Malaysia †Quarterly Balance of Payment in 2010-2012 Essay

This report is focused on the analysis of Malaysia’s balance of payment for last six quarters (from Q3/2011 to Q3/2012). It will show the impact of balance of payment to economy or the financial crisis. The last part of this report will involve the summary and the forecast the Malaysia’s balance of payment in the future. Third quarter of 2011 Current account: the current account balance recorded a surplus of RM26.6 billion, an increase of RM3.2 billion (13.8 percent). This higher surplus was attributed to: the lower net payments on income of RM3.8 billion higher surplus on goods of RM38.2 billion. Goods Account: the surplus on goods increased to RM38.2 billion by Exports FOB expanded by RM5.0 billion to record RM176.7 billion. The demands for exports FOB was mainly contributed by electrical & electronic products, palm oil & palm oil based products and liquefied natural gas (LNG). Moreover, Imports FOB posted RM138.5 billion, an increase of RM3.1 billion (2.3 percent). This was attributed to higher value of imports Services Account: Exports of services registered RM26.6 billion. Meanwhile, imports of services posted RM29.0 billion. On net basis, the services account experienced higher deficit of RM2.4 billion from RM0.7 billion previously. This was mainly due to: 1. lower net receipts in travel account of RM5.5 billion from RM6.7 billion; and 2. higher net payments in transportation account of RM6.7 billion from RM6.3 billion. Income Account: income receipts recorded RM13.9 billion from RM11.2 billion previously, of which investment income recorded RM13.0 billion and compensation of employees RM0.9 billion. On the payments side, income account registered RM17.8 billion from RM18.0 billion, of which investment income recorded RM16.3 billion and compensation of employees RM1.4 billion. So there was more investment in Malaysia. Current Transfers: Net payments on current transfers remained unchanged. Capital account: In the current quarter of 2011, the capital account recorded a higher net outflow of RM58.0 million from that of RM26.0 million posted last quarter. Year-on-year, net outflow of capital account narrowed from RM63.0 million. Cumulatively, the capital account recorded lower net outflow of RM97.0 million from RM166.0 million in the first nine months of 2010. Financial account: The financial account reverted to net outflow of RM23.3 billion from net inflow of RM44.5 billion previously. This was mainly due to a swing in portfolio investment from net inflow of RM48.1 billion to net outflow of RM23.4 billion. Direct Investment: direct investment posted net outflow of RM7.7 billion, consisting of DIA: higher net outflow of RM12.9 billion. The major sectors attributed to DIA were financial & insurance, oil & gas, and construction. FDI: lower net inflow of RM5.2 billion. FDI inflows were primarily channeled into manufacturing, oil & gas, and wholesale & retail trade sectors. Portfolio Investment: Portfolio investment reverted to net outflow of RM23.4 billion from net inflow of RM48.1 billion previously. Year-on-year, portfolio investment also showed a turnaround from net inflow of RM18.3 billion a year ago. Reserve assets: The international reserves Bank Negara Malaysia increased by RM10.9 billion in the current quarter as compared to an increa se of RM61.7 billion in Q2 2011. Fourth quarter of 2011 Current account: the current account recorded a surplus of RM22.0 billion, a decrease of RM4.6 billion. The lower surplus was reflected in: higher net payments on income of RM5.6 billion, higher net payments on services of RM4.0 billion, and lower surplus on goods of RM36.9 billion. Goods Account: goods registered a lower surplus amounting to RM36.9 billion from RM38.2 billion a quarter ago. This was attributed to the higher imports FOB. The demand for exports FOB was mainly associated to electrical & electronic products, palm oil & palm oil based products and liquefied natural gas (LNG). In the meantime, there was the higher imports FOB Services Account: exports of services registered higher net receipts of RM28.1 billion, an increase of RM1.5 billion. Meanwhile, imports of services increased by RM3.0 billion (10.3 per cent) to record RM32.0 billion from RM29.0 billion in Q3 2011. In terms of net, the net payments on services account broadened to RM4.0 billion from RM2.4 billion pre viously. This was mainly due to higher net payments on other services amounting to RM3.2 billion as compared to RM1.1 billion in July – September 2011. Income Account: In the current quarter, income receipts recorded RM14.7 billion from RM13.9 billion in the preceding quarter. The RM0.8 billion increase was reflected in higher receipts on investment income of RM13.8 billion, while compensation of employees consistently maintained receipts of RM0.9 billion. On net basis, the outlay on income account widened to RM5.6 billion from RM3.8 billion. This was contributed by higher net outlay on both investment income of RM4.8 billion and compensation of employees of RM0.8 billion. Current Transfers: Net payments on current transfers continued to record RM5.3 billion for three consecutive quarters. Current transfers saw an increase in both receipts and payments amounting to RM1.5 billion and RM6.8 billion. Capital account: In Q4 2011, capital account posted lower net outflow of RM54.0 million from RM58.0 million in Q3 2011. This was mainly due to lower net payments on capital transfers from RM34.0 million to RM16.0 million. Financial account: In the quarter under review, financial account posted net inflow of RM0.2 billion, a reversal from net outflow of RM23.3 billion. This scenario was supported by the lower outflow in portfolio investment of RM2.7 billion, coupled with higher inflow in other investment of RM11.2 billion. Direct Investment: Direct investment posted a net outflow of RM7.9 billion from RM7.7 billion last quarter, of which: DIA: higher net investment outflow of RM14.3 billion. The major sectors attributed to DIA were oil & gas, financial & insurance, and utilities. FDI: higher net inflow of RM6.5 billion. FDI inflows were primarily channeled into manufacturing, oil & gas, and wholesale & retail trade sectors. Portfolio Investment: Portfolio investment registered lower net outflow of RM2.7 billion from RM23.4 billion attained last quarter. Year-on-year, portfolio investment reverted from net inflow of RM3.5 billion to net outflow of RM2.7 billion. Reserve Assets The international reserves of Bank Negara Malaysia increased by RM6.3 billion in Q4 2011 as compared to an increase of RM10.9 billion in Q3 2011, stood at RM423.4 billion as at end of 2011. First quarter of 2012 Current account: In the period January – March 2012, current account recorded lower surplus of RM18.1 billion from RM22.4 billion in Q4 2011. This was mainly attributed to: Income account: A higher net outflow of RM8.6 billion Goods account: A lower surplus of RM35.8 billion. Goods Account: goods registered lower surplus of RM35.8 billion (-RM1.0 billion or -2.8 per cent) from RM36.8 billion last quarter. This was due to decrease in exports FOB larger than that of imports FOB Services Account: exports of services registered RM27.9 billion from RM29.0 billion during Q4 2011, consisting of the following components: transportation of RM3.3 billion, travel of RM14.7 billion, other services of RM9.9 billion, and government transactions of RM49.0 million. Meanwhile, imports of services decreased. On net basis, services account remained unchanged Income Account: On net basis, the income outlay widened by RM3.3 billion to RM8.6 billion from RM5.3 billion recorded in the preceding quarter, specifically due to higher net outlay on investment income of RM7.8 billion from RM4.5 billion. Current Transfers: current transfers continued to record net payments RM5.3 billion. Both receipts and payments saw an increase amounting to RM1.5 billion and RM6.8 billion. Capital a ccount: capital account posted higher net outflow of RM166.0 million from RM55.0 million in Q4 2011. This was mainly due to higher net payments on capital transfers to RM93.0 million from RM17.0 million. Financial account: financial account recorded a higher net outflow of RM10.3 billion from RM0.2 billion posted in previous quarter. This higher net outflow was mainly attributed to other investment: reverted to net outflow RM26.1 billion from net inflow RM11.0 billion, and direct investment: higher net outflow of RM9.4 billion from RM8.2 billion. Direct Investment: Direct investment registered a net outflow of RM9.4 billion from RM8.2 billion last quarter, of which: DIA: higher net outflow of RM16.9 billion which were wholesale & retail trade, financial & insurance, and health services. FDI: higher net inflow of RM7.5 billion. FDI inflows were primarily channeled into oil & gas, financial & insurance, and manufacturing sectors. Portfolio Investment: The portfolio investment switched to net inflow of RM25.3 billion from net outflow of RM2.7 billion previously. Meanwhile year-on-year, portfolio investment registered higher net inflow by RM16.9 billion to RM25.3 billion. Other Investment: In the current quarter, other investment reverted to a net outflow of RM26.1 billion from a net inflow of RM11.0 billion. This was attributable to a turnaround in the private sector to -RM25.6 billion from a net inflow of RM11.1 billion. Reserve Assets: The international reserves of Bank Negara Malaysia decreased by RM7.2 billion in Q1 2012 as compared to an increase of RM6.2 billion in Q4 2011, stood at RM416.1 billion as at end of March 2012. Second quarter of 2012 Current account: In April – June 2012, current account balance showed a lower surplus of RM9.6 billion, a decrease of RM8.5 billion from RM18.1 billion attained a quarter ago. The lower surplus was reflected in: Goods account: recorded lower surplus by RM6.4 billion to RM29.4 billion from RM35.8 billion; and Income account: the net outlay widened by RM3.1 billion to RM11.7 billion from RM8.6 billion. Goods Account: the current quarter, the goods account registered a lower surplus of RM29.4 billion as compared to RM35.8 billion in the previous quarter. This was due to imports FOB which expanded at a faster pace (7.3 per cent) relative to that of exports FOB (2.1 per cent). Exports FOB increased to RM177.7 billion compared to RM174.0 billion in Q1 2012. This was mainly contributed by higher exports for electrical & electronic products and palm oil & palm oil based products. Imports FOB rose to RM148.2 billion. This was due to higher domestic demands for imports by end-use for three major categories namely intermediate goods, capital goods, and consumption goods. Services Account: In the quarter under review, exports of services registered RM28.9 billion from RM27.9 billion last quarter. Meanwhile, imports of services increased by RM0.7 billion from RM31.7 billion a quarter ago, of which: transportation of RM10.4 billion, travel of RM9.0 billion, other services of RM12.8 billion; and, government transactions of RM194.0 million. On net basis, services account posted lower net payments of RM3.6 billion from RM3.8 billion last quarter. This was led by a lower deficit on other services from RM2.5 billion to RM1.8 billion. On the contrary, transportation posted higher net payments of RM7.1 billion while travel recorded lower net receipts of RM5.4 billion. Income Account: In the current quarter, income receipts registered RM9.0 billion from RM9.6 billion in Q1 2012. On net basis, the income outlay broadened to RM11.7 billion from RM8.6 billion posted in the previous quarter. This was solely due to higher net outlay in investment income amounting to RM11.1 billion. Meanwhile, compensation of employees recorded a lower net outflows of RM0.6 billion. For the first half of 2012, the deficit on income account broadened to RM20.3 billion, affected by higher net payments on investment income Current Transfers: In the quarter under review, the net payments on current transfers narrowed to RM4.6 billion. Both receipts and payments increased to record RM2.3 billion and RM6.9 billion. Capital account: In Q2 2012, the capital account registered lower net outflow of RM67.0 million from RM166.0 million last quarter. This was due to lower net outflow on both capital transfers and non-produced, nonfinancial assets by RM60.0 million and RM40.0 million, respectively. Financial account: In the quarter ended June 2012, the financial account turned around to a net inflow of RM5.4 billion from net outflow of RM10.3 billion previously. This movement was driven by a switch in both other investment and direct investment. On the contrary, portfolio investment saw a reversal to net outflow of RM5.0 billion, from net inflow of RM25.3 billion. Direct Investment: The direct investment switched to a net inflow of RM3.5 billion from a net outflow of RM9.4 billion last quarter, of which: DIA: recorded lower net outflow of RM2.5 billion. These investments were largely directed into oil & gas, real estate, and financial & insurance sectors. FDI: lower net inflow of RM6.1 billion, decreased by RM1.4 billion from RM7.5 billion previously. FDI inflows were primarily channeled into oil & gas, manufacturing, and financial & insurance sectors. Portfolio Investment: Portfolio investment reverted to net outflow of RM5.0 billion from net inflow of RM25.3 billion previously. Meanwhile year-on-year, portfolio investment turned around to net outflow of RM5.0 billion from net inflow of RM48.0 billion in Q2 2011. On the contrary, for the period January – June 2012, portfolio investment registered lower net inflow of RM20.3 billion from RM56.5 billion, a decrease of RM36.1 billion. Reserve Assets The international reserves of Bank Negara Malaysia increased by RM12.7 billion in Q2 2012 as compared to a decrease of RM7.2 billion in Q1 2012, stood at RM428.8 billion as at end of June 2012. Third quarter of 2012 Current account: The current account balance recorded a lower surplus of RM9.5 billion for the period of July – September 2012, as compared to RM9.6 billion in the preceding quarter. This lower surplus was reflected in: Goods account: lower surplus RM25.5 billion Current transfers: the net payments widened to RM4.7 billion Meanwhile, income and services account recorded lower net payments of RM7.9 billion and RM3.4 billion Goods Account: In the quarter under review, the goods account registered a lower surplus of RM25.5 billion as compared to RM29.4 billion in the previous quarter. This was due to decrease in exports FOB by 1.8 per cent relative to increase in imports FOB by 0.5 per cent. Services Account: exports of services remained the same as previous quarter Income Account: the income receipts recorded RM11.4 billion increased by RM2.5 billion from RM9.0 billion in Q2 2012. Compensation of employees remained RM1.0 billion and investment income attained RM10.4 billion. The investment income comprises of: direct investment abroad (DIA): higher receipts of RM3.8 billion, mainly generated from financial & insurance, oil & gas, and information & communication sectors portfolio investment: higher receipts of RM1.3 billion other investment: higher receipts of RM5.4 billion However, income payments (debit) recorded RM19.4 billion decreased by RM1.3 billion from RM20.7 billion in Q2 2012. On net basis, the income account deficit reduced to RM7.9 billion from RM11.7 billion previously. This was primarily due to a lower net payments in investment income amounting to RM7.2 billion, while compensation of employees recorded higher net payments of RM0.7 billion. Current Transfers: In the third quarter 2012, both receipts and payments decreased to record RM1.4 billion and RM6.1 billion. On net basis, this account recorded higher net payments RM4.7 billion. Capital account: In Q3 2012, the net outflow decreased to RM42.0 million from RM67.0 million last quarter. This was due to lower outflow on both capital transfers and nonproduced nonfinancial assets which recorded RM24.0 million and RM18.0 million Financial account: In the current quarter, the financial account reverted to a net outflow of RM8.7 billion from net inflow of RM5.4 billion reported previously. This was due to a swing in both portfolio investment from net outflow of RM5.0 billion to net inflow of RM27.6 billion and other investment to net outflow of RM38.1 billion from net inflow of RM5.9 billion. On the contrary, direct investment recorded lower inflow RM1.9 billion from RM3.5 billion. Direct Investment: Direct investment posted a lower net inflow of RM1.9 billion from RM3.5 billion during previous quarter. Portfolio Investment: Portfolio investment recorded a net inflow of RM27.6 billion, turned around from net outflow of RM5.0 billion previously. Similarly, year-on-year, portfolio investment switched to net inflow from net outflow of RM28.0 billion in Q3 2011. Reserve Assets: The international reserves of Bank Negara Malaysia decreased RM7.5 billion in Q3 2012 as compared to an increase of RM12.7 billion in Q2 2012, stood at RM421.3 billion as at end of September 2012. Summary and Forecasting of Balance of Payment As you seen that, the balance of trade (export-import) both of goods and services continually decrease between third quarter of 2011 to third quarter of 2011. Especially, the last two quarter (Q2/2012 and Q3/2012). The major reasons are the Eurozone Crisis and Hamburger crisis in United State of America that provide a large impact to Malaysia in term of export of goods and services. In second quarter of 2012 it decrease 19.78 percent from the first quarter of 2012 and it also decrease 14.54 in the third quarter. For these reasons makes Malaysia’s export decline because the European countries and USA are the large market for Malaysian exporter. The financial account is very fluctuating between these five quarters. The causes are Eurozone crisis and Hamburger crisis same as above problems. The investors’ confident are decline. It make the direct investment decrease in the third quarter of 2012 and other investment was negative RM 38,083 million. On the other hand, a lot of investors move their portfolio to Malaysia for avoid the risk and uncertainty in Europe and USA. That makes the portfolio investment surplus RM 27,588 million. In the near future, the balance of payment of Malaysia will be continually decrease in term of balance of trade, current account and the financial account will be increasing. The central bank of Malaysia will cut the interest rate and use the fiscal deficit policy. This cause will make the Malaysia’s citizen has more income and more consumption. Next, Malaysia will import more goods and services to server their people due to the higher purchasing power. In term of financial account will be change in positive way. When the Malaysian government cut the interest rate, it will attract the foreign investors to invest and boost the economy. The portfolio investment will be also surplus because the problems in Europe and USA. So, the investors will avoid their risk by investing in Malaysia’s financial market. References : http://www.statistics.gov.my/portal/index.php?option=com_content&view=article&id=1324%3Aquarterly-balance-of-payments-performance-julyl-september-2011-updated-18112011&catid=103%3Amalaysia-balance-of-payments&Itemid=153&lang=en http://www.statistics.gov.my/portal/index.php?option=com_content&view=article&id=1413%3Abop&catid=103%3Amalaysia-balance-of-payments&Itemid=153&lang=en http://www.statistics.gov.my/portal/index.php?option=com_content&view=article&id=1586%3Abalance-of-payments-first-quarter-2012updated-23052012-&catid=103%3Amalaysia-balance-of-payments&Itemid=153&lang=en http://www.statistics.gov.my/portal/index.php?option=com_content&view=article&id=1700%3Aquarterly-balance-of-payments-performance-april-june-2012-updated-15082012&catid=103%3Amalaysia-balance-of-payments&Itemid=153&lang=en http://www.statistics.gov.my/portal/index.php?option=com_content&view=article&id=1797%3Aquarterly-balance-of-payments-third-quarter-2012-updated-16112012&catid=103%3Amalaysia-balance-of-payme nts&Itemid=153&lang=en http://www.tradingeconomics.com/malaysia/net-trade-in-goods-and-services-bop-us-dollar-wb-data.html