MNI BRIEF: Malaysia CENBANK Cuts Growth Forecast To 3%-4%

Malaysia's central bank has lowered its 2021 growth forecast, expecting GDP growth of between 3% and 4% this year after announcing on Friday a recovery in second quarter growth to 16.1%.

The rebound reflected a low base after the economy contracted by 0.5% in the first quarter, according to a statement from Bank Negara Malaysia. The central bank had previously forecast growth of between 6% and 7.5%, but said nationwide containment measures due to the pandemic had prompted a review.

BNM Governor Nor Shamsiah said she expected the national vaccination program to be a catalyst for positive sentiment, and that the growth recovery was expected to "broadly resume" in the second half of 2021 and improve into 2022.

The central bank held its policy rate unchanged at 1.75% at its last meeting after cutting by 125 basis points last year, with the last cut in July 2020, see: MNI INSIGHT: Malaysia Central Bank Ponders Rate Cut in Q4.

BNM also released data showing second quarter inflation increased to 4.1%, largely due to the base effect of fuel prices, while core inflation was stable at 0.7%. BNM has forecast inflation will moderate and average between 2% and 3% this year.