KUALA LUMPUR, Oct 7 (Bernama) – Domestic financial market remains orderly and financial intermediation continues to support the economic recovery despite external headwinds, the Ministry of Finance said.
In its Economic Outlook 2023 report released today, MoF said the degree of monetary accommodation was reduced amid strong domestic growth prospects and the unprecedented conditions during the COVID-19 crisis that necessitated the extraordinary monetary support have since abated.
It said this was reflected in the overnight policy rate (OPR) being raised by a cumulative 75 basis points for three consecutive times from May to September 2022.
The ministry said monetary aggregates continued to expand during the first seven months of 2022 with narrow money (M1) grew by 9.3 per cent to RM602.2 billion on higher demand deposits while broad money (M3) enlarged by 5.5 per cent to RM2.22 trillion on higher net claims on the private sector.
“Future monetary policy stance will continue to be guided by the Monetary Policy Committee’s (MPC) assessment of evolving conditions and their implications on the overall outlook to domestic inflation and growth.
“The MPC will continue to conduct monetary policy in Malaysia in order to achieve the goal of price stability and sustainable economic growth over the longer term,” it said.
On banking sector performance, MoF said it remained well capitalised to support economic recovery amid heightened volatility in global financial markets, reflecting the strong capital position of banks which recorded RM129.6 billion of excess capital buffer and healthy capital ratios as at end-July.
It said the banking system’s pre-tax profit improved to RM20.9 billion as at end-June 2022 amid moderation in credit cost due to the pre-emptive of provisions in 2020 and 2021 as well as gradual tapering of loan loss provisions as repayment activities picked up.
“The overall profitability of banks is expected to remain robust supported by improvements in loan growth as the country recovers from the prolonged effects of the COVID-19 pandemic,” it said.
MoF said the demand for loans remained high as loan applications recorded an uptick by 20.1 per cent to RM775.3 billion following the normalisation of economic activities while loan approvals increased by 27.8 per cent to RM382 billion during January-July 2022.
It said outstanding household loans grew by 6.1 per cent to RM1.16 trillion as at end-July and loan disbursements rose 23.4 per cent to RM236.9, billion, particularly for the purchase of residential properties and passenger cars.
The ministry said total household debt was valued at RM1.41 trillion as at end-July 2022.
It added that the growth in household debt during the first half of the year was due to various public and private home ownership incentives as well as sales and service tax exemption on vehicle purchases.
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