Bank Islam Integrated Annual Report 2020

39. FINANCIAL RISK MANAGEMENT (CONTINUED) (b) Credit risk (continued) (iii) Credit quality of financing, advances and others (continued) Key macroeconomic variables The following table shows certain key macroeconomic variables used in modelling the allowance for credit losses for Stages 1 and 2. For the base, upside and downside scenarios, the projections are provided for the next 12 months and for the remaining forecast period, which represents a medium-term view. Base scenario Upside scenario Downside scenario Next 12 months (2021) Remaining forecast period (2022) Next 12 months (2021) Remaining forecast period (2022) Next 12 months (2021) Remaining forecast period (2022) Kuala Lumpur Composite Index (“KLCI”) 1,750.0 1,850.0 1,850.0 1,950.0 910.2 1,010.2 House Price Index (“HPI”) 1.86% 2.24% 3.60% 3.98% 0.57% 1.55% Consumer Price Index (“CPI”) 2.0% 2.3% 1.6% 1.9% 2.5% 2.8% Unemployment Rate 3.5 3.3 3.2 2.9 4.3 3.7 Gross Domestic Production (“GDP”) 6.20% 5.30% 6.63% 5.73% 4.20% 3.30% An increase in unemployment rate or CPI will generally correlate with higher allowances for credit losses, whereas an increase in the other macroeconomic factors (KLCI, HPI and GDP) will generally correlate with lower allowances for credit losses. Due to the unprecedented nature of the pandemic, and the difficulty of predicting reliably the forecast period, the Group and the Bank have applied certain management overlay on the overall allowance for credit losses. These overlays and post-model adjustments were taken to reflect the latest macroeconomic outlook not captured in the modelled outcome and potential impact to delinquencies and defaults when the various relief and support measures are expiring in 2021. The impact were estimated at portfolio level and remain outside of the core MFRS 9 process. Total overlays for ECLs maintained by the Group and by the Bank as at 31 December 2020 are RM231,574,000. Notes to the financial statements for the financial year ended 31 December 2020 280 Financ ial Statement s Accountabi l i t y Addi t ional Informat ion