Bank Negara Malaysia (BNM) is expected to maintain the status quo of the overnight policy rate (OPR) during the monetary policy committee (MPC) meeting in July this year on the back of Malaysia’s current macroeconomic stability, an economist said.
Juwai IQI chief economist Shan Saeed said the central bank has made some prudent and sagacious monetary goals. As a result, it is able to maintain price, monetary and growth stability, and most importantly structural stability in the ringgit.
“In October 2022, the ringgit was trading at RM4.78 and people were talking about the local currency touching RM5.50 and RM6 against the US dollar, that the ringgit was going to collapse. We disagreed.
“On Nov 24, 2022 when Prime Minister Datuk Seri Anwar Ibrahim was appointed, the ringgit was traded at RM4.48 against the US dollar. It appreciated 1.5 per cent in less than four hours after the announcement was made.
“For this year, the ringgit will be trading between RM4.10 and RM4.37 against the greenback and oil prices will be between US$83 and US$127 per barrel,” he told Bernama.
Shan noted that the ringgit will be supported by three variables, that is, high oil prices, gross domestic product (GDP) which is expected to grow between 4.5 per cent and 5.5 per cent, and macroeconomic stability.
He also opined that Anwar’s recent visit to China will see an upsurge in trade and commerce, together with macroeconomic stability and higher commodity prices.
“Furthermore, Malaysia’s budget deficit and debt to GDP ratio will come down because the government will benefit from higher commodity prices, which will give room for fiscal manoeuvring. So BNM will continue to maintain the OPR,” he opined.
Shan also stressed that credit should be given to BNM’s governor Tan Sri Nor Shamsiah Mohd Yunus as she had pre-empted many things in 2020.
The governor, Shan said, had brought down the OPR from three per cent to 1.75 per cent, and very slowly and gradually in a very structured manner, raised the interest rate by 25 basis points (bps), which points to BNM’s confidence in the economy.
On the other hand, the Federal Reserve had raised the interest rates by 75 bps, and some banks by 200 bps. That shows those central banks are panicking, he said.
“BNM governor has made some sagacious and smart calls and is doing a good job. With the OPR at 2.75 per cent currently, I believed there is no need to raise rates, which can then bolster GDP growth. The most important thing is that the export numbers are on the rise.
“We continue to be buoyant about Malaysia’s 2023 economic outlook,” he added.
In its Economic and Monetary Review 2022 recently, BNM said the MPC considerations will focus on managing inflation risks while supporting sustainable economic growth in 2023.
The central bank said similar to other economies, 2023 will be a challenging year for the Malaysian economy with more moderate economic growth projected and inflation expected to remain elevated.
“The MPC will also continue to consider the cumulative impact of past OPR adjustments when formulating future decisions, given the lag effects of monetary policy on the economy,” it said.
