The Malaysian economy is projected to grow between 4% and 5% in 2024.
This will be supported by the resilient domestic demand and improvement in external demand, Bank Negara Malaysia (BNM) said today (Mar 20) in presenting its Economic and Monetary Review 2023 (EMR 2023), which sets out BNM’s economic assessments and forecasts.
Headline inflation is expected to average between 2% and 3.5% in 2024 amid contained cost pressures from easing global supply conditions. Inflation outlook remains highly subject to upside risks due to potential price adjustments on food and energy items, as well as external pressures from exchange rate and global commodity price developments.
Domestic monetary and financial conditions remain conducive of financial intermediation. Credit supply will be supported by continued willingness of financial institutions to lend amid a strong banking system and a healthy capital market.
In addition, the improving economic and labour market conditions will support credit demand.
BNM’s monetary policy will continue to be forward-looking with a focus on the trajectory of growth and inflation, the central bank said.
EMR 2023 Highlights
Given Malaysia’s strong fundamentals and positive growth prospects, the current ringgit level is undervalued.
Following this and beyond conducting foreign exchange operations, BNM has been actively engaging with government-linked companies (GLCs) and government-linked investment companies (GLICs) to encourage more consistent repatriation and conversion of their foreign investment income into ringgit.
At the same time, BNM is closely monitoring the trends of foreign currency holdings by Malaysian corporates, exporters and importers. These actions are contributing to positive outcomes. BNM has seen increased flows and market interest in buying the ringgit.
Looking ahead, financial markets expect the ringgit to appreciate further into 2024 and continue on an appreciating trend as the effects of global factors subside. Some analysts have projected further into 2025 and assess the ringgit to continue strengthening.
Financial Stability Review for Second Half 2023
Despite global volatility, domestic financial markets remain orderly with continuous intermediation of two-way flows in the bond and equity markets.
The overall debt-servicing ability of businesses and households remains healthy. Evolving loan performance trends are within banks’ expectations, BNM said in its Financial Stability Review for Second Half 2023 (FSR 2H 2023) today.
The biannual publication details BNM’s assessment of domestic financial stability risks and outlook.
BNM said latest stress tests conducted by them affirm the resilience of financial institutions against unexpected losses from severe macroeconomic and financial shocks. This will continue to support financial institutions’ ability to fulfil financing and protection needs of household and businesses.
Strengthening operational and cyber resilience remains a top priority for BNM and financial institutions. BNM continues to require financial institutions to adopt strong cyber hygiene standards. BNM has also taken steps to strengthen collaboration with local and international counterparts through more timely sharing of cyber threat intelligence.
