13th September 2022 - 2 min read
Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz has reiterated that the increase of Malaysia’s overnight policy rate (OPR) will be carried out at a gradual pace as there are consequences to hiking it too aggressively.
“Our economy was growing strongly in the first half of the year at 6.9%, and so we can afford to increase the OPR,” explained Tengku Zafrul in a forum conducted by Bloomberg, adding that the financial sector has remained stable amidst the tightening of interest rates by Bank Negara Malaysia (BNM). His comment also echoes BNM’s early reassurance that it will not take an aggressive approach in normalising Malaysia’s monetary policy to the pre-pandemic level as this will risk disrupting the country’s economic growth.
Tengku Zafrul also stressed that Malaysia’s monetary policy remains accommodative as the current OPR is still lower than what it was prior to the start of the Covid-19 pandemic, which ranged between 3% to 3.25%. To note, Malaysia’s OPR currently stands at 2.50%, following three OPR hikes in 2022 thus far. All three hikes – which took place in May, July, and September 2022 – saw an increase of 25 basis points (bps) to the OPR, respectively.
Aside from commenting on the OPR increase, Tengku Zafrul also highlighted that the country’s economic growth may surpass the official prediction of gross domestic product (GDP) growth for 2022, currently forecasted at 5.3% to 6.3%. This is as Malaysia has seen strong economic growth trends in the second quarter of 2022 (2Q22) – with the GDP growing at 8.9% – despite the present weaker global economy and strong US dollar. This strong growth is expected to continue into the third quarter of the year (3Q22), he said.
Several other matters that were also discussed during the forum included the performance of Malaysia’s currency and the upcoming Budget 2023. On the ringgit, Tengku Zafrul said that the government is less concerned about the performance of the currency as it focuses on the mid- to long-term performance of the economy.
As for Budget 2023, the finance minister remarked that the government will concentrate on three key areas: maintaining economic growth, ensuring sustainable and inclusive economic growth, and fiscal responsibility. The national budget is set to be tabled on 7 October 2022.
(Source: The Star)
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