In its recent meeting, the Monetary Policy Committee (MPC) of Bank Negara Malaysia announced the decision to maintain the Overnight Policy Rate (OPR) at 3%. The move is in line with the current assessment of the global and domestic economic landscape.
Globally, the economy continues to expand, driven by robust domestic demand and a resilient labor market. While signs of recovery are emerging in the electrical and electronics sector, global trade remains soft due to a shift from goods to services and ongoing trade restrictions. China’s economy shows improvement, but its recovery remains modest, primarily due to weaknesses in the property market. Although global inflation has edged downwards, it continues to be above average. The growth outlook is subject to downside risks, including geopolitical tensions, unexpected inflation outcomes, and increased volatility in global financial markets.
For Malaysia, the fourth-quarter GDP estimates confirm that the overall growth for 2023 aligned with expectations. Looking ahead, 2024 is anticipated to see improved growth supported by export recovery and resilient domestic expenditure. Factors such as employment and wage growth, increased tourist arrivals and spending, and ongoing investment activities contribute to the positive outlook. However, risks remain, including weaker external demand and larger declines in commodity production.
Inflation in Malaysia moderated in the fourth quarter, and both headline and core inflation for 2023 remained within expectations. For 2024, inflation is projected to remain modest, reflecting stable cost and demand conditions. The outlook is contingent on domestic policies regarding subsidies and price controls, along with global commodity prices and financial market developments. The government’s plan to review price controls and subsidies in 2024 will impact the inflation and demand outlook.
The recent movements in the ringgit are attributed to external factors and do not accurately reflect the current domestic economic performance. To mitigate the risk of increased volatility in global financial and foreign exchange markets, Bank Negara Malaysia will maintain sufficient liquidity to support the orderly functioning of the domestic foreign exchange market.
With the OPR at the current level, the monetary policy stance continues to be supportive of the economy, aligning with the assessment of inflation and growth prospects. The MPC emphasizes its vigilance to ongoing developments and commits to ensuring that the monetary policy remains conducive to sustainable economic growth while maintaining price stability.
