THE Association of Banks Malaysia (ABM) sees the new monetary and administrative measures announced by Bank Negara as further proactive steps towards maintaining economic growth, supporting business activity and implementing the Financial Services Masterplan.
As it noted, the focus is on strengthening the domestic economy through better coordinated delivery and allocation of more funds to small- and medium-sized enterprises (SMEs), relaxing the requirements for foreign companies to raise funds locally, and improving the effectiveness of development financial institutions (DFIs).
ABM chairman Dr Rozali Mohamed Ali said in a statement yesterday that the central bank had rightly emphasised the need to enhance the level of professionalism in the financial services sector through the establishment of the International Centre for Leadership and Excellence in Finance.
At the same time, the consumer education programme will be developed to increase awareness of consumers rights and the service levels that should be expected from financial institutions, he noted.
Economists, meanwhile, see the lowered economic growth forecast of 4.5% for this year as a realistic figure, though this is dependent on what the private sector does.
And they have not ruled out a cut in interest rates, saying that comments from Bank Negara on Wednesday indicated it was reserving that flexibility should economic conditions worsen.
There were a lot of caveats in the 4.5% growth estimate, said CIMB economist Lee Heng Guie. But the message is that the government is consolidating and the private sector has to act.
Economists say it is crucial that the private sector loosens its purse strings as the government would be consolidating its position by spending a little less than previously.
Estimates are that the private sectors consumption would grow by 6.9% and private investment by 8.1%. Greater reliance on the private sector to start spending money comes on the heels of a 3.6% increase in public sector expenditure this year after growing by 8.6% last year.
Comparing these two sets of official numbers, the downward revision (of the growth forecast) reflects mainly the concern of Iraq war uncertainty and weaker-than-expected global economic conditions, said DBS Bank senior economist Wong Chee Seng.
Domestically, the numbers suggest that demand conditions remain relatively resilient with real aggregate demand growing by 5.9% versus 4.3% last year.
Some economists say such private sector growth, although possible, could be difficult in light of global uncertainties. Private investment had shown positive growth in recent quarters and manufacturing applications had grown by 35% last year.
An economist with a local brokerage said companies might be hesitant to invest as the capacity utilisation rate had been coming down and there was still a lot of excess capacity. Also, global uncertainties could see some companies postponing planned investments until a clearer outlook emerged, he added.
Strains on private sector consumption are emerging, some economists say, as the rate of non-performing loans for residential houses has risen and consumers tend to be cautious in an uncertainty environment.
On the other hand, job security, based on the low unemployment rate, high agricultural product prices and historical low interest rates, are factors that would push consumption higher.