DEVELOPMENTS IN THE MALAYSIAN ECONOMY

Growth increased in the second

quarter
While domestic demand in Malaysia has
remained strong, the prolonged weakness in
the external sector has affected the overall
growth performance. In the second quarter, the
Malaysian economy expanded by 4.3% (1Q
2013: 4.1%). Private consumption continued to
expand, while the growth in gross fxed capital
formation was supported by investment activities
of the private sector and public enterprises.
Exports registered a larger decline, amid
weakness across most export products.
On a quarter-on-quarter seasonally adjusted
basis, the economy recorded a growth of 1.4%
(1Q 2013: -0.4%).
Domestic demand remained robust
Domestic demand expanded by 7.3% in the
second quarter (1Q 2013: 8.2%), spurred by
sustained expansion in both household and
business spending, and continued support from
the public sector.

Private consumption expanded by 7.2% in the
second quarter (1Q 2013: 7.5%), supported by
stable employment conditions and sustained
wage growth in the domestic-oriented
sectors. Public consumption growth improved
(11.1%; 1Q 2013: 0.1%), refecting mainly higher
Government spending on supplies and services,
and sustained spending on emoluments.
Gross fxed capital formation continued to expand
(6%; 1Q 2013: 13.1%), reinforced by private
sector capital spending. Private sector investment
grew by 12.7% (1Q 2013: 10.8%), led by capital
spending in the consumer-related services sub-
sectors such as telecommunication and real estate,
the ongoing implementation of infrastructure
projects and capacity expansion in the oil and gas
sector. Meanwhile, public investment declined by
6.4% (1Q 2013: 17.3%). Continued expansion in
capital spending by public enterprises, particularly
in the oil and gas sector, telecommunications and
utilities sectors, was outweighed by lower Federal
Government development expenditure. By type of
assets, investment activity was driven mainly by
structures investment (10.9%; 1Q 2013: 12.9%),
while growth in machinery and equipment declined
(-0.5%; 1Q 2013: 15.1%).
GDP by Expenditure Components
(at constant 2005 prices)
2012 2013
2Q 1H 1Q 2Q 1H
Annual change (%)
Aggregate Domestic Demand
(excluding stocks)
Consumption
Private sector
Public sector
Gross Fixed Capital Formation
Private sector
Public sector
Net Exports
Exports of Goods and Services
Imports of Goods and Services
14.0
9.1
8.6
11.0
26.2
25.6
27.2
-40.4
1.6
8.3
11.8
8.4
8.0
10.1
20.7
22.4
17.9
-33.1
1.9
7.7
8.2
6.1
7.5
0.1
13.1
10.8
17.3
-36.4
-0.6
3.6
7.3
8.0
7.2
11.1
6.0
12.7
-6.4
-41.6
-5.2
-2.0
7.7
7.1
7.4
5.8
9.3
11.8
4.7
-38.7
-2.9
0.8
GDP 5.6 5.4 4.1 4.3 4.2
GDP (q-o-q growth,
seasonally adjusted) 1.3 - -0.4 1.4 -
Source: Department of Statistics, Malaysia
Share
2012
(%)
2012 2013
2Q 1H 1Q 2Q 1H
Annual change (%)
Agriculture
Mining
Manufacturing
Construction
Services
7.3
8.4
24.9
3.5
54.6
-4.6
2.2
5.7
21.5
6.6
-1.3
1.2
5.1
18.5
6.2
6.0
-1.9
0.3
14.2
5.9
0.4
4.1
3.3
9.9
4.8
3.1
1.0
1.9
12.0
5.4
Real GDP 100.0
1
5.6 5.4 4.1 4.3 4.2
Real GDP (q-o-q
seasonally adjusted) - 1.3 - -0.4 1.4 -
1
Numbers do not add up due to rounding and exclusion of import duties component
Source: Department of Statistics, Malaysia
GDP by Economic Activity
(at constant 2005 prices)
GFCF by Type of Assets
43.0
47.6 45.6 43.6
46.4 48.8 46.8 45.7 46.4
51.0
48.4
42.7 44.7 47.2
45.2 42.6 45.2 45.6 45.9
40.0
8.6 9.7
9.6
9.2 8.4 8.6 8.0 8.7 7.7 8.9
0
20
40
60
80
100
1Q
2011
2Q 3Q 4Q 1Q
2012
2Q 3Q 4Q 1Q
2013
2Q
Other Assets* Machinery &equipment Structures
* Other assets include mineral exploration, research &development, etc
Source: Department of Statistics, Malaysia
% share to real GFCF
Quarterly Bulletin
Second Quarter 2013
40
The Introduction of the Seasonally Adjusted GDP Series
Introduction
With effect from the second quarter of 2013, the Department of Statistics, Malaysia
(DOSM) will publish the seasonally adjusted (SA) series for Malaysias Gross Domestic
Product (GDP) and its key components. This initiative is part of DOSMs efforts to enhance
the data resources available for economic analysis. The availability of the SA data allows
for analysis on the basis of quarter-on-quarter (q-o-q) growth, which is more sensitive
to current momentum relative to year-on-year (y-o-y) growth. Of signifcance, q-o-q SA
growth could facilitate the earlier identifcation of turning points relative to y-o-y growth. The
practice of seasonally adjusting GDP and analysing q-o-q growth is in line with international
best practice, as refected in its extensive use in both the advanced and regional
economies
1
.
What is seasonal adjustment?
Many economic time series are affected by seasonality, which are predictable fuctuations
that depend on the time of the year. These include regular holidays and festivals (such as
Eid-ul Fitri and Chinese New Year), weather-related factors (such as predictable monsoons
and dry weather seasons) and trading day effects (which are related to the number of
working days in a quarter). These seasonal patterns result in quarterly fuctuations in GDP
that do not refect the underlying strength of the economy
2
. Seasonal adjustment is the
process of estimating and adjusting for these seasonal fuctuations in a data series. As a
result, quarterly fuctuations of SA GDP will better refect changes in the underlying trend,
business cycle movements and irregular shocks affecting the economy, while minimising
the distortions that arise from seasonal fuctuations (Figure 1).

1
Advanced economies (including the US, euro area and Japan) and regional peers (including PR China, Korea, the Philippines, Singapore
and Thailand) publish seasonally adjusted GDP data and q-o-q SA growth.
2
For example, factory closures due to a long holiday may lead to lower-than-usual production in a particular quarter, even in the absence of
shocks or fundamental slowdowns.
Seasonally adjusted GDP
Non-seasonally adjusted GDP
Source: Department of Statistics, Malaysia


Figure 1: Seasonal adjustment removes
predictable fluctuations in the levels
of GDP
130
140
150
160
170
180
190
200
2Q
05
4Q 2Q
06
4Q 2Q
07
4Q 2Q
08
4Q 2Q
09
4Q 2Q
10
4Q 2Q
11
4Q 2Q
12
4Q 2Q
13
RM billion
41
Quarterly Bulletin
Second Quarter 2013
DOSM employs the Seasonal Adjustment for Malaysia (SEAM) procedure to seasonally
adjust Malaysias GDP estimates
3
. SEAM consists of two steps: (1) the widely-used X-12-
ARIMA methodology
4
, and (2) a correction for moving holidays specifc to Malaysia. The
X-12-ARIMA method estimates and corrects for stable seasonality (seasonal patterns that
do not move along the Gregorian calendar, such as Christmas) and the Easter holiday.
Subsequently, regressions are used to capture moving holidays in Malaysia, which are
determined by the respective religious calendars
5
and are not captured by the X-12-ARIMA
methodology. This enables a more accurate estimation of SA GDP for Malaysia.
How is seasonally adjusted data useful?
With non-seasonally adjusted (NSA) data, only y-o-y growth can provide useful insights for
analysis on a quarterly basis. Y-o-y growth implicitly adjusts for seasonality, as it compares a
particular quarters GDP with the corresponding quarter in the previous year
6
(Figure 2). On
the other hand, q-o-q growth of NSA GDP is less meaningful, as it is distorted by quarterly
seasonal fuctuations (Figure 3). The availability of SA data enhances economic analysis
by enabling the analysis of q-o-q SA growth which is more sensitive to current momentum
relative to y-o-y growth. This is due to the reference points for the calculation of both growth
rates. Q-o-q SA growth is calculated with respect to the preceding quarter, highlighting the
extent to which the economy has grown since the previous quarter. In contrast, y-o-y growth
highlights the magnitude by which the economy has expanded relative to four quarters
earlier, rendering it less sensitive to current momentum.

3
Please refer to Norhayati Shuja, Mohd Alias Lazim, and Yap Bee Wah (2007) Moving Holiday Effects Adjustment for Malaysian Economic
Time Series, Department of Statistics, Malaysia for further details.
4
X-12-ARIMA was developed by the United States Census Bureau.
5
Religious calendars in Malaysia often follow the lunar calendar and do not coincide with the Gregorian calendar.
6
Y-o-y growth is not sensitive to seasonal patterns that occur within the same quarter each year.
Figure 2: Y-o-y growth is virtually identical
in both series as it is an implicit seasonal
adjustment
-8
-6
-4
-2
0
2
4
6
8
10
12
2Q
06
4Q 2Q
07
4Q 2Q
08
4Q 2Q
09
4Q 2Q
10
4Q 2Q
11
4Q 2Q
12
4Q 2Q
13
y-o-y growth (seasonally adjusted)
y-o-y growth (non-seasonally adjusted)
%
Source: Department of Statistics, Malaysia

q-o-q growth (seasonally adjusted)
q-o-q growth (non-seasonally adjusted)
Source: Department of Statistics, Malaysia


-10
-8
-6
-4
-2
0
2
4
6
8
2Q
06
4Q 2Q
07
4Q 2Q
08
4Q 2Q
09
4Q 2Q
10
4Q 2Q
11
4Q 2Q
12
4Q 2Q
13
Figure 3: Q-o-q growth requires SA data
for more effective analysis
%
Given its sensitivity, q-o-q SA growth is a particularly useful tool in the early identifcation of
major turning points in economic growth. This was highlighted in the second quarter of 2008
(the downturn from the global fnancial crisis) and the second quarter of 2009 (the recovery
from the downturn). In the second quarter of 2008, q-o-q SA growth already showed signs
of an economic slowdown (+0.5%; 1Q 2008: +2.4%), while y-o-y growth remained relatively
Quarterly Bulletin
Second Quarter 2013
42
strong (Figure 4). The economy subsequently contracted, due to weaker global demand. On
the other hand, in the second quarter of 2009, the economy was beginning to show signs of
a turnaround towards an economic recovery, as refected in the latest indicators. While y-o-y
growth remained negative, SA GDP grew by 2.5% on a q-o-q basis in the second quarter of
2009, suggesting that the GDP had already emerged from the trough (Figure 5). Therefore,
experience suggests that q-o-q SA growth can be a particularly useful complement to y-o-y
growth in the early identifcation of major turning points in a business cycle.
However, the sensitivity of q-o-q SA growth to current momentum also means that it is more
volatile than y-o-y growth (Figure 6). Conclusions over growth momentum based on a single
quarter of q-o-q SA growth may therefore be highly misleading. Rather, any trend should be
validated by subsequent data points to ascertain whether any change in the current growth
momentum refects either a temporary shock or a fundamental shift in the growth trajectory.
More importantly, it is also crucial to complement current analysis with concurrent and
leading indicators, as well as on-the-ground surveillance. This would allow for a more robust
assessment of the underlying state of the economy.
q-o-q growth (seasonally adjusted) (RHS)
y-o-y growth
Source: Department of Statistics, Malaysia


Figure 5: Q-o-q SA growth suggested
turnaround in momentum in 2Q 2009
% %
q-o-q growth (seasonally adjusted) (RHS)
y-o-y growth
Source: Department of Statistics, Malaysia


Figure 4: Q-o-q SA growth suggested
weakening momentum in 2Q 2008
% %
6.6%
0.5%
-4
-3
-2
-1
0
1
2
3
-16
-12
-8
-4
0
4
8
12
1Q
06
2Q 3Q 4Q 1Q
07
2Q 3Q 4Q 1Q
08
2Q 3Q 4Q
-3.7%
2.5%
-4
-3
-2
-1
0
1
2
3
4
-16
-12
-8
-4
0
4
8
12
16
1Q
07
2Q 3Q 4Q 1Q
08
2Q 3Q 4Q 1Q
09
2Q 3Q 4Q
q-o-q growth (seasonally adjusted) (RHS)
y-o-y growth
Source: Department of Statistics, Malaysia


Figure 6: Q-o-q growth is more volatile
than y-o-y growth
% %

-4
-3
-2
-1
0
1
2
3
4
-16
-12
-8
-4
0
4
8
12
16
2Q
'06
4Q 2Q
'07
4Q 2Q
'08
4Q 2Q
'09
4Q 2Q
'10
4Q 2Q
'11
4Q 2Q
'12
4Q 2Q
'13
43
Quarterly Bulletin
Second Quarter 2013
Conclusion
In summary, SA GDP estimates allow for the meaningful calculation of q-o-q growth for
Malaysia. Q-o-q SA growth serves as an additional tool that enables a richer understanding
of the underlying state of the economy. Given its sensitivity to current momentum and
its ability to detect turning points early, q-o-q SA growth can be a useful complement to
y-o-y growth for economic analysis. However, due to the more volatile nature of q-o-q SA
growth, analysis should also be complemented with the latest indicators and on-the-ground
surveillance to better ascertain the growth momentum.
Additional Material
1) Journal article from DOSM discussing Seasonal Adjustment for Malaysia (SEAM)
Norhayati Shuja, Mohd Alias Lazim, and Yap Bee Wah (2007) Moving Holiday Effects
Adjustment for Malaysian Economic Time Series, Department of Statistics, Malaysia
www.statistics.gov.my/portal/download_journals/fles/2007/Volume1/Contents_holiday.pdf
2) Technical Notes on seasonal adjustment of Malaysian GDP estimates
http://www.statistics.gov.my/portal/index.php?option=com_content&view=article&id=141
4&Itemid=111&lang=en
Benefts Limitations
Y-o-y growth An implicit seasonal adjustment
Less volatile
Less sensitive to current
momentum
Slower detection of turning points
Q-o-q SA growth More sensitive to current
momentum
Faster identifcation of turning
points
More volatile
Summary Table: A comparison between y-o-y and q-o-q growth
Quarterly Bulletin
Second Quarter 2013
44
Major economic sectors supported by
continued strength in domestic demand
On the supply side, the services and manufacturing
sectors continued to expand, driven largely by
sub-sectors catering to the domestic market.
Growth of the mining sector rebounded following
higher production of both natural gas and crude
oil. However, the agriculture sector moderated,
weighed down by a sharp reduction in natural
rubber output and slower growth in crude palm
oil production. In the construction sector, growth
remained frm, led by the civil engineering and
residential sub-sectors.
The services sector registered a growth of
4.8% in the second quarter (1Q 2013: 5.9%),
supported mainly by sub-sectors supporting
domestic demand. The wholesale and retail trade
sub-sector expanded by 5.0% (1Q 2013: 5.9%).
Growth in the retail segment was underpinned
Share
2012
(%)
2012 2013
2Q 1H 1Q 2Q 1H
Annual change (%)
Intermediate Services 41.0 7.2 6.2 6.3 4.0 5.1
Finance & insurance
Real estate & business services
Transport & storage
Communication
17.2
10.1
6.7
7.0
6.6
7.7
5.9
9.5
4.3
7.3
5.9
9.5
6.2
6.3
3.8
9.0
-0.2
6.9
4.2
9.8
2.9
6.6
4.0
9.4
Final Services 59.0 6.2 6.1 5.7 5.4 5.5
Wholesale & retail trade
Accommodation & restaurant
Utilities
Government services
Other services
26.1
4.5
4.6
14.7
9.2
6.1
6.8
4.3
8.3
4.2
6.2
6.5
4.6
7.7
4.1
5.9
6.2
3.9
6.0
5.2
5.0
4.9
4.1
6.6
5.3
5.4
5.6
4.0
6.3
5.2
Total Services 100.0
1
6.6 6.2 5.9 4.8 5.4
1
Numbers do not add up due to rounding
Source: Department of Statistics, Malaysia
Performance of the Services Sector (value added at constant 2005 prices)
by the continued strength in household spending,
while the wholesale segment moderated in tandem
with the slower trade activity. In the communication
sub-sector, growth remained robust (9.8%; 1Q
2013: 9.0%), refecting continued demand for
data communication services. Performance of the
transportation and storage sub-sector was better
at 4.2% (1Q 2013: 3.8%). This was attributed
to the frm growth in land transportation activity,
arising from production activity catering to the
domestic market, and the expansion in the aviation
industry. These developments more than offset the
impact of a weaker external environment on the
transportation and storage sub-sector. Growth in
the fnance and insurance sub-sector registered
a marginal contraction of 0.2% (1Q 2013: 6.2%),
weighed down by slower growth in insurance
premiums, particularly in life insurance. In addition,
banks income from fnancing activities also
recorded slower growth due to the moderation in
loan growth.
2012 2013
2Q 1H 1Q 2Q 1H
Index
MIER Consumer Sentiments Index
MIER Retail Trade Index
MIER Tourism Market Index
114.9
119.4
117.3
114.6
102.4
121.3
122.9
101.0
115.5
109.7
104.9
112.6
116.3
103.0
114.1
Annual change (%)
Tourist arrivals
Total passenger trafc at all airports
Total consumption credit outstanding
Total loans outstanding
Loans outstanding to the wholesale & retail trade, hotels & restaurants
Imports of consumption goods
Total sales of motor vehicles
Container cargo handled (Port Klang and PTP)
4.3
1.9
7.5
12.6
11.3
10.7
13.7
4.2
2.4
4.1
7.5
12.6
11.3
15.2
6.6
5.8
15.9
9.1
7.7
10.6
14.2
-0.6
13.9
-0.4
n.a.
17.1
1
7.1
9.1
14.7
6.9
-4.3
0.5
n.a.
12.3
2
7.1
9.1
14.7
3.3
4.1
0.1
1
April-May
2
J an-May

Source: Various sources
Selected Quarterly Indicators in the Services Sector
45
Quarterly Bulletin
Second Quarter 2013
Capacity utilisation rate in the manufacturing sector*
Overall
IPI (RHS)
Domestic-oriented industries
Export-oriented industries
* Beginning 2012, the capacity utilisation rate in the manufacturing sector has
been rebased fromvalue-add in year 2006 to value-add in year 2009
Source: Bank Negara Malaysia & Department of Statistics, Malaysia
% Index
80
85
90
95
100
105
110
115
120
125
130
45
50
55
60
65
70
75
80
85
90
1Q
2008
2Q 3Q 4Q 1Q
2009
2Q 3Q 4Q 1Q
2010
2Q 3Q 4Q 1Q
2011
2Q 3Q 4Q 1Q
2012
2Q 3Q 4Q 1Q
2013
2Q
The manufacturing sector expanded further
in the second quarter (3.3%; 1Q 2013: 0.3%),
due mainly to continued strength in domestic
demand. Growth in the domestic-oriented
industries increased to 8.3% (1Q 2013:
2.4%), due to higher production of transport
equipment and construction-related fabricated
metal products. The export-oriented industries
registered a growth of 1.8% (1Q 2013: -0.5%)
mainly due to higher production of chemicals
and refned petroleum products.
Overall capacity utilisation rate in the
manufacturing sector was sustained in the
second quarter (1Q and 2Q 2013: 79%). Export-
and domestic-oriented industries were operating
at 79% and 76% of total capacity, respectively
(1Q 2013: 80% and 74%, respectively).
The mining sector turned around to record a
positive growth of 4.1% (1Q 2013: -1.9%) as a
result of higher production of both natural gas
and crude oil. However, the agriculture sector
recorded a moderate growth of 0.4% (1Q 2013:
6.0%). Natural rubber output contracted sharply
as smallholders reduced tapping following a fall
in prices. In addition, production of crude palm
oil normalised to register a more moderate pace
of growth.
In the construction sector, growth remained
strong (9.9%; 1Q 2013: 14.2%), driven by the
civil engineering and residential sub-sectors.
Infrastructure and oil and gas projects, such as
the MRT, Tanjung Bin and Janamanjung power
plants, and Sabah-Sarawak Gas Pipeline,
remained the key drivers of growth in the sub-
sector. The construction of high-end residential
properties in Klang Valley, Penang and Sabah
supported growth in the residential sub-sector.
Share
2012
(%)
2012 2013
2Q 1H 1Q 2Q 1H
Annual Change (%)
Value Added (RM million at constant 2005 prices) 5.7 5.1 0.3 3.3 1.9
Overall Manufacturing Production
1
100.0 5.8 5.2 0.2 3.4 1.8
Export-oriented industries
Electronics and electrical products cluster
Of which:
Electronics
Electrical products
Primary-related cluster
Of which:
Chemicals and chemical products
Petroleum products
Rubber products
Off-estate processing
Domestic-oriented industries
Construction-related cluster
Of which:
Construction-related products
Fabricated metal products
Consumer-related cluster
Of which:
Transport equipment
Food, beverage & tobacco products
80.2
32.3
21.4
10.9
47.9
17.4
15.8
2.5
3.7
19.8
8.3
5.5
2.8
11.5
4.3
7.2
5.1
2.9
3.0
2.8
6.2
10.8
9.5
4.1
-15.4
8.2
4.8
2.6
7.6
11.3
14.6
10.2
4.0
1.5
-0.2
3.7
5.4
9.9
6.5
3.7
-7.8
9.1
6.5
1.8
12.3
11.4
12.1
10.8
-0.5
1.1
8.1
-7.0
-1.3
3.5
-11.4
12.1
11.9
2.4
2.7
-3.7
9.6
2.1
8.5
-1.0
1.8
1.3
8.4
-7.7
2.1
4.5
0.7
7.2
0.2
8.3
7.9
-8.2
27.3
8.7
21.9
-0.6
0.7
1.2
8.2
-7.4
0.4
4.0
-5.6
9.6
5.8
5.4
5.4
-6.1
18.4
5.4
15.0
-0.8
1
Industrial Production Index (2005=100)
Source: Department of Statistics, Malaysia
Performance of the Manufacturing Sector
Quarterly Bulletin
Second Quarter 2013
46
Share
2012
(%)
2012 2013
2Q 1H 1Q 2Q 1H
Annual change (%)
Value Added
(at constant 2005 prices)
Production
Of which:
Crude oil and condensates
Natural gas
100
-
-
2.2
5.7
-0.8
1.2
3.0
1.6
-1.9
-2.4
0.3
4.1
2.1
8.1
1.0
-0.2
4.0
Source: PETRONAS
Department of Statistics, Malaysia
Performance of the Mining Sector
Infation was higher in the second
quarter
The headline infation rate, as measured by the
annual change in the Consumer Price Index
(CPI), was higher at 1.8% in the second quarter
(1Q 2013: 1.5%). The increase was attributed
mainly to price increases in the food and non-
alcoholic beverages and housing, water,
electricity, gas, and other fuels categories.
Infation in the food and non-alcoholic
beverages category rose to 3.5% during the
quarter (1Q 2013: 2.9%), as a decline in supply
due to warmer weather led to more expensive
chicken prices (2Q 2013: 9.1%, 1Q 2013: 6.9%).
Infation in the housing, water, electricity, gas,
and other fuels category was also higher at
1.8% (1Q 2013: 1.3%) refecting an increase in
rental during the quarter.
The higher infation however, was partially offset
by the lower infation in the miscellaneous goods
and services category (2Q 2013: 0.4%, 1Q 2013:
1.3%) due to a decline in the prices of jewellery.
The Producer Price Index (PPI) recorded a
larger decline of 4.1% on an annual basis in
the second quarter (1Q 2013: -3.4%). In terms
of composition, prices of both commodity and
non-commodity related components declined by
10.8% and 0.2% respectively (1Q 2013: -9.5%
and +0.2% respectively). Prices of both local
and imported components also declined further
by 5.2% and 1.6% respectively (1Q 2013: -4.6%
and -0.5% respectively).
2012 2013
2Q 1H 1Q 2Q 1H
Annual change (%)
Value of construction work done
Housing approvals
New housing sales and advertising
permits
Production
1
of construction-related
materials
Structural metal products
Iron and steel
Structural non-refractory clay
and ceramic products
Ready-mix concrete
Loans for the construction sector
Approval
Disbursement
35.3
126.9
13.9
4.8
3.1
-2.0
8.9
23.8
-9.0
17.8
24.6
101.7
13.2
6.5
23.7
-6.8
6.1
21.2
12.3
16.8
16.3
-19.0
-14.8
2.7
16.1
6.6
-6.3
23.1
-28.9
23.5
11.6
-48.1
7.4
7.9
61.4
-1.6
-8.2
17.8
-5.8
25.3
13.8
-35.6
-3.2
5.4
37.0
2.2
-7.3
20.2
-18.7
24.6
1
Industrial Production Index (2005=100)
Source: Ministry of Housing and Local Government, Department of Statistics, Malaysia and
Bank Negara Malaysia
Indicators for the Construction Sector
Performance of the Agriculture Sector
Share
2012
(%)
2012 2013
2Q 1H 1Q 2Q 1H
Annual change (%)
Value Added
(at constant 2005 prices)
Industrial Crops
Of which:
Oil palm
Rubber
Food Crops
Of which:
Fishing
Livestock
100.0
55.7
36.5
8.2
44.3
14.4
11.7
-4.6
-12.0
-17.5
0.1
5.9
-0.2
7.3
-1.3
-5.9
-8.6
-5.0
4.7
-2.1
8.9
6.0
5.4
14.6
-2.2
6.7
6.9
6.7
0.4
-5.6
1.2
-26.2
7.3
1.3
8.1
3.1
-0.1
7.7
-13.7
7.0
4.0
7.4
Source: Department of Statistics, Malaysia
Contribution to Consumer Price Inflation
1Q 13 2Q 13
Source: Bank Negara Malaysia
-0.5 0.0 0.5 1.0 1.5 2.0
All Items
Food and non-alcoholic beverages
Housing, water, electricity, gas andother fuels
Restaurants and hotels
Furnishings, household equipment and
routine household maintenance
Transport
Alcoholic beverages and tobacco
Education
Miscellaneous goods andservices
Health
Recreation services andculture
Clothing and footwear
Communication
percentage points
47
Quarterly Bulletin
Second Quarter 2013
Stable labour market conditions in the
second quarter
Employment conditions improved during the
quarter, with total employment level averaging
13.08 million persons during the frst two
months of the quarter, representing a net job
gain of 244,000 persons compared to the
previous quarter. However, the unemployment
rate increased marginally to 3.2% in April-
May (1Q 2013: 3.1%), due to the faster
increase in the number of people in the
labour force. Labour demand in the second
quarter also strengthened as refected in the
higher number of job vacancies posted in the
JobsMalaysia Portal (353,261 positions; 1Q
2013: 322,146 positions).
The Ministry of Human Resources reported a
signifcant rise in the number of retrenchments
to 4,854 persons compared with 2,058
persons in the preceding quarter. However,
71% of the layoffs were accounted for by a
single frm in May due to company-specifc
reasons. Meanwhile, growth in aggregate real
wages in the manufacturing sector moderated
to 5.7% (1Q 2013: 6.4%), due to lower wage
growth in the export-oriented industries.
Moderation in the external sector in
line with weakness in global economy
The current account surplus amounted to
RM2.6 billion in the second quarter, equivalent
to 1.1% of GNI, due to a lower goods surplus as
well as sustained services defcit and outfows in
the income accounts.
Labour Market Conditions
Vacancies (LHS) Retrenchments (RHS)
Vacancies ('000 positions) Retrenchments (persons)
Vacancies data from2012 onwards is not comparable to previous
years due to a reclassification exercise
Source: Ministry of Human Resources
Note:
0
1,000
2,000
3,000
4,000
5,000
0
200
400
600
800
1,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2010 2011 2012 2013
Share
2012
(%)
2012 2013
2Q 1H 1Q 2Q 1H
Annual change (%)
Gross Exports
Manufactured
E&E
Non-E&E
Petroleum & agri-related
Equipment & metals
Misc. manufacturing goods
Commodities
Minerals
Agriculture
Gross Imports
Intermediate goods
Capital goods
Consumption goods
Re-exports and dual-use goods
Trade balance (RM billion)
100.0
67.0
32.9
34.1
12.9
12.6
8.6
32.1
20.7
11.4
100.0
61.4
15.9
7.5
15.2

2.8
2.1
-2.4
6.7
7.9
12.6
-2.7
3.7
16.3
-12.5
8.7
-0.2
27.1
10.7
37.9
21.3
3.3
1.6
-2.1
5.5
6.5
9.4
-1.4
6.4
18.6
-10.3
7.8
-0.8
22.9
15.2
37.0
51.1
-2.4
-3.2
-4.8
-1.6
-3.6
-0.9
0.3
-1.1
7.4
-17.0
6.4
-1.7
12.8
-0.6
39.5
16.3
-5.1
-2.5
-3.9
-1.2
-3.8
-2.4
4.7
-10.8
-4.7
-21.1
2.5
1.0
-6.3
6.9
16.8
8.2
-3.8
-2.8
-4.4
-1.4
-3.7
-1.7
2.5
-5.8
1.5
-19.1
4.4
-0.3
2.5
3.3
27.5
24.6
Source: MATRADE and Department of Statistics, Malaysia
Trade Account
2012 2013
2Q 1H 1Q 2Q 1H
RM billion
Current Account
(% of GNI)
Goods
Services
Primary income
Secondary income
Financial Account
Direct investment
Assets
Liabilities
Portfolio investment
Assets
Liabilities
Financial derivatives
Other investment
Ofcial sector
Private sector
Net Errors & omissions
2
7.9
3.6
29.8
-4.4
-12.8
-4.6
6.5
4.6
-6.7
11.3
-4.9
-3.8
-1.1
1.0
5.8
-0.3
6.1
-1.7
24.8
5.7
65.7
-9.5
-21.5
-10.0
-3.7
-4.8
-28.2
23.4
20.2
-11.4
31.5
1.0
-20.0
-1.0
-19.0
-15.4
8.7
3.9
24.7
-3.4
-8.8
-3.8
1.0
-2.2
-11.5
9.4
3.9
-5.3
9.2
0.2
-0.9
-0.7
-0.2
-5.6
2.6
1.1
18.7
-3.7
-8.4
-4.1
5.2
-7.9
-15.4
7.4
3.7
-11.0
14.7
-1.4
10.8
-1.3
12.1
-6.2
11.2
2.5
43.3
-7.1
-17.2
-7.9
6.2
-10.1
-26.9
16.8
7.6
-16.4
23.9
-1.2
9.9
-2.0
11.9
-11.8
Overall Balance 12.7 5.5 4.0 1.5 5.6

Assets: (-) denotes outows due to the acquisition of assets abroad by residents
Liabilities: (+) denotes inows due to the incurrence of foreign liabilities
1
In accordance with the Sixth Edition of The Balance of Payments and International
Investment Position Manual (BPM6) by the International Monetary Fund (IMF)
2
Includes foreign exchange revaluation on gains/losses made on international reserves
during the period under review
Source: Department of Statistics, Malaysia
Balance of Payments
1
The trade surplus narrowed to RM8.2 billion in
the second quarter (1Q 2013: RM16.3 billion),
following a further contraction in gross exports,
while gross imports continued to expand, albeit
at a more modest pace.
Quarterly Bulletin
Second Quarter 2013
48
Gross exports contracted in the second quarter
(-5.1%; 1Q 2013: -2.4%), refecting mainly
lower commodity exports, as prices of all major
commodities continued to decline. Exports
of E&E weakened due mainly to lower global
demand for personal computers and electrical
products, while non-E&E exports were weighed
down by the decline in resource-based exports.
Gross imports expanded at a more moderate
pace of 2.5% (1Q 2013: 6.4%), due mainly to the
contraction in imports of capital goods (-6.3%;
1Q 2013: 12.8%). The weakness in capital
imports was refected across both the transport
and non-transport equipment segments. In
contrast, consumption imports grew strongly,
driven by increased demand for processed food
and beverages and durable consumer goods.
Meanwhile, imports of intermediate goods
expanded marginally despite the decline in
manufactured exports, refecting a build-up in
inventories during the quarter.
The services account recorded a defcit of
RM3.7 billion in the second quarter
(1Q 2013: -RM3.4 billion), due mainly to higher
net payments for transport and construction
services. Nonetheless, net travel infows
increased despite lower tourist arrivals,
supported by higher spending by foreign tourists
in Malaysia relative to the previous quarter.
Share
2012
(%)
2012 2013
2Q !H 1Q 2Q 1H
Annual change (%)
United States
European Union (EU)
Japan
Selected ASEAN countries
1
North East Asia
PR China
Hong Kong SAR
Korea
Chinese Taipei
West Asia
2
India
Total exports
8.7
8.9
11.8
26.4
23.6
12.6
4.3
3.6
3.1
3.4
4.2
100.0
3.8
-9.1
7.0
10.3
0.5
9.2
-3.2
-15.2
-7.5
-0.9
7.6
2.8
4.6
-9.8
10.8
9.8
-1.3
2.9
-5.6
-5.0
-6.8
-2.8
1.5
3.3
-2.9
-6.6
-8.3
9.9
-5.0
-1.7
-9.0
-2.9
-15.7
-1.3
-3.2
-2.4
-4.7
-3.4
-8.4
0.7
-9.8
-9.5
-9.4
-8.5
-12.7
5.3
-10.2
-5.1
-3.8
-5.0
-8.4
5.2
-7.5
-5.8
-9.2
-5.5
-14.1
2.1
-7.0
-3.8
1
Singapore, Thailand, Indonesia, Philippines, Brunei Darussalamand Vietnam
2
United Arab Emirates, Saudi Arabia, Oman, Iraq, Qatar, Kuwait, J ordan, Lebanon, Bahrain, Syria, Palestine, Yemen and Iran

Source: Department of Statistics, Malaysia
Malaysia: Direction of Exports
The defcit in the primary income balance
declined slightly to RM8.4 billion (1Q 2013:
-RM8.8 billion), arising from higher investment
income accrued to Malaysian companies
investing abroad and lower investment income
accrued to foreign investors in Malaysia.
The higher income of Malaysian companies
investing abroad was attributable mainly to
companies in the oil and gas and services
sectors.
The fnancial account recorded a net infow of
RM5.2 billion in the second quarter (1Q 2013:
RM1 billion), largely refecting banking infows
and sustained direct investment by foreign
multinational corporations. During the quarter,
Malaysian residents continued to build direct
investment and portfolio assets abroad.
Outward direct investment (or change in direct
investment assets)
1
was larger at RM15.4 billion
(1Q 2013: RM11.5 billion) during the quarter.
This was due mainly to higher extensions of
equity capital following an acquisition of a
Norwegian company by a domestic oil and
gas frm, which amounted to RM7.6 billion.
The investments were undertaken primarily
by companies in the oil and gas and services
sectors, particularly within the fnance and
insurance, and information and communication
sub-sectors.
1
Malaysia adopted the latest manual in its compilation of balance of payments statistics (BPM6) in 1Q 2013. Under BPM6, outward direct investment
refers to change in direct investment assets (which includes direct investment abroad by Malaysia companies) while inward direct investment refers
to change in direct investment liabilities (which includes foreign direct investment into Malaysia). For a full account of these changes, please refer to
Economic and Financial Developments in the Malaysian Economy in the First Quarter of 2013, Bank Negara Malaysia, as well as Explanatory Notes on
Balance of Payments, First Quarter 2013, Department of Statistics Malaysia.
49
Quarterly Bulletin
Second Quarter 2013
Inward direct investment (or change in direct
investment liabilities) was slightly lower,
registering an infow of RM7.4 billion (1Q
2013: RM9.4 billion) despite higher extension
of equity capital during the quarter, as MNCs
reduced retained earnings in Malaysia to
distribute higher dividends to shareholders
abroad. Infows of direct investment were broad-
based, undertaken mainly by companies in the
manufacturing and oil and gas sectors.
Infows of portfolio funds amounted to RM3.7
billion during the quarter (1Q 2013: RM3.9
billion) on account of higher non-resident
purchases in the domestic capital market amidst
continued portfolio investment abroad by the
resident institutional players. There were also
sizeable outfows of foreign portfolio funds
later in the quarter in tandem with heightened
uncertainties in the global fnancial markets.
Other investment recorded a large net infow of
RM10.8 billion (1Q 2013: RM0.9 billion), mainly
attributed to larger placements of deposits by
foreign fnancial institutions in the domestic
banking system. The official sector continued to
register a small net outfow, due to repayments
of external loans.
The overall balance of payments registered a
surplus of RM1.5 billion in the second quarter
(1Q 2013: RM4 billion). Errors and omissions
(E&O) amounted to -RM6.2 billion and partly
refected foreign exchange revaluation gains on
international reserves, as the ringgit depreciated
against major currencies during the quarter.
External debt
Total external debt increased to RM284.7 billion
or USD88.6 billion as at end-June 2013 (end-
March: RM264.4 billion or USD84.8 billion),
equivalent to 29% of GNI.
Medium- and long-term external debt increased
to RM170.3 billion, as a net drawdown of external
borrowings by the private sector offset the net
repayment by the public sector. As at end-June
2013, the short-term external debt was also
higher at RM114.4 billion due mainly to the net
drawdown of interbank borrowings. The higher
total external debt during the quarter was also
due to the weakening of the ringgit against
regional and major currencies.
International reserves remained high
The international reserves of Bank Negara
Malaysia amounted to RM432.8 billion
(equivalent to USD136.1 billion) as at 28 June
2013. This reserve level has taken into account
the quarterly adjustment for foreign exchange
revaluation changes. As at 31 July 2013, the
reserves position amounted to RM438.3 billion
(equivalent to USD137.8 billion), sufficient to
fnance 9.7 months of retained imports and is
3.8 times the short-term external debt.
Reserves Retained import cover (RHS) Reserves/ST ext debt (RHS)
Net International Reserves (as at end period)
Source: Bank Negara Malaysia
Month/Times USD billion
2
4
6
8
10
12
14
70
80
90
100
110
120
130
140
150
160
J
2011
F M A M J J A S O N D J
2012
F M A M J J A S O N D J
2013
F M A M J J
as at 31 July 13:
USD137.8 billion
9.7 months
3.8 times
External Debt Outstanding
2012 2013
end-June end-Mar end-June
p
RM billion
Medium- and long-term debt
Public sector
Private sector
Short-term debt
1
Total external debt
USD billion equivalent
160.3
87.3
73.0
110.1
270.4
83.8
163.2
81.8
81.4
101.2
264.4
84.8
170.3
82.2
88.0
114.4
284.7
88.6
External debt/GNI (%)
Reserves/Short-termexternal debt (times)
29.9
3.9
27.0
4.3
29.0
3.8
2
1
Excludes currency and deposits held by non-residents with resident banking institutions
2
Based on international reserves as at 31 J uly 2013
p
Preliminary
Source: Ministry of Finance, Malaysia and Bank Negara Malaysia
Quarterly Bulletin
Second Quarter 2013
50
Higher Government revenue remained
supportive of expenditure
Federal Government revenue was higher at
RM51.6 billion in the second quarter, amid rising
individual income tax collections. The higher
revenue was channelled into sustaining the
increase in operating expenditure, which was
driven by higher payments for supplies and
services. Development expenditure was lower
during the quarter, with most of it disbursed to
the transportation and education sectors. As a
result, the Federal Government recorded a fscal
defcit of 1.9% of GDP during the quarter (2Q
2012: -2.7% of GDP). The defcit continued to be
fnanced from domestic borrowings. As at end-
June 2013, total outstanding debt of the Federal
Government amounted to RM519.3 billion or
51.8% of the estimated 2013 GDP.
2012 2013
2Q 1H 1Q 2Q 1H
RM billion
Revenue
% annual growth
Operating expenditure
% annual growth
Current account
% of GDP
Net development expenditure
% annual growth
Overall balance
% of GDP
50.7
2.2
48.2
18.8
2.5
1.1
8.8
6.8
-6.3
-2.7
98.6
10.3
93.8
18.4
4.8
1.0
16.9
16.2
-12.1
-2.6
43.8
-8.6
49.9
9.4
-6.1
-2.6
8.8
8.3
-14.9
-6.4
51.6
1.7
49.2
2.0
2.4
1.0
6.8
-22.4
-4.4
-1.9
95.3
-3.3
99.1
5.6
-3.7
-0.8
15.6
-7.6
-19.4
-4.1
Memo item:
Total net expenditure
% annual growth
Total Federal Government debt
(as at end-period)
% of GDP
Domestic debt
% of GDP
External debt
% of GDP
57.0
16.8
476.7
50.6
458.8
48.7
17.9
1.9
110.7
18.1
476.7
50.6
458.8
48.7
17.9
1.9
58.7
9.3
508.9
50.8
492.8
49.2
16.1
1.6
56.0
-1.8
519.3
51.8
502.9
50.2
16.5
1.6
114.7
3.6
519.3
51.8
502.9
50.2
16.5
1.6
p
Preliminary
Source: Ministry of Finance, Malaysia
Federal Government Finance
p
Federal Government Finance
p
Preliminary
Source: Ministry of Finance, Malaysia
RM billion
-30
-20
-10
0
10
20
30
40
50
60
70
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
2011 2012
p
2013
p
Overall balance
Development expenditure
Revenue
Operating expenditure
51
Quarterly Bulletin
Second Quarter 2013