MACROECONOMIC SURVEILLANCE AND FORECASTING DIVISION

Macroeconomic & Forecasting

MIER Annual Economic Model

The model has been continuously revised as a result of a series of projects such as the ASEAN Link Project. Besides generating the annual forecasts presented at the year-end National Economic Outlook Conference and the supplementary revisions every quarter, the model has been utilised to provide inputs to the Asian Development Bank (ADB) Annual Forecasting Conference and the Institute of Developing Economies' (IDE) Asian forecasting activity.

Malaysian Economic Outlook

The Malaysian Economic Outlook is released quarterly to review the international and domestic economic conditions and projections. The latest issue was released at the National Economic Outlook Conference 2008-2009 with estimates for 2007, and forecasts for 2008 and 2009, on 27-28 November 2007. The forecasts took into consideration the two in-house quarterly survey reports on business conditions and consumer sentiments and other developments in the domestic and international environment.

Quarterly Business Conditions Survey Report

The Business Conditions Survey was first mounted in the second quarter of 1987 to provide inputs for the Institute's economic forecasting activity. It is conducted on a quarterly basis to augment the assessment of the short-term prospects for the economy. The survey findings are used to supplement the availability of quantitative information from conventional sources. A Business Conditions Index (BCI) is constructed from the survey results, which gives advance information that permits inferences to be drawn regarding emerging economic trends.

The survey covers a sample of over 600 manufacturing businesses incorporated locally and manufacturing concerns operating in Malaysia, covering 11 industries. Questions posed in the survey questionnaire relate to such key determinants as production level, new order bookings, sales performance, inventory build-up and new job openings. Reports of the survey findings are published two weeks after the end of each quarter.

Quarterly Consumer Sentiments Survey Report

The Consumer Sentiments Survey, initiated in January 1988, is a series of surveys conducted quarterly on a sample of over 1,000 households in Peninsular Malaysia to gauge consumer spending trends and sentiments. Consumer behaviour reflects income level and general economic conditions. Together with the business conditions survey, the findings of this survey relating to consumer spending are incorporated into the MIER's near-term economic outlook report.

Respondents are asked about their perceptions on household's current and expected financial positions and employment outlook. The survey also seeks to uncover general economic conditions such as inflation as seen from the consumers' perspective. Questions relating to their plans to buy houses, new or used cars and other major consumer durable are also asked. A quarterly Consumer Sentiments Index (CSI) is generated from the survey.

Quarterly Automotive Industry, Retail Trade, Residential Property and Tourism Market Survey Reports

These sectoral industry surveys were conducted for the first time in the second quarter of 2001. Findings from these surveys are used as inputs for the Institute's economic forecasting activity as well as to assist the Institute in updating both the private and public sectors on the latest economic trends in the country. Being new, these surveys had to undergo several test runs before culminating into full-blown indices for the first time in the second quarter of 2003 for public consumption.

Quarterly Automotive Industry Survey Report

The objective of this survey is to track broad trends in the automotive industry in relation to important variables including sales, production, prices and employment. In addition, respondents are also asked what they expect the trends to be like in the next quarter. The results of the survey serve as inputs to MIER's forecasting activity and used as an additional source of information, apart from the readily available secondary statistical data. Altogether there are 35 firms being sampled and they consist of major producers, assemblers and distributors of passenger cars and commercial vehicles.

Quarterly Retail Trade Survey Report

The retail trade survey covers a sample size of 100 firms. This forward-looking survey is conducted on a quarterly basis to assist in assessing the short-term outlook for the retail business sector, which can also be incorporated into the Institute's short-term forecasting activity. From the survey results, a diffusion index is constructed to provide a clear idea of the underlying trends in the retail sector.

Questions posed in the survey questionnaire cover key areas such as present and future business situation, inventory/sales ratio, gross margins, sales prices, expansion plan and new job openings.

Quarterly Residential Property Survey Report

The MIER Residential Property Survey is conducted quarterly, covering a total of 780 housing developers. A random probability sampling technique is used in the selection of the sample. A Residential Property Index (RPI) is constructed with responses to seven key questions, five of which refer to the current quarter, while the other two are questions on expectations for the next quarter. It is designed to complement the Institute's macro surveys, namely, the Business Conditions Survey and the Consumer Sentiments Survey. Questions posed relate to such key determinants as supply, sales, bookings, investment, unsold units, prices and employment.

Quarterly Tourism Market Survey Report

Using a sample of 900 firms, the Tourism Market Survey Report is conducted on a quarterly basis to assess the short-term outlook for the tourism industry. The survey findings, together with secondary information provided by hotel operators and tour agencies, permit inferences to be drawn regarding emerging trends in the tourism industry. Question posed in the survey questionnaire cover areas such as hotel and tour bookings, hotel and tour promotions, employment, prices, capital expenditure and operating costs.

The MIER Monthly Monitor

Beginning September 1997, the Monthly Monitor, an in-house project, was added to the Institute's regular publications. The purpose of the Monitor is to provide a summary of economic news and updates on Malaysia and the outside world. A statistical table with side comments is also included to provide a quick glance on the recent trends in key macro-economic statistics.

TEC-MIER CEO Confidence Index

The Institute has co-branded with TEC Asia a quarterly survey on CEO confidence called the "TEC-MIER CEO Confidence Index". The first issue in the series, fourth quarter 2005, was released in the weekly EDGE newspaper on 16 January 2006. This has become a regular work activity of the Institute since its first issue.

ProQuest Reference Asia

MIER has signed a 5-year agreement with ProQuest Information and Learning Ltd to contribute articles (Malaysian Economic Outlook, Survey of Business Conditions, Survey of Consumer Sentiments, MIERScope and MIERScan) in the online subscription-based information service - Southeast Asia module of ProQuest Reference Asia. In return, MIER receives a usage-based royalty payment. This project was launched on 18 December 2002.

Economic Information Support for UMW

Commissioned by the UMW Corporation, on a retainer fee basis, the objective of the study is to provide support in the areas of economic and general sectoral information, analysis and forecasts for Malaysia over the medium term. The project took off in January 2001, with industry reports being submitted on a quarterly basis. However, it is currently carried out once a year as an economic input to UMW's Annual Business Plan meeting.

PAIR-FTA-Malaysia Project

The PAIR-FTA-Malaysia (Projections for Asian Industrialising Region (PAIR)-Free Trade Agreement (FTA)-Malaysia) Project is a three-year region-wide project, with the second phase completed in March 2006. The project, commissioned by the Institute of Developing Economies (IDE-JETRO), Japan, requires quantitative estimations of bilateral import functions for Malaysia against its major trading partners. The import functions are estimated under three broad categories: primary commodities, crude oil and manufactures. The project is now into the third and final phase, with the final report submitted in December 2006. In addition, a preliminary case study on Free Trade Agreements (FTAs) in East Asia with special reference to Malaysia was subsequently submitted. A workshop was held at IDE-JETRO, Japan on 7-8 March 2007, to discuss the findings and results of the final report as well as to conclude the project study.

Malaysia's Experience with Sovereign Debt and Development

The World Bank commissioned MIER to write a research paper on Malaysia's experience with sovereign debt and development in view of the country's success in using sovereign debt to promote growth and development. This case study is to document Malaysia's use of sovereign debt over the last two decades in quest of growth and development. Topics addressed included the following: (a) analysis of the trends in public indebtedness (public debt-to-GDP ratio) and debt dynamics; (b) factors which enabled debt to be used well while avoiding fiscal and macroeconomic crisis; (c) role of the state in economic development (including how it changed over time if at all) with emphasis on provision of public goods and infrastructure; (d) cost recovery issues-pricing of public services, the rate of return on public investments, etc; (e) counter-cyclical fiscal policy and maintenance of growth; and (f) development of institutions to guide borrowing and debt management control/management of contingent liabilities. The first draft was submitted on 25 June 2006, and the final report in November 2006. As the Institute was not able to supply all the data sets required by the World Bank (data not being compiled or published by the government), the study was truncated.

Paper on '10 Years After the Crisis'

The Institute was invited by the Institute of Development Studies (IDS), University of Sussex, United Kingdom to write a paper on Malaysia entitled '10 Years After the Crisis'. The paper was presented in a conference held in Bangkok on 26-27 February 2007. The paper focuses on the strengths and weaknesses facing Malaysia, 10 years after the crisis. It is forward-looking, focussing on issues of relevance to Malaysia. Where relevant, references are made to lessons drawn from the East Asian Crisis. Key policy suggestions on reducing potential vulnerabilities are also included. A revised version of the paper was submitted end-March 2007 for publication in the IDS Journal.

ADBI Project on Managing Capital Flows: Search for a Model

Commissioned by the Asian Development Bank Institute (ADBI), Tokyo, the objective of this project is to develop a policy framework for managing capital flows that can be used as a basis for formulating: (a) DMCs' (Developing Member Countries) national policy responses to surges in capital inflows consistent with the goals of macroeconomic and financial sector stability; (b) Asian regional co-operation initiatives in support of national efforts to manage capital flows; and (c) Proposals for reforming the international financial architecture that can support DMCs' effort to manage capital flows.

To achieve the objective, ADBI will provide Asian think tanks a forum for identifying and studying issues on capital flows and for debating on alternative measures for managing such flows. Two such forums were held in October and December 2007, respectively in ADBI, Tokyo, Japan whereby the draft report was presented in the latter forum. Two more such forum will be held in March and May 2008, respectively to conclude the project.

East Asian Regional Model (EARM)-Malaysia Forecast Project

This project is commissioned by IDE-JETRO, Japan whereby the Institute is to undertake forecast for the country study on Malaysia. In the 21st century, China's presence is growing in the East Asian region as well as in the entire world economy. IDE-JETRO realises the increasing importance of studying the Asian industrialising region from a worldwide perspective. Based on macro-econometric models from which consistent sets of solutions (forecasting) could be arrived, IDE-JERTO aims to analyse the economic structure of the economies of the East Asian region and provide economic forecasts for the member countries.

ADBI Paper on Financing Asia's Future

Commissioned by the Asian Development Institute (ADBI), Tokyo, the task is to prepare and present a paper on "Financing Asia's Future" at the ADBI's 10th Anniversary Conference: A Decade of Development. The final paper of publishable quality is to be submitted for ADBI publication by 31 January 2008.