Bank Negara Malaysia (BNM) has maintained the overnight policy rate (OPR) at 1.75% following the Monetary Policy Committee (MPC) meeting today, as it sees continued recovery in the global economy, although downside risks remain amid uncertainties surrounding the Covid-19 pandemic.
The central bank said the recent resurgences in Covid-19 cases and the subsequent containment measures have affected economic activity in several major economies, although the expedited roll-out of vaccination programmes and policy support are expected to lift global growth prospects going forward.
“The overall outlook remains subject to downside risks, primarily if there is further resurgence of Covid-19 infections and delays in mass inoculation against Covid-19,” it said in a statement.
The resurgence of Covid-19 cases in Malaysia and the introduction of targeted containment measures had affected the recovery momentum in the fourth quarter of 2020, it said, with BNM expecting growth for 2020 to be near the lower end of its earlier forecasted range.
The bank previously forecasted GDP construction of between -3.5% and 5.5% for 2020.
While near-term growth will be affected by the containment measures, BNM said the impact in 2021 will be less severe than that experienced in 2020.
“The growth trajectory is projected to improve from the second quarter onwards.
“The improvement 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,” the central bank said.
It said the average headline inflation is expected to be negative in 2020, due to substantially lower global oil prices, and is projected to average higher in 2021 due to higher oil prices.
BNM said underlying inflation is expected to remain subdued amid continued spare capacity in the economy, although the outlook is subject to global oil and commodity price developments.
“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,” said BNM.
Source: The Edge Markets