,3566,98414,1264.712,333GenderMale110,57791,52854,979109,22736.596,706Female195,460171,22899,871190,42163.5181,134Educational LevelLess than PT3/PMR/SRP/LCE6917664029240.3753PT3/PMR/SRP/LCE4,1102,8701,4382,5160.82,027SPM/MCE67,37351,2457,55714,7544.913,812Skills Certificate19,9817,7872,2488,6632.97,594MHSC/STPM, Matriculation, Diploma and Degree223,882200,088143,205272,79191.0253,654Employment StatusUnemployed154,548129,58171,852137,71246.0128,9141 Malaysian Skills Certificate (SKM), other skills certificate and non-technical skills certificate2 January to June 2020Note: Covers job seekers registered with Labour Department through JobsMalaysia and within valid registration periodSource: Ministry of Human Resources, Malaysiaeconomic outlook 2021169statistical tables201620172018201920203share(%)Number of Vacancies by Occupational Category1854,0441,473,3761,095,020974,612100.0251,944Managers26,32011,1644,7628,5630.92,805Professionals36,20441,17121,33431,9003.313,727Technician and associate professionals14,02616,90419,46634,4293.58,075Clerical support workers14,65414,0837,69011,5541.28,670Service and sales workers41,30163,33534,92642,4624.48,462Skilled agricultural, forestry and fishery workers9,64912,2125,6332,0890.2418Craft and related trade workers22,22835,24425,06331,9823.36,837Plant and machine operators and assemblers118,178151,779127,391147,32115.148,883Elementary occupation571,4841,127,484848,755664,31268.2154,067Number of Vacancies by Sector854,0441,473,3761,095,020974,612100.0251,944Agriculture, forestry and fishing174,751264,216240,470204,32421.047,391Mining and quarrying1,8572,7303,1083,4350.4697Manufacturing376,349617,308421,582351,94236.194,657Construction127,985255,851191,045141,78314.527,566Services173,102333,271238,815273,12828.081,633Number of Placements by Sector222,64320,36914,138-Agriculture, forestry and fishing1,6391,3821,326-Mining and quarrying0716-Manufacturing11,34212,3258,557-Construction2,396652538-Services7,2666,0033,701-1 Classification of occupational groups is based on the Malaysia Standard Classification of Occupations (MASCO) 20132 Data for 2016 covers period from January to November 2016. Data for 2018 covers period from January to June 20183 January to June 2020Note: Definition of vacancies refers to job vacancy listings by employers in public (selected only) and private sector on JobsMalaysia. The job listing includes non-substantive vacancies such as sales person, promoter, insurance agent and part-time workers as well as foreign workersSource: Ministry of Human Resources, Malaysia3.22. VACANCIES AND PLACEMENTS Malaysiaeconomic outlook 2021170statistical tables4.1. INTEREST RATES MalaysiaAverage rates during the period (%)Average rates during the period in 2020(%)2016201720182019Jan. Feb. Mar.Apr.MayJun.Jul.Aug.Overnight interbank3.062.983.193.052.892.752.512.512.031.991.791.741-week interbank3.123.033.263.122.962.782.562.562.092.021.831.773-month interbank3.483.383.663.463.24-2.762.75-2.27-1.96Commercial banksFixed deposits3-month3.03 2.92 3.14 2.98 2.682.652.382.36 1.88 1.86 1.63 1.62 12-month3.18 3.09 3.31 3.17 2.872.842.592.56 2.03 2.03 1.79 1.78 Savings deposit1.00 0.96 1.04 1.01 0.890.870.780.77 0.61 0.59 0.48 0.48 Weighted Base Rate1 (BR)3.71 3.62 3.88 3.76 3.433.433.183.182.682.682.432.43Base lending rate (BLR)6.73 6.67 6.89 6.78 6.506.486.266.26 5.78 5.75 5.52 5.49 1 Effective from 2 January 2015, the BR replaced the BLR as the main reference rate for new retail floating rate loans and financing facilitiesSource: Bank Negara Malaysiaeconomic outlook 2021171statistical tables4.2. BROAD MONEY (M3) Malaysia RM millionEnd-period201620172018201920204Broad money (M3)11,655,2251,736,4451,894,517 1,961,554 2,031,377Transaction balances379,853 421,552 425,722 450,471 496,825 Currency in circulation285,480 92,388 94,297 100,159 114,852 Demand deposits294,373 329,164 331,425 350,312 381,972 Broad quasi-money1,275,372 1,314,893 1,468,796 1,511,083 1,534,552 Savings deposits145,129 150,505 157,387 169,975 202,819 Fixed deposits773,221 823,165 920,662 952,127 939,142 Negotiable instruments of deposits (NIDs)8,327 8,154 11,547 12,671 8,688 Repurchase agreements (Repos)-Foreign currency deposits137,593 133,268 151,496 156,727 169,645 Other deposits211,103 199,800 227,704 219,583 214,258 Factors Affecting M3Net claims on Government 113,193 129,824 183,634 194,584 254,074 Claims on Government166,425 186,671 249,184 256,438 327,521 Less: Government deposits53,232 56,848 65,550 61,854 73,447 Claims on private sector1,648,719 1,745,091 1,892,470 1,976,463 2,020,700 Loans1,480,345 1,537,001 1,645,784 1,715,637 1,749,460 Securities168,375 208,090 246,686 260,825 271,240 Net foreign assets3517,821 517,269 522,402 514,447 553,911 Bank Negara Malaysia415,756 406,832 411,768 416,413 438,882 Banking system102,065 110,437 110,634 98,033 115,029 Other influences-624,508 -655,739 -703,989 -723,940 -797,308 1 Exclude interplacements among banking institutions2 Exclude holdings by the banking system3 Includes exchange rate revaluation losses/gains4 End-August 2020Note: Data based on BNM Monthly Statistical Bulletin (August 2020). Total may not add up due to roundingSource: Bank Negara Malaysiaeconomic outlook 2021172statistical tables4.3. KEY EXCHANGE RATESMalaysia RM to one unit of foreign currency1Change (%)20162017201820192020201620172018201920202End-DecemberEnd-SeptemberSpecial Drawing Rights (SDR)6.01165.77095.75585.65925.8522-1.04.20.31.7-3.3US dollar4.48604.06204.13854.09254.1585-4.310.4-1.81.1-1.6Singapore dollar3.10163.03923.03223.03873.0373-2.12.10.2-0.20.0100 Japanese yen3.84423.60203.74753.76553.9378-7.36.7-3.9-0.5-4.4Pound sterling5.51085.46605.25325.37225.338315.40.84.1-2.20.6Euro4.72384.85104.73404.58524.8775-0.7-2.62.53.2-6.0100 Thai baht12.516712.433412.700613.682713.1224-4.70.7-2.1-7.24.3100 Indonesian rupiah0.03340.03000.02860.02950.0279-6.911.34.9-3.15.7100 Korean won0.37200.38010.37210.35400.3553-1.9-2.12.15.1-0.4100 Philippine peso9.05168.12327.87398.07208.59021.111.43.2-2.5-6.0Chinese renminbi0.64550.62300.60170.58660.61052.43.63.52.6-3.91 US dollar (USD) rates are the average of buying and selling rates at noon in the Kuala Lumpur Interbank Foreign Exchange Market. Rates for foreign currencies other than USD are cross rates derived from rates of these currencies against the USD and the RM/USD rate2 End-December 2019 End-September 2020Source: Bank Negara Malaysiaeconomic outlook 2021173statistical tables4.4. COMMERCIAL BANKS: LOANS OUTSTANDING BY PURPOSE AND SECTORMalaysia20162017201820192020DecemberDecemberDecemberDecemberAugustRMmillionshare (%)RMmillionshare (%)RMmillionshare (%)RMmillionshare (%)RMmillionshare (%)PurposePurchase of securities41,368 3.8 37,505 3.4 34,092 3.0 30,864 2.7 29,221 2.5 Purchase of transport vehicles98,152 9.1 94,928 8.6 93,847 8.3 89,358 7.7 88,595 7.6 of which:Purchase of passenger cars91,093 8.4 88,244 8.0 87,221 7.7 82,901 7.2 82,138 7.1 Purchase of residential property364,966 33.8 386,446 35.2 404,159 35.6 421,993 36.6 435,311 37.5 Purchase of non-residential property169,789 15.7 172,212 15.7 172,217 15.2 173,319 15.0 173,064 14.9 Purchase of fixed assets other than land and building7,570 0.7 6,620 0.6 7,415 0.7 8,945 0.8 9,640 0.8 Personal use32,772 3.0 33,627 3.1 35,532 3.1 36,922 3.2 37,793 3.3 Credit card34,350 3.2 35,459 3.2 36,240 3.2 37,098 3.2 32,676 2.8 Purchase of consumer durables111 0.0 98 0.0 84 0.0 73 0.0 68 0.0 Construction36,310 3.4 36,601 3.3 38,727 3.4 41,105 3.6 42,760 3.7 Working capital254,908 23.6 253,462 23.1 266,071 23.4 264,301 22.9 264,645 22.8 Other purpose39,964 3.7 41,343 3.8 46,591 4.1 49,621 4.3 48,258 4.2 Total Loans11,080,260 100.0 1,098,300 100.0 1,134,973 100.0 1,153,597 100.0 1,162,032 100.0 Sector2Primary agriculture23,851 2.2 21,944 2.0 20,169 1.8 18,763 1.6 17,982 1.5 Mining and quarrying7,939 0.7 5,726 0.5 5,615 0.5 7,542 0.7 7,013 0.6 Manufacturing (including agro-based)81,741 7.6 81,072 7.4 86,185 7.6 94,548 8.2 92,162 7.9 Electricity, gas and water supply8,169 0.8 9,816 0.9 11,267 1.0 11,246 1.0 11,220 1.0 Wholesale and retail, restaurants and hotels93,593 8.7 94,179 8.6 98,992 8.7 101,281 8.8 103,867 8.9 Construction48,002 4.4 51,381 4.7 54,033 4.8 57,140 5.0 57,148 4.9 Real estate87,129 8.1 89,355 8.1 88,981 7.8 83,669 7.3 85,721 7.4 Transport, storage andcommunication21,805 2.0 21,661 2.0 21,530 1.9 20,875 1.8 22,399 1.9 Finance, insurance and businessservices73,275 6.8 71,548 6.5 84,051 7.4 82,491 7.2 80,887 7.0 Education, health and others20,888 1.9 19,980 1.8 18,645 1.6 20,924 1.8 21,205 1.8 Household sector606,544 56.1 622,330 56.7 636,839 56.1 648,438 56.2 655,060 56.4 Other sector37,323 0.7 9,309 0.8 8,664 0.8 6,680 0.6 7,369 0.6 1 Includes loans sold to Cagamas2 Definitions of economic sectors/industries are based on MSIC 20003 Includes loans to individual businessesNote: Data based on BNM Monthly Statistical Bulletin (August 2020). Total may not add up due to roundingSource: Bank Negara Malaysiaeconomic outlook 2021174statistical tables4.5. GOVERNMENT AND CORPORATE BOND YIELDS Malaysia20162017201820192020Jan.Feb.Mar.Apr.MayJun.Jul.Aug.Sep.Malaysian Government Securities market indicative yield (%)1-year3.26 2.89 3.45 2.96 2.81 2.60 2.53 2.34 2.06 2.05 1.77 1.70 1.763-year3.50 3.34 3.63 3.01 2.88 2.62 2.76 2.42 2.28 2.25 1.93 1.84 1.995-year3.70 3.56 3.78 3.18 2.95 2.67 3.10 2.53 2.48 2.47 2.12 2.11 2.2510-year4.23 3.91 4.08 3.31 3.13 2.83 3.36 2.87 2.81 2.87 2.55 2.62 2.665-year corporate bond yields (%)AAA4.404.334.393.633.513.213.663.223.113.112.862.762.79AA4.784.644.693.953.873.563.993.563.473.423.183.133.18A6.666.366.375.275.094.605.034.744.704.694.524.594.56BBB10.129.629.667.657.316.616.916.816.646.656.786.396.35Source: Bank Negara Malaysiaeconomic outlook 2021175statistical tables201620172018201920203Indices1Composite1,641.731,796.811,690.581,588.761,504.82FBM EMAS11,466.5412,942.5711,527.5111,323.4910,831.56FBM ACE4,780.716,603.554,317.495,226.599,914.01Trading volume2 (million units)433,678.5641,315.6643,208.1653,085.51,271,710.1Main Market289,799.5430,833.7420,153.9453,037.4745,338.2ACE Market77,807.5156,155.6104,049.2103,750.4430,801.0LEAP Market-4.880.6332.8133.4Daily Average1,762.92,639.22,646.92,676.66,911.5Trading value2 (RM million)484,106.5614,822.8625,496.4525,225.9749,007.2Main Market457,858.7578,620.9579,691.7483,252.3606,701.8ACE Market14,050.529,040.419,781.821,404.7116,375.6LEAP Market-1.45.133.226.5Daily Average1,967.92,530.12,574.12,152.64,070.7Number of listed companies904905915929932Main Market791788783772765ACE Market113115119129133LEAP Market-2132834Market capitalisation1 (RM billion)1,667.41,906.81,700.41,711.81,638.7Main Market1,649.41,881.91,680.31,682.51,583.9ACE Market10.015.612.118.834.5LEAP Market-0.20.92.43.1Market capitalisation/GDP (%)135.6146.6124.8120.4-1 End-period2 Based on market transactions and direct business transactions3 End-September 2020Source: Bursa Malaysia4.6. BURSA MALAYSIA: SELECTED INDICATORSeconomic outlook 2021176statistical tables4.7. ISLAMIC BANKS: LOANS OUTSTANDING BY PURPOSE AND SECTOR Malaysia20162017201820192020DecemberDecemberDecemberDecemberAugustRMmillionshare(%)RMmillionshare(%)RMmillionshare(%)RMmillionshare(%)RMmillionshare(%)PurposePurchase of securities28,486 6.6 32,443 6.8 41,622 7.4 48,017 7.9 48,529 7.5 Purchase of transport vehicles72,368 16.7 74,266 15.5 75,161 13.3 77,821 12.7 82,044 12.7 of which:Purchase of passenger cars70,698 16.3 71,852 15.0 72,875 12.9 75,613 12.4 80,588 12.5 Purchase of residential property112,780 26.0 132,956 27.8 158,812 28.2 181,933 29.8 197,289 30.6 Purchase of non-residential property38,455 8.9 40,943 8.5 45,917 8.1 51,998 8.5 55,159 8.5 Purchase of fixed assets other than land and building2,502 0.6 2,231 0.5 3,041 0.5 3,563 0.6 3,695 0.6 Personal use33,510 7.7 35,145 7.3 58,875 10.4 60,448 9.9 63,869 9.9 Credit card2,799 0.6 3,200 0.7 3,680 0.7 4,094 0.7 3,699 0.6 Purchase of consumer durables21 0.0 19 0.0 24 0.0 21 0.0 14 0.0 Construction9,226 2.1 11,063 2.3 17,507 3.1 18,209 3.0 17,842 2.8 Working capital112,914 26.0 117,920 24.6 126,704 22.5 132,878 21.7 137,789 21.3 Other purpose21,270 4.9 28,767 6.0 32,757 5.8 32,086 5.3 35,476 5.5 Total Financing1434,332 100.0 478,954 100.0 564,099 100.0 611,068 100.0 645,405 100.0 Sector2Primary agriculture12,359 2.8 14,234 3.0 14,876 2.6 17,175 2.8 17,590 2.7 Mining and quarrying5,770 1.3 5,259 1.1 5,325 0.9 3,376 0.6 3,774 0.6 Manufacturing (includingagro-based)20,930 4.8 21,497 4.5 24,975 4.4 27,555 4.5 29,348 4.5 Electricity, gas and water supply2,286 0.5 2,271 0.5 2,880 0.5 4,516 0.7 4,635 0.7 Wholesale and retail, restaurants and hotels19,425 4.5 21,276 4.4 25,107 4.5 30,401 5.0 31,655 4.9 Construction17,769 4.1 22,210 4.6 34,957 6.2 34,533 5.7 34,751 5.4 Real estate22,621 5.2 25,419 5.3 27,569 4.9 30,163 4.9 30,951 4.8 Transport, storage andcommunication16,684 3.8 15,786 3.3 16,277 2.9 18,567 3.0 18,248 2.8 Finance, insurance and businessservices35,428 8.2 34,450 7.2 31,582 5.6 32,068 5.2 33,178 5.1 Education, health and others22,162 5.1 21,846 4.6 21,842 3.9 19,381 3.2 32,904 5.1 Household sector254,385 58.6 282,474 59.0 344,257 61.0 378,754 62.0 402,376 62.3 Other sectors34,512 1.0 12,231 2.6 14,454 2.6 14,581 2.4 5,996 0.9 1 Includes loans sold to Cagamas2 Definitions of economic sectors/industries are based on MSIC 20003 Includes loans to individual businessesNote: Data based on BNM Monthly Statistical Bulletin (August 2020). Total may not add up due to roundingSource: Bank Negara Malaysiaorganisation of the ministry of finance malaysiaeconomic outlook 2021177ORGANISATION OF THE MINISTRY OF FINANCE MALAYSIADEPARTMENTS UNDER THE MINISTRY OF FINANCEMINISTER OF FINANCEYB Senator Tengku Dato Sri Zafrul Tengku Abdul Aziz AGENCIES UNDER THE MINISTRY OF FINANCE DEPUTY MINISTER OF FINANCE IIYB Tuan Mohd Shahar AbdullahDEPUTY MINISTER OF FINANCE IYB Datuk Abd. Rahim BakriTREASURY OF MALAYSIASecretary General of TreasuryDato Asri bin Hamidin HamidonROYAL MALAYSIAN CUSTOMSDEPARTMENTDirector General of CustomsDato Sri Abdul Latif bin Abdul KadirACCOUNTANT GENERALSDEPARTMENT OF MALAYSIAAccountant GeneralDatuk Dr. Yacob bin MustafaVALUATION AND PROPERTYSERVICES DEPARTMENTDirector General of Valuationand Property ServicesSr Azmi bin Abdul LatifLANGKAWI DEVELOPMENTAUTHORITYChief Executive OfficerDr. Hezri bin AdnanBANK SIMPANAN NASIONALChief ExecutiveDatuk Yunos bin Abd GhaniPERBADANAN INSURANSDEPOSIT MALAYSIAChief Executive OfficerEn. Rafiz Azuan bin AbdullahBURSA MALAYSIA BERHADChief Executive OfficerDatuk Muhamad Umar SwiftINLAND REVENUE BOARD OFMALAYSIAChief Executive OfficerDato Sri Dr. Sabin bin SamitahBANK NEGARA MALAYSIAGovernorDatuk Nor Shamsiah binti Mohd YunusEMPLOYEES PROVIDENTFUNDChief EPF OfficerEn. Alizakri AliasSECURITIES COMMISSIONMALAYSIAChairmanDatuk Syed Zaid AlbarLABUAN FINANCIALSERVICES AUTHORITYDirector GeneralDatuk Danial Mah AbdullahYAYASAN TUN RAZAKChairmanTun Mohammed Hanif bin OmarMALAYSIA TOTALISATOR BOARDChief Executive OfficerDato Abdul Rauf bin SaniRETIREMENT FUND(INCORPORATED)Chief Executive OfficerTuan Syed Hamadah binSyed OthmanPUBLIC SECTOR HOMEFINANCING BOARDChief Executive OfficerEn. Mohd Farid bin Dato Hj Nawawi178organisation of the ministry of finance malaysiaeconomic outlook 2021NATIONAL BUDGET OFFICEEn. Johan bin Mahmood MericanGOVERNMENT PROCUREMENTDIVISIONDato Zamzuri bin Abdul AzizGOVERNMENT INVESTMENTCOMPANIES DIVISIONDatin Rashidah binti Mohd SiesSTRATEGIC INVESTMENT DIVISIONDato Shahrol Anuwar bin SarmanSTATUTORY BODY STRATEGICMANAGEMENT DIVISIONEn. Mohd Sakeri bin Abdul KadirPUBLIC ASSET MANAGEMENTDIVISIONDr. Anuar bin AriffinOFFICE OF THE SPECIALCOMMISSIONERS OF INCOME TAXPn. Haslina binti MansorLEGAL DIVISIONPn. 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