The Malaysian economy is generally looking healthy for 2007 and the banking sector appears to share the prospects of a good year ahead. Fitch Ratings has predicted real gross domestic product (GDP) growth of 5% this year, a slight dip compared with 2006. Overall asset quality has improved: provisioning for non-performing loans (NPLs) of 50%-100% being taken up by a majority of banks despite no mandatory requirement.
Banks describe the slip in consumer confidence at the beginning of 2006 as a “blip”, which was caused by a sharp rise in inflation that started at the end of 2005, peaking at 4.8%. By the end of 2006, inflation had fallen back to about 3.1% and consumer confidence improved.
