Kuala Lumpur, Malaysia

SINGAPORE: Malaysia economy in 2024 is set to grow by 4 to 5%, as reported by The Business Times. Bank Negara Malaysia Governor Abdul Rasheed Ghaffour highlighted the resilience of domestic demand and improving external demand as key factors behind this forecast.

Speaking on Wednesday (20 Mar), Mr Ghaffour shared the bank’s optimism for the year ahead while cautioning about potential short-term challenges stemming from upcoming reforms.

Our prospects are good. We have reason to cautiously anticipate a better year ahead. There is also a favourable window of opportunity to implement crucial structural reforms,” he shared to the media after the release of Bank Negara Malaysia’s 2023 annual report.

The reforms, aimed at rationalising subsidies and reducing the fiscal deficit, are crucial for the country’s long-term prosperity, although they do present transitional hurdles.

Mr Ghaffour stressed the importance of decisive action to capitalise on Malaysia’s robust economic rebound post-Covid and pave the way for sustained growth. Despite global economic slowdown and domestic inflationary pressures, Malaysia achieved a 3.7% GDP growth in 2023.

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The central bank projects headline inflation to range between 2 and 3.5% in 2024, with easing global supply conditions helping contain cost pressures.

Although inflation moderated to 2.5% in 2023 from 3.3% in the previous year, Mr Ghaffour said, “inflation outlook remains highly subject to upside risks due to potential price adjustments on food and energy items, as well as external pressures from exchange rate and global commodity price developments.”

While acknowledging that subsidy rationalisation might impact living costs, particularly for lower-income groups, Mr Ghaffour ruled out immediate monetary policy intervention.

He emphasised, “we will continue monitoring the data, whether there is an anchoring of inflation or demand pressures. Only such situations will require monetary policy interventions.”

The overnight policy rate remains at 3% since a 25-basis-point hike in May 2023, with economists expecting stability throughout 2024. Mr Ghaffour reaffirmed that Malaysia’s current ringgit level is undervalued, attributing its depreciation to external factors aligning with emerging market currencies.

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As the ringgit depreciated against the US dollar, Mr Ghaffour revealed Bank Negara’s efforts to encourage consistent repatriation and conversion of foreign investment income into the ringgit. The bank is also monitoring foreign currency holdings by Malaysian companies, contributing to increased market interest in the ringgit.

Financial markets anticipate the ringgit’s further appreciation in 2024, with some projections extending to 2025.

Bank Negara’s annual report for 2023 states that financial position remained stable in 2023, with total assets reaching RM631.26 billion (approximately S$179.39 billion) and a net profit of RM7.16 billion (approximately S$2.03 billion). Out of which, RM4.31 billion (S$1.22 billion) has been allocated to the risk reserve, with a dividend of RM2.85 billion (approximately S$809.88 million) declared to the government for the financial year 2023. /TISG

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