KUALA LUMPUR – Malaysia is unlikely to go into a recession this year as sustained domestic demand and spending are set to continue anchoring growth, said Bank Negara Malaysia governor Tan Sri Nor Shamsiah Mohd Yunus.
However, she said that the latest official gross domestic product (GDP) projections would only be released in the new Budget 2033 to be tabled on February 24.
“We do expect that growth will continue in 2023, but at a much more moderate pace due to slower external demand.
“The important thing I want to emphasise is that we are seeing sustained improvement in the job market and we are going to benefit from the positive impact from China's reopening,’’ she told reporters during a press conference on the fourth quarter (Q4) and 2022 GDP statistics released today.
When asked about the overnight policy rate (OPR), she said any decision on the policy would not be solely in tandem with other central banks but rather more focused on the domestic economic environment.
Speaking at a press conference today, she said the Monetary Policy Committee (MPC) would continue to calibrate the monetary policy to ensure sustainable domestic growth and price stability, which is in line with the central bank’s mandate.
“I want to stress… we do not set our OPR based on other central banks’ decisions on their monetary policy.”
The MPC maintained the OPR at 2.75% during its first meeting in January 2023 after raising the rate by 25 basis points four times last year. The last hike was to increase the OPR to 2.75% in November 2022.
Nor Shamsiah said the pause would allow BNM to have better clarity and take stock of the impact of the cumulative increases in the OPR in 2022 as well as take into account the economic environment and its impact on the growth and inflation outlook.
She noted that Malaysia's current inflation was the result of a combination of both supply and demand factors.
“While we know that the OPR has a limited influence in addressing cost-push price pressures, it is an important tool to manage demand pressures. We have been seeing these demand pressures since the economy reopened, which contributed to the persistence and pervasiveness of domestic inflation.
“This has been the challenge of central banks around the world, with some facing pressing demand pressures more than others, hence, the rather aggressive monetary policy tightening in those economies.”
Asked about potential signs of distress in loan repayments, she pointed out that loan repayments for businesses were on the uptrend while loan repayments by households had always been sustained.
Nor Shamsiah said household debt servicing capacity continues to be supported by improving income and employment conditions, healthy loan servicing buffers at 37% median debts service ratio of outstanding loans, and continued availability of repayment assistance.
“When you look at the strength of any household or business, you have to look at both financial assets and financial liabilities. Just looking at increases in the OPR on debt servicing may not give you the whole picture,” she added.
Nor Shamsiah said that at the current OPR level, Malaysia's monetary policy remained accommodative and supportive of the economy.
“We acknowledge the delicate balance between inflation and growth risks, especially in the context of the challenging environment we are currently facing.”
When asked about her reappointment as BNM governor, she said: “The appointment of the governor is by the Yang di-Pertuan Agong. So, for me, I’m focused on discharging the ‘amanah’ that has been given to me to make sure that BNM continues to deliver its mandate.”
“That is occupying most of my time, if not all my time.”
Her contract expires this year.
She was appointed as governor for a five-year term effective July 1, 2018, to June 30, 2023. She took over from Tan Sri Muhammad Ibrahim who resigned on June 15, 2018. Nor Shamsiah was BNM’s deputy governor from 2010 to 2016. – Bernama, February 10, 2023
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