BNM: Malaysia's economy on track to grow 4-5 per cent this year

The forecast was based on greater spillover from the tech upcycle, tourist arrivals and swifter implementation of new and existing investment projects.

17 May 2024 04:05pm
BNM Governor Datuk Shaik Abdul Rasheed Ghaffour during a joint press conference organised by BNM and DOSM to release the GEP statistics for the first quarter of 2024 in Sasana Kijang here today. Photo by Bernama
BNM Governor Datuk Shaik Abdul Rasheed Ghaffour during a joint press conference organised by BNM and DOSM to release the GEP statistics for the first quarter of 2024 in Sasana Kijang here today. Photo by Bernama
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KUALA LUMPUR - Bank Negara Malaysia (BNM) has maintained its forecast for the economy to grow 4.0 to 5.0 per cent this year, given the encouraging first quarter of 2024 (1Q 2024) growth of 4.2 per cent.

BNM governor Datuk Abdul Rasheed Ghaffour said the forecast was based on greater spillover from the tech upcycle, tourist arrivals and swifter implementation of new and existing investment projects.

However, the growth may face downside risk of weaker-than-expected external demand, escalation of geopolitical conflicts and a larger decline in commodity production, he said at the gross domestic product (GDP) 1Q 2024 press conference here today.

"Meanwhile, the nominal effective exchange rate (NEER), which measures the ringgit’s performance against major trading partners, appreciated by 2.5 per cent,” he said, adding that against the US dollar (USD), the ringgit appreciated by 1.6 per cent from Feb 26 to May 15, 2024, and compared to regional currencies, the ringgit performed relatively well.

Rasheed said the pressure on the local currency has reduced since the central bank engaged with government-linked companies, government-linked investment companies, corporations, and investors to encourage them to repatriate their foreign earnings since the end of February, and this has given positive outcomes.

Asked about the impact of possible subsidy rationalisation for diesel and RON95, the governor said that for the short term, it may have some impact in terms of consumption and investments but this could be mitigated by cash transfer or income transfer from the government (for people in need).

"The long-term impact is that this could be positive for the country in terms of the fiscal position,” he said, adding that fuel subsidy rationalisation not only influences household spending but also incentivises corporations to invest in energy-efficient production, creating high-value job opportunities.

"Looking at the current environment in terms of growth, we are experiencing good growth numbers and moderating inflation trend.

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"This provides a good window of opportunity for us to undertake subsidy rationalisation and reforms,” said Rasheed.

However, he said that this important matter should be announced by the government, not only on how to do it but also in terms of the finances and the sequencing.

"More important is how to ensure fair and equitable income transfer to the capital segments of society,” Abdul Rasheed added.

On the civil servants’ salary adjustment in December, he said that based on experience, the adjustment should not hugely impact the inflation rate.

Rasheed also said that the impact of the newly introduced Employees Provident Fund (EPF) Account 3 withdrawals will also be minimal towards the inflation rate. - BERNAMA