Malaysian economy to expand 4.3-4.8% this year

KU ALA LUMP UR: The Malaysian economy is expected to remain on a steady growth path, expanding between 4.3 per cent to 4.8 per cent in 2019, anchored by private sector activity, stable income and employment growth and sustained capacity expansion by businesses, said Bank Negara Malaysia (BNM) Governor Datuk Nor Shamsiah Mohd Yunus.

She said the well-diversified export structure, in terms of products and markets, would help soften the impact of moderating global growth on external demand.

“New production facilities and the recovery from the supply disruptions in the commodity sector will provide additional impetus to domestic economic activity,” the governor said in a statement in the 2018 BNM Annual Report released here yesterday.

She pointed out the welldeveloped financial system with strong financial institutions would ensure domestic financing conditions remain supportive of the changing needs of the economy.

“As a highly open economy with an internationally integrated financial system, Malaysia will also be affected by the outcome of several key risk factors such as trade tensions, prolonged political and policy uncertainties and lower commodity prices.

Nevertheless, we face these headwinds from a position of strength, reinforced by a diversified economy, a resilient external position and a strong financial system,” said the governor.

Meanwhile, in this environment of heightened risks, she stressed that the focus of the Bank’s policy was on preserving monetary and financial stability by reinforcing the resilience of the economy and addressing vulnerabilities.

Citing an example, she said the central bank aimed to identify and manage risks before they become destabilising while building policy space and buffers preemptively.

“The broad range of policy instruments available, which includes targeted prudential policies and financial market measures, provides the Bank with policy flexibility while avoiding an over-reliance on any particular policy tool,” said Nor Shamsiah.

In the meantime, the governor said the thrust of this year’s monetary policy was to remain accommodative to ensure supportive conditions for sustainable economic growth amid the subdued inflation outlook.

The average headline inflation in 2019 is expected to be broadly stable relative to 2018.

Touching on the exchange rate, Nor Shamsiah said the flexible exchange rate regime continued to be a key source of strength for the Malaysian economy, in managing more volatile capital flows and their effects on domestic financial conditions.

The flexibility of the exchange rate acts as a shock absorber for the economy, increasing its resilience when faced with external shocks.

“Nevertheless, as the exchange rate represents an important price for economic and financial market activities, the central bank will continue to ensure orderly market conditions and manage excessive volatility so that the intermediation process is not disrupted,” said the governor.

Nor Shamsiah also mentioned sustained current account surplus and adequate international reserves accorded crucial buffers to flexibly manage the impact of volatile capital flows on the exchange rate and the overall economy.

In addition, ongoing measures to deepen the onshore foreign exchange market have supported more efficient hedging activities by economic and financial market participants to better manage their foreign exchange risks, she said.

At the same time, the governor said there is an urgent need to reinvigorate private investment, which is essential for Malaysia’s economic progress.

She added that attracting highquality investments should be a key focus of policy to enhance the productive capacity of the economy and create the right kind of jobs for people from all walks of life.

“This calls for a clear national investment policy thrust, supported by effective incentives, a coordinated promotional strategy, and efficient business-friendly regulatory and approval regimes. Such policies should encourage the exploration, cultivation and development of new growth areas, including the digital economy and green technology,” she said. — Bernama