EPF dividend rates anticipated to be lower given recent performance - Economists

KUALA LUMPUR – Dividend rates distribution for the Employees Provident Fund (EPF) this year is expected to be lower, said several economists.

Earlier this week, the EPF announced the fund’s total investment income over the first quarter of 2022, ending March 31 (Q122). The fund recorded a total investment income of RM15.85 billion over the period, a decline from the RM19.29 billion recorded in the same period in 2021.

EPF had attributed the dip to significant decline to the overall decline being experienced in the worldwide markets.

When speaking to Bernama, Sunway University economics professor, Yeah Kim Leng said that as a result of EPF’s Q122 performance, the fund’s dividend rate is expected to decline in tandem with the lower investment income.

He explained that other global factors such as the likelihood of a prolonged war between Russian-Ukraine, inflationary pressures and hiking interest rates are causing the growth projections to be slashed by economists worldwide.

Furthermore, there are risks of recession being flagged as the US is now struggling to tame high inflation rates.

“If it can navigate a soft landing and China is able to return back to normal activities amid its pandemic policy, we might be able to see EPF’s investment income holding up and enabling a decent dividend rate, although it would most likely be lower than last year,” he stated.

For 2021, EPF announced the dividend rates of 6.1% for conventional savings and 5.65% for Shariah savings.

Meanwhile, Geoffrey Williams, an economics professor from Malaysia University of Science and Technology (MUST), echoed Yeah’s sentiments.

Williams also does not anticipate the high dividend declaration in 2021 to be repeated this year, seeing as the EPF had already indicated that the general investment environment is not performing well.

EPF’s strong dividend performance in 2021 was bolstered by a strong rebound in the equity markets, he explained.

“But the growth for 2022 is already being revised throughout the world, that is why investment returns are likely to be lower,” he added.

With regards to the overall weaker Q122 performance, Yeah said that it was foreseen because of the turbulence in the global financial markets as well as the food and energy markets that were caused by the Russian-Ukraine war.

According to him, financial markets were also shaken up by the substantial increases in inflation and expectations of interest rate hikes.

For Williams however, he stated that the Q122 performance was not anticipated but also not surprising due to the general market instability that happened over the quarter under review.

As of December 31, 2021, EPF reported that the fund’s total investment income had increased by 6% from RM63.45 billion in 2020 to the recorded RM67.06 billion in 2021. It was driven by the steady recovery of equity markets and majority of the asset classes which happened amid global rebound.

The dividends that EPF declared for 2021 were higher than the 5.45% for conventional savings and 5.0% Shariah savings that were recorded pre-pandemic, in 2019.

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