The central bank said on Thursday for 2019, domestic demand will remain the key driver of growth though it was cautious about moderating global growth and its fallout on the local economy.
KUALA LUMPUR: Bank Negara Malaysia's Monetary Policy Committee (MPC) decided to maintain the Overnight Policy Rate (OPR) at 3.25% as latest indicators point towards sustained economic expansion.
The central bank said on Thursday for 2019, domestic demand will remain the key driver of growth though it was cautious about moderating global growth and its fallout on the local economy.
“Private consumption will continue to be underpinned by stable employment and wage growth, while private investment will be supported by on-going multi-year projects in both export- and domestic-oriented industries,” it said
It pointed out that sustained growth in private sector activity was expected to offset lower public spending arising from the ongoing fiscal consolidation by the government.
“With moderating global growth, the external sector is likely to soften. Risks to growth are tilted to the downside, primarily from potential escalation of trade tensions and commodity-related shocks,” it said.
Bank Negara said global growth momentum was moderating with slower growth in the major economies.
“Trade tensions are beginning to have a material impact on global trade and investments. Tightening financial conditions and heightened volatility in financial markets, coupled with country-specific factors ranging from heightened political and policy uncertainty and elevated debt levels, could further weigh on growth prospects,” it said.
On Malaysia's headline inflation, it averaged at 1.0% in 2018. However, for 2019, inflation is expected to average moderately higher.
The impact of the consumption tax policy on headline inflation in 2019 will start to lapse towards the end of the year.
“However, the trajectory of headline inflation will be dependent on global oil prices. Underlying inflation is expected to remain contained in the absence of strong demand pressures,” it said.
Bank Negara said the domestic financial markets have remained resilient, despite bouts of volatility due to global developments. Domestic monetary and financial conditions remain orderly and supportive of economic growth.
“The financial sector is sound, with financial institutions operating with strong capital and liquidity buffers. Importantly, the domestic economy maintains its underlying fundamental strength, with steady economic growth, low unemployment and surplus in the current account of the balance of payments.
Bank Negara’s monetary operations will continue to ensure sufficient liquidity to support the orderly functioning of money and foreign exchange markets and intermediation activity.
Bank Negara said att the current level of the OPR, the degree of monetary accommodativeness is consistent with the intended policy stance. The MPC will continue to monitor and assess the balance of risks surrounding the outlook for domestic growth and inflation.
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