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Malaysia: Uneven recovery after easing of MCO
KUALA LUMPUR: While businesses have started to recover with the gradual easing of the movement control order (MCO) since May, the recovery has been uneven, according to Bank Negara.
It said the performance of Malaysian non-financial corporates (NFCs) deteriorated in the first half of 2020.
Tourism-related and services industries were notably among the most impacted by the pandemic, as revenues fell sharply following lower inbound passenger loads and reduced spending on non-essential services.
Restrictions on air travel also weighed heavily on global oil demand, disrupting the recovery of firms in the oil and gas sector observed in late 2019.
More recently, the wholesale and retail sector has seen a gradual recovery following the easing of mobility restrictions post-MCO.
Improvements were also observed in the manufacturing sector, notably within the electrical and electronics (E&E) and medical product segments, which have benefited from a backlog of orders due to the MCO.
“In the real estate sector, activity has picked up slightly in recent months although conditions remain challenging, ” it said in its “Financial Stability Review – First Half 2020” report.Bank Negara also said while the overall debt-servicing capacity of NFCs has weakened due to the impact of Covid-19, it remained above the prudent threshold, reflecting reasonably healthy initial financial conditions before the pandemic.
The total outstanding debt of the NFC sector grew by 3.8% annually to RM1.6 trillion or 108.1% of gross domestic product (GDP) as at June 2020, mainly attributed to lower repayments due to the automatic loan moratorium and an increase in working capital loans.
Aggregate new loans disbursed to NFCs however declined (-3.4%) as demand for financing moderated sharply and banks re-assessed business sector risks.
In the capital market, refinancing risks remain low as corporates were able to raise funding during this period.
The report said corporate sector external debt increased by 4.9%, mainly driven by additional borrowings by firms in the oil and gas-related sector and valuation effects due to the weaker ringgit against selected major and regional currencies.
It also said the impact of the pandemic has been more pronounced on small and medium enterprises.
Surveys indicate that among smaller firms, many have limited financial buffers with cash reserves of only two months or less of expenses.
Source: https://www.thestar.com.my/business/business-news/2020/10/15/uneven-recovery-after-easing-of-mco