Macro Update: The State of Penang - 2020 - Full Report

Known as the “Silicon Valley of the East” for its strong electronics and electrical (E&E) manufacturing base, Penang is the main economic driver for Northern Malaysia. It recorded the highest gross domestic product (GDP) per capita among the 13 states in Malaysia since 2014. One of the nation’s major trading hubs, Penang is among Malaysia’s top foreign investment destinations.

Penang’s fiscal management remains prudent and conservative. Over a nine-year period between 2010 and 2018, Penang’s fiscal balance remained in surplus, save for only once (2018).  As a result, it has managed to accumulate a commendable level of fiscal buffers (end-2018: RM1.97 billion) to safeguard against economic shocks.

Not surprisingly, Penang has the lowest debt among all states since 2011. From a liquidity perspective, it also has a far higher consolidated funds-to-gross debt ratio (2018: 3,408x). It is notable that Penang is financially self-sufficient and has no loan arrears with the federal government since 2016.

Although there were some concerns about the possibility of drastic policy changes post-14th General Election (GE14) in 2018, things remain somewhat status quo because the state government has remained basically unchanged since 2008. Penang thus remains politically and institutionally stable. Such an attribute is positive for investor sentiment in the state.