KUALA LUMPUR: Bank Negara Malaysia’s Monetary Policy Committee (MPC) kept the Overnight Policy Rate (OPR) unchanged at 1.75% during its meeting on Wednesday.
It said in a statement for Malaysia, the resurgence in Covid-19 cases and the introduction of targeted containment measures had affected the recovery momentum in the fourth quarter of 2020.
“As a result, growth for 2020 is expected to be near the lower end of the earlier forecasted range.
“For 2021, while near-term growth will be affected by the re-introduction of stricter containment measures, the impact will be less severe than that experienced in 2020, ” it said.
However, Bank Negara said the growth trajectory was projected to improve from the second quarter onwards.
The improvement, it said, will be driven by the recovery in global demand, turnaround in public and private sector expenditure amid continued support from policy measures, and higher production from existing and new manufacturing and mining facilities.
The roll-out of vaccines in the coming months will also lift sentiments.
Bank Negara, however, cautioned that downside risks to the outlook remain, stemming mainly from ongoing uncertainties surrounding the dynamics of the pandemic and potential challenges that might affect the roll-out of vaccines both globally and domestically.
As for the average headline inflation, Bank Negara expected it to be negative in 2020 due mainly to the substantially lower global oil prices.
On the outlook for 2021, headline inflation is projected to average higher, primarily due to higher global oil prices, it said.
“Underlying inflation is expected to remain subdued amid continued spare capacity in the economy. The outlook, however, is subject to global oil and commodity price developments, ” it said.
Bank Negara said the MPC considers the stance of monetary policy to be appropriate and accommodative.
“Given the uncertainties surrounding the pandemic, the stance of monetary policy going forward will be determined by new data and information, and their implications on the overall outlook for inflation and domestic growth. The Bank remains committed to utilise its policy levers as appropriate to create enabling conditions for a sustainable economic recovery, ” it said.
Twelve economists surveyed by Bloomberg expected Bank Negara to keep the OPR steady at a record-low 1.75%, while 11 predict a 25-basis point cut.
In the first seven months last year, the OPR was reduced by 125 basis points starting January, following signs of economic slowdown since 2019 before the Covid-19 cases started to rise, which then triggered lockdowns globally early last year.
RHB Banking Group revised its forecast for Gross Domestic Product (GDP) this year to 5.4% from 6.3%, reflecting a more conservative growth outlook amid the re-imposition of the Movement Control Order (MCO 2.0).
On Monday, Prime Minister Tan Sri Muhyiddin Yassin announced the “Perlindungan Ekonomi dan Rakyat Malaysia (Permai)” assistance package worth RM15bil comprising 22 initiatives to shore up consumer and business sentiment.
Last April, the government had implemented the RM250bil Prihatin Rakyat Economic Stimulus Package (Prihatin) in March last year and the RM10bil Additional Prihatin Rakyat Economic Stimulus Package (Prihatin Tambahan) last April.
It also unveiled the RM35bil National Economic Recovery Plan (Penjana) in June last year and the RM10bil Prihatin Supplementary Initiative Package (KITA Prihatin) in September.
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