top of page

BNM: Govt Has Sufficient Fiscal Space for Further Economic Stimulus

Updated: Jun 16, 2020

With its proven track record of continuous commitment to the medium-term fiscal consolidation path, Bank Negara Malaysia (BNM) Governor Datuk Nor Shamsiah Mohd Yunus said the Government has the fiscal space for further economic stimulus.

In the event there is a need for further economic stimulus, the Government could opt to issue additional borrowings within the space it has built up over the years,” Nor Shamsiah said in a virtual media briefing held today.

She added that the gradual fiscal consolidation over the years is what has allowed the Government to build the fiscal space needed to support the economy during the periods of economic slowdown.

The Government had embarked on fiscal consolidation in 2010 and since then Malaysia’s fiscal deficit has declined by nearly half from 6.7% of Gross Domestic Product (GDP) in 2009 to 3.4% of GDP last year, said Nor Shamsiah.

Notably, the Government has rolled out an RM260 billion stimulus package to keep the economy afloat following the implementation of the Movement Control Order (MCO) from March 18. The subsequent Conditional MCO has now been extended to June 9.

The stimulus measures are expected to widen the fiscal deficit to 4.7% in 2020, as against 3.2% projected late last year.

Noting that sovereign ratings on both advanced and emerging markets have been revised due to weaker prospects and fiscal position, Nor Shamsiah said rating agencies should “not be overly-focused on headline figures for fiscal deficit”.

My message for rating agencies is not to be overly focused on headline figures for the fiscal deficit, but more on what we have done to deliver a swift rebound post-COVID-19 new normal,” she said.

The Governor stressed that the ratings should give importance to the role of fiscal response in this unprecedented crisis, taking into account that the response is targeted and time bound.

When asked about BNM’s monetary policy outlook, Nor Shamsiah said the Central Bank will maintain its pragmatic, flexible and targeted approach to achieve the monetary and financial stability mandate.

BNM still has ample space and flexibility to deploy policy tools to ensure intermediation of financial markets and liquidity across various sectors of the economy, she said.

Source: The Edge Markets

4 views0 comments


bottom of page