Current account balance to remain in surplus

PETALING JAYA: The current account balance is expected to remain in surplus, albeit narrower, in the future said Bank Negara Malaysia (BNM) in its 2016 annual report.
In the near-term, global and domestic developments will continue to influence the performance of the current account. In recent years, Malaysia’s current account movement has been influenced by three major developments, namely the global economy, global commodity prices and investment in the Malaysian economy.
Malaysia’s export performance is projected to improve, in line with higher global demand and commodity prices. This should also support higher incomes for export-oriented firms and Malaysia’s outward foreign direct investment, particularly those in the commodity-related sectors.
Investments are expected to continue to be channelled towards productive sectors. While large-scale and more complex investment activities will contribute to raising demand for foreign goods and services, these investments are expected to raise productive capacity and lift efficiency.
“These short-term trade-offs may be necessary to place Malaysia on a solid footing to tap on the opportunities in a fast-changing global environment.”
Malaysia’s external sector resilience was demonstrated during the recent sharp decline in commodity prices. Although it has narrowed, Malaysia’s trade balance remained in surplus, underpinned by a diversified export structure, both in terms of products and markets. This underscores the importance of advancing structural reform measures to promote trade and investment diversification and competitiveness, and more importantly to move up the value chain.
These include labour and product market reforms, the gradual removal of subsidies, allowing greater foreign participation in the services sector, enhancing efficiency of administrative processes, facilitating private investment in infrastructure, easing tourist visa regulations and deepening market access.

“The continued implementation of reforms will be critical in strengthening Malaysia’s external sector and shaping the path of Malaysia’s current account balance moving forward,” said BNM.