M3 Growth to Rise While Loan Growth Moderates

Economic Research	1 March 2017
Malaysia
Economic Update
M3 Growth to Rise While Loan Growth Moderates Growth in broader money supply, M3, gained pace in January, on the back of a pick-up in demand for funds by the private and public sectors. We envisage M3 growth to pick up to 4.5% in 2017, from 3% in 2016 (2.6% in 2015). Meanwhile, loan growth is expected to slow to around 4.5% in 2017, from 5.3% in 2016, and compared with 7.9% in 2015, on account of: 1.   Slower household loans, due to more stringent rules on lending, and a softening property market; 2.   Moderating business loans due to a modest business environment. We expect headline inflation rate to pick up to 3% in 2017, from +2.1% in 2016 in view of several recent cost-push developments that would bolster inflationary pressure. The Central Bank, however, would likely keep the overnight policy rate (OPR) unchanged at the current level of 3% in 2017, in our view. Economist:  Vincent Loo Yeong Hong  | +603 9280 2172 Economist:  Aris Nazman Maslan  | +603 9280 2184