MNI STATE OF PLAY: Malaysia Central Bank Sees Improving Growth

Malaysia's central bank sees the domestic economy on a recovery path as borders reopen, but inflation should remain low throughout 2022 and the balance of risks to global growth stays tilted to the downside.

With more than 70% of the population vaccinated and Malaysia set to open to international travellers next month, private sector spending and ongoing policy support should boost growth momentum, Bank Negara Malaysia said after its Monetary Policy Committee decided, as expected, to leave its Overnight Policy Rate unchanged at 1.75%.

Core inflation should average below 1.0% this year and remain moderate moving into 2022, it said. The bank does not have an official inflation target but is understood to prefer a range of between 1% and 3%.

EXPANSIONARY FISCAL POLICY

Fiscal policy continues to be expansionary, with the government last week announcing a USD80 billion budget for 2022, a slight increase on this year. Bank Negara also last week announced a further USD1 billion in funding for small- and medium-sized enterprises through its Targeted Relief and Recovery Facility.

Also supporting recovery is an export boom, with data last week showing a 24.9% year-on-year rise to September with total trade also 25.5% higher.

Bank Negara Malaysia cut its policy rate 125 basis points last year to the current level, with the last cut in July 2020.