00:00Now, we are coming today, speaking to you, the economy minister has highlighted some of these geopolitical tensions as well,
00:08and I think it's sort of par for the course when it comes to dealing with these things in the region.
00:14What is your sense of whether we are seeing a sort of new world order emerging?
00:20I think it's important to start by reinforcing again that Malaysia is back, yep,
00:25and effectively we've focused about rebuilding the economy into new energy drivers for the country, right?
00:33And these last three years have been transformative for Malaysia to get the basics right.
00:37So fiscal reform has been a big agenda for us.
00:40We've managed to control fiscal deficits.
00:42We've taken it down towards our target in a FRA of three.
00:45And now what we're seeing is also that stability has allowed us to attract FDIs coming into Malaysia in a better form, yep.
00:53And because of that, all cylinders are firing at this point of time.
00:57Of course, the geopolitical world is choppy.
01:00We've seen that.
01:01But Malaysia has shown tremendous resilience, and last year was an example of that, right?
01:07Originally, we forecasted Malaysia to come in between 4 to 4.8% GDP growth.
01:14But our fourth quarter advance estimate is indicating a 5.7%, which will take the year-focused growth to about 4.9% overall.
01:23So that shows that the resilience, the diversification of our economy has actually anchored Malaysia well.
01:30And because clarity of policy has been established, people can come in, people can look at Malaysia and use it as a core base to actually do a lot more things.
01:39I wonder, though, given how Malaysia has boomed in the past couple of years, and a lot of this has to do with tech-related investments, how predicated is it that this AI bubble doesn't burst?
01:52I think the reality is, if you look at where we position ourselves in the semiconductor space, yep, we're very strong in offset, we're very strong in testing.
02:03And at the moment, we're also trying to punch through into cheap designs and so on.
02:07So when you look at the whole value chain, it's about growing and anchoring the value chain to be stronger in the future as we move forward.
02:14But the base element today is relevant today, because core infrastructure growth is needed.
02:21Data centers are core in terms of the AI journey, and Malaysia's chips that are coming in are being highly demanded at this point of time.
02:30So I think, despite the challenges of what we've seen, resilience of core demand is still there.
02:36Yeah. The key for Malaysia is actually in architecting, where do we want to position overall country as a future, not just from where we were in the past, but actually going up the value chain, pushing down cheap design, looking at advanced packaging as another leapfrog ahead, and looking at other segments of industries that we want to anchor, building on strength that exists in Malaysia.
02:59So core demand is intact, moving up the value chain that's underway.
03:06What is your sense of the growth trajectory for this year then? Because the government's estimates, is there a way that we can see it upward revised?
03:15At the moment, we're still anchored on the 4% to 4.5% GDP growth for this year.
03:21But we saw order books for manufacturers are still strong, just from data that we're gathering today.
03:26So Bank Negara will be releasing the GDP forecast for this year, probably in the window of April to May sort of window.
03:33So at that time, I think that will be appropriate to do a revision.
03:36Okay. And what do you think the scope for that potential revision? Is it going to be something towards the ballpark area of five, potentially?
03:45I think let the technocrats actually do the work and look at it.
03:49At the moment, I'm optimistic that the revision will be an upwards revision, but let us have the core discipline to price things well.
03:57Okay. Do you think Bank Negara has room to ease this year?
04:01But if growth is as strong as you're alluding to, then does it need to?
04:06I think the economy, as I said, is firing on all cylinders, right?
04:10If you look at the fourth quarter GDP estimates, all segments of the market was actually on positive growth.
04:16And so I don't think there's a necessity for us to do any more stimulus along the way because the engines are moving well.
04:23In the government's focus, the government's also activating and strengthening its focus on domestic economy.
04:29So you saw in the 2026 budget, a lot of allocation has gone down in projects, in domestic consumption and so on.
04:38And a lot of focus in terms of lifting the quality of life in Malaysia.
04:43So pay, salaries are big things.
04:45So when we do that, it actually induces also a multiplying effect in the economy because spending levels on public consumption has also gone up.
04:52What we're also orchestrating in Malaysia is making sure that our government-linked entities also spend some amount of time to orchestrate growth for Malaysia.
05:03From the Ministry of Finance, we don't tell what they invest in, but we encourage them to do a lot more in Malaysia.
05:08And we've seen them step up investments in Malaysia.
05:11So this is providing more capital into the space.
05:14If growth is firing on all cylinders, as you say, what might the effect on price pressures domestically be then?
05:22Because we are seeing a number of Asia central banks sounding more hawkish.
05:27The RBA has made an awkward U-turn.
05:31It's had to hike rates.
05:32Is a BNM rate hike in the realm of possibility?
05:37I think if you look at inflation, inflation is behaving itself, right?
05:41The numbers at the end of December show overall inflation from Malaysia is 1.4%.
05:46And we continue to see a very stable energy sort of level pricing.
05:52So I think the inducement of increased inflation is not on the table at this point of time.
05:59And if you remember, in our fiscal reform journey, we've been doing quite a lot of reform in terms of redressing subsidies along the way.
06:08And despite that, inflation has behaved.
06:11So I think going forward this year, there are no tough subty rationalisation initiatives and so on.
06:19So there should not be a catalyst for inflation to creep up.
06:22Not this year.
06:23Next year?
06:23Is that in the pipeline?
06:25I think if you look at what we've done, we've anchored a better fiscal reform.
06:31And trajectory says that we will get to fiscal deficits below 3% by 2028.
06:38And because of the tax measures that we've already induced in, it's playing through at this point of time.
06:43Because improved efficiency of collections have come into, it's helping us get there without having to take any other difficult decisions.
06:49So that means no fresh subsidy reform measures for some time to come?
06:53We will push through the current trajectory because we're happy with what we've got.
06:57We've tackled the big things already.
06:59Okay.
06:59So at this point of time, it's about economy efficiency that we're thriving through.
07:03It's about stimulating the economy in terms of inducing more investments into the economy and growing as opposed to needing to tweak the fiscal space as much.
07:12In terms of growth and shipments, you know, the key exports are chips.
07:17The ringgit strength, is that a concern for that?
07:20A lot of these things are priced in dollars anyway.
07:22So net-net, one of the key messages that we're saying to the industry here, you also have to do your part in improving productivity and so on.
07:29Embracing digitalization and doing that will also help them mitigate the margins along the way.
07:35So I think we've had very good trade numbers.
07:38Trade numbers for 2025 was RM3 trillion.
07:42Highest ever at this point of time.
07:44Exports are still going up.
07:45And overall trade is up, say, 6% compared to what we were before.
07:49So I think that engine still is strong.
07:51It's still just top-performing currency.
07:53Kudos to that.
07:55But I wonder, though, the last time we spoke to you, you correctly predicted that the ringgit would strengthen past 4.
08:02Some of us on the street are seeing 385, 38.
08:06Is that level possible?
08:09I don't like to take out the crystal ball too much, right?
08:12But last year, it was quite clear that the grid was quite undervalued along the way.
08:17And the market is actually reacting to that.
08:19And we've seen good inflows.
08:21Beginning January, we've had also good inflows in equity and bond market.
08:25And that's continuing to strengthen the ringgit as we move on.
08:28I think the ringgit will continue to follow the trajectory based on what the base economy is actually doing.
08:34Do you still see it as undervalued this year?
08:37I think the ringgit still has potential because growth is still intact in this country and it's still growing well.
08:43How much potential is it?
08:45I think the market will find it's very nice.
08:47Okay. What about the drivers?
08:49Is it underpinned by fundamentals, you think?
08:51So, again, the real economy is moving in Malaysia, right?
08:55GDP is up.
08:56All sectors are up, yeah?
08:58And investments coming in, FDIs coming in, are continuing to support that.
09:02So, I don't think that's any issue in terms of supporting where the trajectory of the GDP of the economy is going on.
09:08Can you talk to us as well about government coffers?
09:12I mean, we are seeing declining contributions from Petronas.
09:16Is that a concern for you?
09:17And do you see further pressure in that sense?
09:21I think one of the key things that the government has been trying to do over the years
09:24was actually reduce dependency on segments on the market, right?
09:27So, if you go back to, say, somewhere about 10, 15 years ago,
09:33the total income that the government depended on tax revenue from oil and gas was close to about 40%.
09:39Last year, it came down to below 18, and they say we're projecting about 13%.
09:46So, actually, Malaysia's economy is not fundamentally anchored as much on oil and gas.
09:51It's important.
09:52It's a very useful income and so on like that.
09:55But the dependency for the government has been marked with use.
09:58So, I think today, we are in an environment that oil price remains at within the 60 sort of ranges.
10:05At that sort of level, we're comfortable, and we've factored those sort of numbers into our budget.
10:10So, is it fair to say that the contributions you expected to continue declining?
10:14I think at that sort of level, and as we continue to explore and continue to do it,
10:19it may have slight improvements, but it's not going to go back to where it was in the past.
10:23And I think the key for Malaysia was the diversification.
10:26The more we push in economy diversification, the more we improve our fiscal space on tax collections a lot,
10:34the resilience of the fiscal space of the government is much better.
10:37Have you already received the final budget numbers and the deficit numbers?
10:43And to what extent are you seeing that it is meeting the target?
10:47We will be concluding our numbers by the end of February.
10:51But at the moment, the indications are we have no problem meeting the fiscal deficit number
10:55that we saved in the budget.
10:57At the moment, we targeted 3.8% for 2025, and I think that's within reach.
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