IMF lauds Malaysia’s macroe­co­nomic poli­cies

New Straits Times - - Business -

KUALA LUMPUR: The In­ter­na­tional Mon­e­tary Fund (IMF) has praised Malaysia for its “sound macroe­co­nomic poli­cies”, which en­sure that the econ­omy stays re­silient in the face of head­winds and risks and place it among the fastest-grow­ing economies among its peers.

It said Malaysia’s re­silience was due to a di­ver­si­fied pro­duc­tion and ex­port base, strong bal­ance sheet po­si­tions, a flex­i­ble ex­change rate, re­spon­sive macroe­co­nomic poli­cies and deep fi­nan­cial mar­kets.

Pol­icy buf­fers must, how­ever, con­tinue to be strength­ened as au­thor­i­ties con­tinue to face a chal­leng­ing environment given the global un­cer­tainty.

“While Malaysia’s eco­nomic growth is ex­pected to con­tinue this year, weaker-than-ex­pected growth in key ad­vanced and emerg­ing economies, or a global re­treat from cross-bor­der in­te­gra­tion, could weigh on the domestic econ­omy,” said the IMF ex­ec­u­tive board af­ter its an­nual con­sul­ta­tion re­port on Malaysia on Fri­day.

It pro­jected the Malaysian econ­omy to grow by 4.5 per cent this year from 4.2 per cent last year, un­der­pinned by domestic de­mand.

For Malaysia, risks to the growth out­look would not only come from ex­ter­nal un­cer­tain­ties but also from the domestic side, par­tic­u­larly house­hold debt that re­mains high.

“The risks are pri­mar­ily re­lated to pub­lic sec­tor and house­hold debt, along with pock­ets of vul­ner­a­bil­i­ties in the cor­po­rate sec­tor,” said IMF.

Fed­eral debt and con­tin­gent li­a­bil­i­ties are rel­a­tively high, which it warned would limit pol­icy space to re­spond to shocks.

With the tar­get to­wards a near­balanced fed­eral bud­get by 2020, the IMF said this would help al­le­vi­ate risks from el­e­vated gov­ern­ment debt lev­els and con­tin­gent li­a­bil­i­ties, and build fis­cal space.

While the mon­e­tary pol­icy stance by Bank Ne­gara Malaysia is ap­pro­pri­ate, it also wel­comes the com­mit­ment to keep the ex­change rate as the key shock ab­sorber. For­eign re­serves would, how­ever, need to be in­creased as a buf­fer in the event of dis­or­derly mar­ket con­di­tions.

IMF also sup­ports Malaysia’s em­pha­sis on in­creas­ing fe­male labour force par­tic­i­pa­tion, im­prov­ing the qual­ity of ed­u­ca­tion, low­er­ing skills mis­match, boost­ing pro­duc­tiv­ity growth, en­cour­ag­ing re­search and in­no­va­tion, and up­hold­ing high stan­dards of gov­er­nance.

It ex­pects the Con­sumer Price In­dex to av­er­age 2.7 per cent on the back of higher global oil prices and ra­tio­nal­i­sa­tion of cook­ing oil sub­si­dies, while the cur­rent ac­count sur­plus will be largely un­changed. Rupa Damodaran

The In­ter­na­tional Mon­e­tary Fund projects the Malaysian econ­omy to grow by 4.5 per cent this year, un­der­pinned by domestic de­mand.

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