The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
Malaysia’s GEAR-uP Programme Boosts Capital Spending Without Straining Government Finances, Says Moody’s
Malaysia's RM120 billion GEAR-uP initiative, led by government-linked investment companies (GLICs), is set to enhance corporate capital spending and infrastructure development, according to Moody's Ratings. The programme, which accounts for approximately 6.5% of Malaysia's GDP in 2023, aims to supplement public spending without adding financial pressure to the government's ongoing fiscal consolidation efforts.
Key Takeaways:
Strategic Investment Without Fiscal Strain: The GEAR-uP initiative, involving six major GLICs—Khazanah Nasional Bhd, Employees Provident Fund (EPF), Retirement Fund (Incorporated), Permodalan Nasional Bhd, Lembaga Tabung Haji, and the Armed Forces Fund Board—will see RM120 billion invested over the next five years in high-growth, high-value sectors such as energy transition and advanced manufacturing. Moody's highlighted that these investments represent fresh capital that was not previously allocated to government budgetary spending, thus avoiding additional fiscal strain.
Positive Impact on Corporate and Infrastructure Sectors: Moody's noted that direct investments from the GLICs will be credit positive for corporate and infrastructure companies, as these funds will support capital spending and reduce the need for debt to finance growth. The initiative is expected to drive socioeconomic development and advance Malaysia's policy objectives, benefiting various sectors of the economy.
Limited Impact on Government Financing and Banking System: Moody's emphasized that the GEAR-uP programme is unlikely to significantly impact broader financing conditions for the government, even though some of the funds might have otherwise been invested in government bonds. Additionally, the total pledged investment represents only about 3% of the combined outstanding bank loans and domestic bonds, suggesting that Malaysia's banking system has sufficient liquidity to support the initiative if necessary. The credit impact on GLICs, such as Khazanah, will depend on the amount and funding method of the investments, with a potential increase in geographic concentration risk for Khazanah's portfolio.
In conclusion, Malaysia's GEAR-uP programme is poised to bolster capital spending and infrastructure development, providing a significant boost to the economy without adding fiscal strain. This strategic deployment of GLIC resources aligns with the government's efforts to stimulate growth while maintaining fiscal responsibility.
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