MIER EXPECTS BANK NEGARA TO CUT KEY RATE BY YEAR END
This will promote growth and provide sufficient liquidity to market, says Kamal
BANK Negara Malaysia will likely cut the key interest rate again by year end, said the Malaysian Institute of Economic Research (MIER).
Its chairman Tan Sri Kamal Salih said this would promote economic growth and provide sufficient liquidity to the market to ease the impact of the Covid-19 outbreak.
“This would boost market liquidity. Another (interest rate) cut (by Bank Negara) is possible,” said Kamal at a press conference on the impact of the Covid-19 outbreak on the economy, here, yesterday.
Last month, Bank Negara cut its the Overnight Policy Rate (OPR) by 25 basis points to 2.75 per cent, the lowest since March 2011. Prior to last month, the OPR was reduced to three per cent from 3.25 per cent in May last year.
MIER deputy director Prof Jamal Othman said the Covid-19 outbreak would affect Malaysia’s gross domestic product (GDP) growth, at least for the first quarter of this year.
However, Jamal said the outbreak’s impact on the economy was under control.
“The overall impact of the outbreak on the economy will depend on its duration and spread.”
He said there was an increase of impediments to growth for international tourist travel and trade.
He added that the effects of these impediments were further compounded by China’s fluctuating economy.
Jamal said MIER, in its research findings, presumed the best and worst case scenarios that the country could face from the outbreak.
“Based on a worst-case scenario, we expect the GDP growth to be lower by about 0.15 per cent for the year, and 0.77 per cent in the first quarter.”
He said MIER would revise downwards its earlier GDP projection of 4.9 per cent.
“Currently, we don’t have the (new predicted GDP) figures to share with yet. However, it will not be far from what has been projected by other institutions,” he added.
Meanwhile, Jamal said Chinese tourists’ expenditure in Malaysia was expected to decrease by 25 per cent, but wholesale and retail sales would decline by one to two per cent.
He said unemployment in tourism-related sectors, especially in air travel and recreational services, might range between 0.5 and 3.5 per cent.
He said tourism and manufacturing sectors were the most affected by outbreak.
Jamal urged Malaysians to help spur the economy and play their part in ensuring the success of Visit Malaysia 2020.
“It is safe to travel in Malaysia. Domestic tourism will ease the outbreak’s impact on our economy,” he added.