“Inflation is tapering off at the moment, and (for Bank Negara Malaysia) to hike the Overnight Policy Rate in January would be too early.”
Rating agency says Overnight Policy Rate move in January will be too early
KRISTINA FONG, RAM economist
RAM Holdings Bhd, formerly known as Rating Agency Malaysia Bhd, is predicting a hike in Overnight Policy Rate (OPR) in May onwards by Bank Negara Malaysia, rather than in January.
Unlike other research houses, RAM economist Kristina Fong believes that there should be more macro data available before a decision is made.
“Inflation is tapering off at the moment, and to hike the OPR in January would be too early,” said Fong.
“There is a lot of feel-good factors towards the end of last year and in January, including the expectation of a hike in the OPR this month,” she said.
This current upside of the ringgit is partly driven by the bullish oil prices and depreciation of the US dollar due to expectations of a tightening in monetary policy.
“As such, we expect the OPR to increase by 25 basis points from May this year,” said Fong.
Fong, alongside RAM group chief executive officer Datuk Seri K. Govindan, presented findings of the yearly RAM Business Confidence Index (RAM BCI) survey at a media briefing here yesterday.
“The continued overall positive readings of RAM BCI across corporate and small and medium enterprises (SMEs) going into 2018 suggest that the economic environment in Malaysia remains sustainable on its current track,” said Govindan.
“This is especially as capacity building activities in both business expansion and capital investment, as well as hiring intentions, continue to stand out as the most positive aspects.
“Given the longer-term nature of these activities, this highlight the firms’ optimism towards Malaysia’s medium term economic outlook,” he added.
He, however, stressed that the SMEs, which makes up the lion’s share of the local corporate landscape, would need support to realise their optimism into tangible results.
“SMEs business expansion often entails diversification into new businesses, moving upstream or downstream or even relocation to improve prospects,” said Govindan.
“Therefore, for SMEs to contribute meaningfully to longterm economic development, it is important for the industry’s stakeholders to continue to ensure that SMEs have access to funding.”
The RAM BCI survey gathered responses from over 3,000 firms nationwide, comprising of 974 large corporates and 2,500 SMEs over a period of six months.
When asked, Govindan said economic implications of the upcoming 14th General Election had not been factored in the survey as it only focused on seven main sentiments for corporations, namely turnover, profitability, hiring intentions, business expansion, capacity utilisations, investment intentions and access to bank finance.
Going forward, RAM expects 2018 to see gross domestic product (GDP) growth of 5.2 per cent, coming off the initial recovery rebound of 5.8 per cent in 2017.