Zeti: Economy on strong growth path

KUALA LUMPUR: Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz (pix) has maintained 2015 economic growth target at 4.5% to 5.5% despite potential external shocks, dismissing doomsayers of the economy as being "aught up with misperceptions surrounding the Malaysian economy".
She said economic growth will be anchored by domestic demand, continued expansion across all economic sectors and external sector is expected to remain resilient.
Domestic demand, which is projected to maintain at 6% growth, will continue to drive the economic growth, supported by robust private investment and spending.
On the trade side, she said an expected narrowed current account surplus of 2% to 3% of gross national income (GNI) is in line with global rebalancing and structural transformation in the local economy.
Lower projected current account balance of RM21.4 billion, meanwhile is due to low oil price and higher deficit in income account.
She pointed out that Malaysia should not be viewed as a highly dependent on oil and gas revenue, but the fact is the economic structure has changed with a significant contribution derived from the manufacturing and services sector.
Manufacturing and services, which are expected to expand by 4.9% and 5.6% respectively, contribute some 77% to the nation's GDP collectively.
"Shifts in economic activity have resulted in a more diversified economic structure," Zeti said.
"We've to strengthen our fundamentals of being on a steady growth path, if the growth weakens or fragile, this would affect us badly," Zeti told a media briefing in conjunction with the release of Bank Negara Annual Report 2014.
She believes the ringgit is also undervalued as a large adjustment in the ringgit over the recent months has been due to concerns over the impact of low oil price on the Malaysian economy. As at 5pm yesterday, the ringgit was 3.697 to the dollar.
Zeti further added that Malaysia has the strength to intermediate volatile capital flows, thanks to the strong and resilient financial market.
She said a stress test for the banking sector shows that there is strong financial buffer and is sufficient to support debt obligations.
"Bank's minimum capital requirement will be maintained. Banks will remain profitable and not cause a collapse in our banking system...there is a high degree of resilience," she noted, citing defaults in highly leveraged entities has been taken into account.
Commenting on inflation, Zeti expects lower headline inflation of 2% to 3% 2015, reflecting the drop in global energy and commodity prices.
"Inflation won't exceed 3% in 2015 and possibly 2016," she said.
For 2014, Bank Negara recorded a net profit of RM6.38 billion, with a dividend payment of RM3 billion to the government.
On another note, Zeti announced the appointment of two external members to the central bank's Monetary Policy Comittee (MPC), namely Datuk Dr Noor Azlan Ghazali and Dr Yeah Kim Leng.
Noor Azlan is the vice chancellor and professor of Economics at Universiti Kebangsaan Malaysia, while Yeah is the dean of the school of business, University of Science and Technology as well as former chief economist at RAM Holdings Bhd.