Headline inflation moderated to 3.7% in January

KUALA LUMPUR, 28 Feb 2023 — Headline inflation moderated to 3.7 per cent in January compared to 3.8 percent in December 2022 due mainly to lower core inflation, Bank Negara Malaysia (BNM) said.

In a statement today, the central bank also said that core inflation declined to 3.9 per cent during the month (December 2022: 4.1 per cent) which largely reflected lower inflation in several core services categories, such as telephone and telefax services, repair and maintenance for personal transport, and food away from home.

Meanwhile, BNM said the Index of Wholesale and Retail Trade (IOWRT) expanded by 9.5 per cent in December 2022 (November 2022: 9.8 per cent). Growth was supported by higher sales of discretionary goods such as clothing, footwear, jewellery and cosmetic goods as well as necessities in physical stores, such as supermarkets, compared to December 2021, when the economy just reopened.

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BNM also said that outstanding credit to the private non-financial sector grew by 4.3 per cent as at end-January 2023 (December 2022: 4.7 per cent), amid slower growth in credit to both businesses (3.3 per cent; December 2022: 3.9 per cent) and households (5.2 per cent; December 2022: 5.5 per cent).

“The growth in outstanding business loans moderated to 2 per cent (December 2022: 3.4 per cent), due mainly to slower growth in working capital financing (1.5 per cent; December 2022: 4.2 per cent). Meanwhile, outstanding corporate bonds continued to grow at a faster pace (5.1 per cent; December 2022: 4.6 per cent).

For households, outstanding loan growth moderated slightly as the growth in loan repayments (21.4 per cent) continued to outpace that of loan disbursements (9.2 per cent),” the central bank said.

BNM also said that banks remain well-capitalised to support economic recovery. “Banks’ capital position remains strong to support credit flows to the economy, with excess capital buffers of RM141.5 billion. Capital ratios rose marginally in January, driven by increases in retained earnings and new issuances of capital instruments,” it said.

BNM said overall gross and net impaired loans ratios remain largely unchanged at 1.7 per cent and 1.1 per cent, respectively.

Loan loss coverage ratio (including regulatory reserves) remains at a prudent level of 117.1 per cent of impaired loans, with total provisions accounting for 1.7 per cent of total loans, it added.

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