



The annual report provides an analysis of the developments in the Malaysian economy and outlines the challenges ahead.• The Malaysian economy registered a commendable growth of 4.2% in 2016.• The country’s economy is projected to register 4.3% - 4.8% growth in 2017.• Domestic demand continues to be the principal driver of growth.• Private consumption growth is expected to expand 6% in 2017.• The current account is expected to register a surplus of 1.0% - 2.0% of gross national income (GNI) in 2017.• Headline inflation is projected to average higher in the range of 3.0% - 4.0% in 2017.• The international reserves of Bank Negara amounted to US$94.5bil (equivalent to RM423.9bil) as at end-2016.• Current account position stood at RM25.2bil or 2.1% of GNI, a smaller amount compared to the previous year (2015: RM34.7bil, 3.1% of GNI).• Monetary policy in 2017 will continue to ensure that its stance is consistent with sustaining a steady growth path amid price stability.• Fiscal policy in 2017 will focus on further strengthening of the Government’s fiscal position, while ensuring continued support for domestic growth and promoting economic inclusiveness.• The Federal Government’s fiscal deficit is expected to narrow further, underpinned by sustained growth in revenue and a modest expansion in operating expenditure.• In the 2017 Budget, fiscal resources have been strategically prioritised towards high impact infrastructure projects and programmes for capacity building.• For the year as a whole, the ringgit depreciated by 4.3% to end the year at RM4.486 against the US dollar.• The Financial Markets Committee (FMC), in collaboration with Bank Negara, introduced several measures to deepen and broaden the domestic foreign exchange market, including by promoting foreign exchange hedging within the domestic foreign exchange market.• Another measure was to require the conversion of foreign currency export proceeds into ringgit.• The external debt stood at RM908.7bil, equivalent to US$200.6bil or 73.9% of GDP as at end-2016 (2015: RM833.8bil).• Malaysia’s external debt position increased by 6.2%, mainly on account of higher intercompany and interbank borrowings.• Malaysia’s external debt remains manageable given its currency, maturity and balance sheet profiles. About 34.4% of the external debt is denominated in ringgit, mainly in the form of non-resident holdings of domestic debt securities and deposits.• Offshore borrowing declined to 42.7% of GDP as at end-2016 compared to 60% of GDP during the Asian Financial Crisis.• As at end-2016, Malaysia recorded a current account surplus and remains a net creditor nation, with international reserves accounting for only a quarter of total external assets.• Bank Negara’s total assets amounted to RM451bil, with a net profit of RM6.5bil for the financial year ended Dec 31,2016• Bank Negara declared a dividend of RM2.5bil to the Government for the year 2016• Since 2012, the increase in house prices in Malaysia has outstripped the rise in income levels. Consequently, prevailing median house prices are beyond the reach of most Malaysians.• The undersupply of housing is particularly acute in the affordable housing segment. This is likely to worsen going forward given current trends in income and demographic factors.• Growth in loans outstanding for home purchase averaged at 13.2% during 2012-2014 (2008-2009: 9.8%). This moderated to 9.2% in 2016 due to the softer housing market.• As at end-2016, about 56% of loans outstanding were for houses priced below RM250,000, while loans for houses priced between RM250,000 to RM500,000 accounted for another 25%.• Rejection rates for housing loan applications fell further to 23.6% in 2016 (2012 - 2015: 26.1%).• Loans for real estate activities and residential property construction increased at a healthy rate of 11.7% in 2016.• Meeting the demand of affordable housing units going forward requires the commitment of both the Government and the private sector.• On the demand side, the development of the rental market to bridge the affordability gap could relieve some of the pressure on the Government to build all of the affordable housing.