KUALA LUMPUR (March 31): Malaysia’s International Investment Position (IIP) turned around to register a net asset position of RM79.6 billion or 5.6% of gross domestic product (GDP) at the end of 2020, from a net liabilities position of RM44.1 billion or -2.9% of GDP in 2019.

According to Bank Negara Malaysia (BNM)’s Economic Monitor 2020 Report, Malaysia last recorded a net external asset position in 2016 of RM70.2 billion or 5.6% of GDP.

The central bank noted that Malaysia’s external assets increased by RM139.6 billion in 2020, largely in the form of portfolio and direct investments by banks and corporates.

IIP measures the total amount of assets held by a specific country’s government, private sector and its citizens.

In other words, the turnaround to a net asset position in 2020 was driven by investments made by Malaysian banks and corporates.

Meanwhile, external liabilities increased by RM15.9 billion. The smaller increase in external liabilities reflected the net repayment of interbank borrowings, lower non-resident deposits and lower market revaluations of equity securities held by non-residents during the year due mainly to the adverse impact of the Covid-19 pandemic on equity prices.

BNM noted that the currency composition of Malaysia’s IIP remained favourable in 2020. The net foreign currency (FCY) external asset position — external assets denominated in FCY minus FCY external liabilities — increased to RM1.1 trillion or 75.1% of GDP, from RM930 billion or 61.5% of GDP in 2019.

“Hence, periods of ringgit exchange rate depreciation will result in a larger increase in external assets compared to external liabilities, thus enhancing Malaysia’s external position,” it said.

Banks and corporates registered a net external asset position, which has been primarily supported by their large net FCY assets.

BNM noted that these entities also held sizeable liquid external assets amounting to RM770.9 billion, up from RM617.8 billion in 2019, which can be drawn upon immediately to meet their external debt obligations.

Read more stories from the BNM Annual Report 2020 here.

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