KUALA LUMPUR: Malaysia’s macro policies such as the overnight policy rate must be adjusted to ensure that they match the country’s economic realities, as the economy strengthens, said Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus (pix).
As to ringgit, she assured that BNM will uphold its role to ensure that its value does not swing too fast or too much, either way and allow an orderly price discovery.
“Under a flexible exchange rate, it is reasonable for the ringgit to fluctuate from time to time. These adjustments allow the domestic economy to adjust to global economic and financial shocks. We saw this during the 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 as much as 11.5% between end-March to early November, before appreciating by 7.8% towards the 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 welcoming address at the BNM’s Sasana Symposium 2023 today.
She added that recently, the ringgit has come under renewed pressure, which underscored the need for more than short-term solutions.
Nor Shamsiah emphasised the importance of structural reforms that will strengthen the country’s growth prospects and encourage more investment opportunities. She opined that this will increase demand for the ringgit and secure a more enduring appreciation in its value over time.
“Ultimately, to secure our future, the country must stay the course in implementing vital reforms. For many of the challenges Malaysia faces, the solutions require a whole-of-nation approach,” she said.
On inflation, she noted that Malaysia is still experiencing high and elevated inflation, partly due to strong demand.
Nor Shamsiah also noted that “some cost pressures are coming down, but it has not translated to the final prices of goods because demand remains high” and believed that “prices are unlikely to come down as long as demand stays strong”.
“If we do not manage excessive price pressures like we see in some other economies, this will affect everyone through lower purchasing power. The B40 and vulnerable groups are the ones who will be the most affected if we let inflation get out of hand and we will not be able to preserve sustainable growth over the longer term,” she added.
In addition, she remarked that the OPR is by design a blunt tool to deliver price stability and “more targeted measures are in place to help those who may be facing difficulties in meeting their monthly loan repayments”.
The governor pointed out that keeping rates too low for too long can have damaging effects on the economy. She cited the Global Financial Crisis which was rooted in the US housing market and caused a synchronised global recession.
The symposium featured an experiential showcase of Malaysia’s cross-border QR payment linkages with Indonesia, Singapore, and Thailand besides the several panel sessions with speakers addressing topics ranging from macro-economic to current pressing issues such as financial scams, digitalising motor insurance claims and social protection.
