MACRO UPDATE: THE STATE OF TERENGGANU - 2020 - FULL REPORT
|Report ID||605268||Popularity||512 views 27 downloads|
|Report Date||Oct 2020||Product|
|Company / Issuer||Economic Research Country||Sector||Country Report - Country Report|
Terengganu contributes around 2.5% towards national gross domestic product (GDP). In 2019, the state’s real GDP grew at a faster pace of 3.3% (2018: 2.5%) due to broad-based growth buoyed by the services and construction sectors. Household income growth has been strong; over the 2016-2019 period, it came in at 5.8% p.a. on a compounded annual growth rate (CAGR) basis, the fastest in Malaysia.
Terengganu received RM7.7 billion in approved manufacturing investments between 2016 and 2019. During the period, 78.1% of investments were foreign while the rest were domestically sourced. Out of the RM6.0 billion in foreign investments, a significant 71.5% was from China, while Indonesia and France contributed 9.5% and 9.3%. By administrative district, Kemaman was the largest beneficiary of manufacturing investments, followed by Besut, Dungun and Hulu Terengganu.
The government has a track record of careful fiscal management. For example, in the aftermath of the global oil price collapse that started in mid-2014, it had prudently cut spending. Over the 2014-2018 period, government expenditure fell by around 26%. While it did post fiscal deficits, the deficits were small and even then not in every year. Oil royalties have consistently been the largest contributor towards the state government’s coffers. In 2018, it came in at RM1.4 billion (2017: RM1.7 billion), which is equivalent to almost 80% of total revenue.
Terengganu’s total outstanding debt fell for the eighth consecutive year in 2018. Thanks to the loan write-off of 14 water-related projects, debt fell by a significant 19.2% to RM733.1 million. In 2019, the state saw a considerable decline in debt outstanding because of automatic debt reductions from deductions to oil royalty payments. The automatic debt reductions resulted in a much-reduced outstanding debt of about RM366.6 million in 2019.