CapitaLand Malaysia Mall Trust | Annual Report 2020

Prepared by: JLL Property Services (Malaysia) Sdn. Bhd. Date: 10 February 2021 1.1 MACROECONOMIC & DEMOGRAPHIC OVERVIEW The global economic growth for the year 2020 is estimated at -3.5% by the International Monetary Fund (IMF). The global economy was seen to be slowly climbing out from one of the worst global recessions experienced during the Great Lockdown in April. Most countries slowly reopened whilst some reinstated partial lockdowns to protect susceptible populations. The whole year’s estimate, therefore, reflects better- than-anticipated second quarter gross domestic product (GDP) out-turns, mostly in advanced economies, where activity began to improve sooner than expected after lockdowns were scaled back in May and June, as well as indicators of a stronger recovery in the third quarter. While nations were debating on measures to take to counter COVID-19, the Malaysian government was among the earliest to enter into a lockdown. It was among the countries that showed success in the flattening of the COVID-19 curve in the first wave of the pandemic. This allowed the reopening of the economy after the Movement Control Order (MCO). Consequently, Bank Negara Malaysia (BNM) reported that the country’s economic growth shrank by 2.7% in the 3Q 2020 compared to the sharper contraction of 17.1% in 2Q 2020. In view of the resurgence in COVID-19 cases, the Ministry of Finance (MOF) has estimated Malaysia’s GDP to contract by 4.5% in 2020. The latest available quarterly figures show that the domestic demand contracted at a slower pace, recording a smaller decline of 3.3% in the 3Q 2020 (2Q 2020: -18.7%), driven by improvements in both consumption and investment activity. Private consumption recovered significantly from the trough in the second quarter to record a smaller contraction of 2.1% in 3Q 2020 (2Q 2020: -18.5%). This was supported by the improved household spending and stimulus measures such as wage subsidies, sales tax reduction for cars as well as the move of allowing the Employees Provident Fund (EPF) fund withdrawals to EPF contributors. According toBNMreport, household spendingwas mainly supported by gradual recovery in income conditions, while investment activity benefitted from the ease of containment measures. Wages for the private services sector registered a smaller contraction of 2.5% (2Q 2020: -6.4%). This improvement was driven by tourism-related services subsectors, such as wholesale and retail trade; food and beverage and accommodation; transport and storage; as well as health; education; and arts and entertainment. Unemployment rate has risen to levels not seen since the 1985/86 recession, when it touched 7.4% at the end of 1986. COVID-19 containment measures and weak demand led firms to undertake cost-cutting actions such as retrenchments, pay cuts and unpaid leaves. These factors weighed on employment and income conditions, especially in 2Q 2020. With the reopening of the economy, positive rehiring activity and lower job losses helped reduce the unemployment rate which contracted to 4.7% in 3Q 2020 (cf. 2Q 2020: 5.1%) as demand conditions normalised. The headline inflation was seen to be less negative at -1.4% in 3Q 2020 (2Q 2020: -2.6%) reflecting higher domestic retail fuel prices in line with the recovery of global oil prices. However, it remained negative as retail fuel prices remained significantly lower than the last year’s corresponding quarter level. BNM cut overnight policy rate (OPR) to a record low of 1.75% in July 2020. The reduction is an additional policy stimulus to accelerate the pace of economic recovery. BNM in January 2021 announced that the OPR rate remains unchanged at 1.75% as they do not foresee the economy being as badly affected as it was in 2Q 2020 and in all likelihood should improve further in 2Q 2021. The government also offered a 6-month blanket loan moratorium as an aid to curb COVID-19 impact. Having ended on 30 th September 2020, it has been extended for targeted groups which lost their jobs during the pandemic until 31 st December 2020. It was announced during Budget 2021, that there will be no further extension of the moratorium, but assistance may be provided to eligible borrowers. Malaysia received about 4.3 million international tourists and receipts of RM12.6 billion between January and September 2020. This reflects a drastic decline by 78.6% and 80.9% year-on-year (y-o-y) from 20.1 million visitors and RM66.1 billion receipts, for the same period last year. This was due to the closure of international INDEPENDENT RETAIL MARKET OVERVIEW 64 CAPITALAND MALAYSIA MALL TRUST • ANNUAL REPORT 2020