BNM calls for moves to heighten progress
Having had sub-par growth for nearly a decade now, policymakers need to relook what we have learnt and rethink our approaches; from fiscal to monetary policies and structural issues that need to be addressed, to enable us to remove any impediments to growth.
KUCHING: There are three important outcomes that need to be achieved in order to secure continued and sustained progress in the global economy.
Bank Negara Malaysia ( BNM) governor Datuk Muhammad Ibrahim opined that those outcomes include reawakening growth, reigniting productivity and restoring inclusiveness.
“Having had sub-par growth for nearly a decade now, policymakers need to relook what we have learnt and rethink our approaches; from fiscal to monetary policies and structural issues that need to be addressed, to enable us to remove any impediments to growth,” he said in his speech during the Malaysian Institute of Economic Research (MIER) 30th anninversary dinner at Kuala Lumpur on Monday evening.
“We need to enact policies that enable the private-sector to revive their dynamism and explore new strategies to enable them to engage and uncover productive investment opportunities.”
The second is to reignite product ivity. To this end, Muhammad Ibrahim said just as how technology and globalisation has resulted in many of the paradoxes outlined earlier, it is also an avenue that could provide answers to our challenges.
“Policy-makers and the private sector need to automate and
Datuk Muhammad Ibrahim, BNM governor
adopt technology to increase productivity and dispense the easy way out of depending on low cost labour model for competitiveness,” he noted.
“Third, and perhaps the most important of all – to restore inclusiveness. The socio- and geo- political paralysis that is splicing the centre towards the far-left and far-right in so many parts of the world can be traced back to the unequal sharing of global economic progress in past decades.
“Thi s under scores the importance of broader- based economic growth and the urgency to close the inequality gap.
“Leaders from the public and private sectors must help boost labour- market participation; across genders, creed and nationalities and cushion any negative social costs that may arise as a by-product of growth.”
Muhammad said the central bank shall continue to strive to make monetary policy decisions based on prevailing data and the assessment to the best of its ability, even if it might be against conventional wisdom.
In managing the exchange rate, he believed a similar philosophy of pragmatism is applied.
“We should recognise that in today’s world of greater interconnectivity, we are all susceptible to the vagaries of the global financial markets.
“But to distance ourselves from the global financial markets is not an option.
“In this regard, despite the extreme volatility experienced in recent years, our thinking has remained the same – market forces ought to determine the direction and level of the exchange rate,” he said.
Muhammad noted the central bank’s role should be to contain the degree of volatility, which BNM knows has signif icant implications for an open economy like Malaysia.
As such, he observed that there will be times when the central bank’s presence is apparent in the market, to manage the degree of volatility, but there will be times when the ringgit movements will be more volatile than normal so that it will take its course in line with demand and supply in the market that reflects underlying trade transactions.
More recently, he also observed the ringgit had adjusted to reflect changes in the global economy including the developments in the US economy and global crude oil prices.
Nonetheless, he noted there are risks associated with different levels of exchange rates and that different levels of exchange rate will benefit differently the various sectors and stakeholders in the economy.
“Looking forward, whi le the financial markets can be capricious, as market players focus on short-term developments, our role as policy makers is to look beyond these noises,” he added.