Matching macro policies with economic realities

“Even as we face headwinds from abroad, the domestic economic activities have already exceeded pre-pandemic levels," said Nor Shamsiah. — Bernama

KUALA LUMPUR: Macro policies such as the overnight policy rate (OPR) must be adjusted in line with the strengthening economy, says Bank Negara governor Tan Sri Nor Shamsiah Mohd Yunus.

She said such measures are necessary to ensure that the broad macro policies match the country’s economic realities.

“Even as we face headwinds from abroad, the domestic economic activities have already exceeded pre-pandemic levels.

“From real wages and employment prospects, to investments and domestic demand, various indicators point to relative strength in our economy,” she said in her opening remarks at the launch of the Sasana Symposium 2023 as reported by Bernama yesterday.

According to Nor Shamsiah, the central bank recognises that although the overall economy is good, there are some quarters that are facing economic challenges.

“However, given that the OPR is, by design, a blunt tool to deliver price stability, more targeted measures are in place to help those who are facing difficulties in meeting their monthly loan repayments,” she added.

On the ringgit’s performance, Nor Shamsiah noted that the local currency had come under renewed pressure in recent weeks, underscoring the need for more solutions.

The governor added that under the flexible exchange rate, it is reasonable for the ringgit to fluctuate from time to time.

The adjustments allow the domestic economy to adapt to global economic and financial shocks, she said.

“We saw this during the US Federal Reserve’s rapid and large interest rate adjustments last year, which caused huge shocks to the global economy.

“At one point, the ringgit declined by as much as 11.5% between end-March and early November before appreciating by 7.8% towards year-end, yet the real economy grew by 8.7% during the year, thanks in no small part to the ringgit’s role as a shock absorber,” she said.

In her speech, she stressed on the need for a structural reform that would strengthen the country’s growth prospects and encourage more investment opportunities.

“This will increase the demand for the ringgit and secure a more enduring appreciation in its value over time,” she said

During the event, Nor Shamsiah also launched Malaysia’s cross-border QR payment linkages with Indonesia, Singapore, and Thailand.

Themed “Structural reforms for a stronger Malaysia”, the one-day symposium featured seven panel sessions on various topics from macroeconomy to pressing issues such as financial scams, digitalising motor insurance claims and social protection.