Malaysia trims GDP outlook, focuses monetary policy on recovery

[KUALA LUMPUR] Malaysia's central bank slightly lowered its economic growth outlook for this year and pledged any changes to its accommodative monetary policy would be "measured and gradual" as it flagged risks from the pandemic and geopolitics.

Gross domestic product may expand 5.3-6.3 per cent this year, Bank Negara Malaysia (BNM) said in its annual Economic and Monetary Review on Wednesday (Mar 30). That compares with its earlier projection of 5.5-6.5 per cent, and last year's 3.6 per cent growth.

The outlook comes as Malaysia further eases virus curbs and aims to treat Covid-19 as endemic. The country will reopen its borders to international visitors and waive quarantine requirements for the fully vaccinated, a move that potentially boosts tourism and eases a labour crunch.

Malaysia isn't "out of the woods", but is better prepared for further challenges, due to improved Covid management and higher vaccination rates, Governor Nor Shamsiah Yunus wrote in the report's forward. The central bank will monitor the inflation outlook closely for signs of price pressures becoming more entrenched amid a recovery in domestic demand, she added.

Russia's war against Ukraine casts a cloud of uncertainty on both the global and domestic recovery trajectory, the central bank warned, while also flagging risks from possible new variants and current lockdowns in China.

While Malaysia stands to benefit from the surge in commodities prices, further increases may pose an upside risk to inflation. BNM said it expects headline inflation between 2.2 per cent and 3.2 per cent this year, higher than the government's 2.1 per cent forecast.

A NEWSLETTER FOR YOU

Friday, 8.30 am

Asean Business

Business insights centering on South-east Asia's fast-growing economies.

Sign Up

Economist expect the central bank to begin hiking its benchmark interest rate in the second half of this year from the record low it's been at since July 2020. As for the way forward, the BNM said in the report that policy will remain accommodative given uncertainties and risks to growth, and that "any potential adjustments to the degree of monetary accommodativeness would be made in a measured and gradual manner". BLOOMBERG