Bank Negara Malaysia held engagement sessions with various stakeholders in conjunction with the release of its Annual Report 2023, Economic and Monetary Review 2023, and Financial Stability Review for the Second Half 2023 in efforts to share more about the country’s economy and financial sector, as well as gain feedback.
These engagements involved Government ministries and agencies, the diplomatic corps, the banking, insurance and takaful, and payment industries, economists, banking analysts and fund managers, businesses including small and medium
enterprises (SMEs), and the media.
Among the information shares and discussed were on Growth and inflation where key stakeholders discussed the growth and inflation outlook for Malaysia this year and the likely action of the Monetary Policy Committee (MPC).BNM highlighted that Malaysia’s economy is expected to grow between 4% and 5% in 2024, supported by increased domestic spending and a
recovery in exports. While headline inflation is expected to average between 2% and 3.5% in 2024.
BNM shared that in the short run, subsidy rationalisation could impact private consumption. However, this would be mitigated partly by targeted assistance from the Government.
The Central Bank also said monetary policy will continue to be forward-looking and informed by the MPC’s assessment of the prospects of domestic inflation and growth.
On the ringgit performance, BNM maintains that the ringgit is currently undervalued. Greater policy rate increases in other countries relative to Malaysia is one of the main factors causing the depreciation of the ringgit. In the long term, exchange rates are anchored by domestic fundamentals. In this respect, Malaysia’s economic fundamentals are sound it said, evident from key economic indicators in 2023 and the projections for 2024.
BNM reiterated that the OPR is not a tool to manage the ringgit exchange rate. Instead, it has and will continue to take concerted measures to manage short-term pressure on the ringgit. This includes intensified efforts to encourage repatriation and conversion of realised foreign investment income by government-linked corporations (GLCs) and government-linked investment corporations (GLICs), stepping up its engagements with corporates and investors, and continued monitoring of
domestic exporters’ and importers’ behaviours and engaging them on any unusual trends observed. BNM also made it clear that GLCs and GLICs are not expected to liquidate their foreign investments to repatriate foreign currency proceeds to Malaysia. Rather, BNM encourages them to repatriate realised foreign currency investment income on a more regular basis.
BNM also clarified that Malaysia’s international reserves are adequate and sufficient to finance 5.4 months of imports of goods and services and is 1.0 times the total short-term external debt as of 15 March 2024. International reserves are meant to be drawn on when necessary. However, BNM said it continues to do this judiciously. In addition, Malaysia’s
long-standing decentralisation of international reserves has led to the accumulation of sizeable non-reserve external assets. ,
BNM highlighted that the Government has been clear on their reform agenda. This includes strategic reforms outlined in key policy documents, such as the National Investment Aspirations (NIA), New Industry Master Plan 2030 (NIMP), and National Energy Transition Roadmap (NETR). Several reform measures have already been implemented or are underway. This includes electricity tariff adjustment and price ceiling removals on items such as chicken.
Beyond this, the Central Bank said it strongly advocates the development of a future-ready workforce through labour market reforms, as well as strengthening social protection programmes are key structural reforms needed in Malaysia.
