The growth will be underpinned by both external and domestic demand against a challenging operating environment
by ASILA JALIL / pic by TMR FILE
BANK Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunos said the central bank will announce the successful recipients of the licences soon after completion of the legal process.
The central bank was expected to announce the five winners of the digital licences this month.Banks, industry conglomerates, technology enterprises, e-commerce operators, fintech players, cooperatives and state governments were among those who applied. Five digital banks will be granted licences to provide financial services to under-served and unserved populations.
She said this at a virtual media briefing on Wednesday in conjunction with the publication of BNM’s latest 2021 Annual Report, Economic and Monetary Review and Financial Stability Review reports.
She expects Malaysia’s economy to grow between 5.3% and 6.3% in 2022, slightly lower than the projection made by the government which is between 5.5% and 6.5%.
Shamsiah said growth will be underpinned by both external and domestic demand against a challenging operating environment.
She said economic recovery is projected to gather further momentum amid the reopening of the economy and international borders on April 1.
“The better Covid-19 management and higher vaccination rates will help mitigate the adverse impact from future resurgences, thus, protect our healthcare system from being overwhelmed. With these factors in mind, we expect less disruption to economic activity and spending in the event of resurgences.
“As an open economy, Malaysia will continue to benefit from the expansion in global demand, which would support both investment activity and the labour market. Overall, for 2022, growth is expected to expand between 5.3% and 6.3%,” she said in a virtual press briefing on the central bank’s annual report yesterday.
As the country is still recovering from the effects of the pandemic, Nor Shamsiah said the central bank intends to keep its Overnight Policy Rate (OPR) stance accommodative to support recovery and ensure price stability.
She said the unprecedented conditions that warranted significant monetary support during the height of the Covid-19 pandemic have abated. The OPR currently stands at a historical low of 1.75%.
“With the policy rate at its historical low, we are cognisant of the consequences of keeping interest rates low for an extended period. Global experience has shown that this could lead to an unhealthy build-up in financial imbalances.
“As the recovery is gaining strength, we must have the discipline and foresight to begin rebuilding policy buffers for future shocks,” she said.
There have also been concerns surrounding the risks to domestic inflation due to elevated commodity prices amid prolonged supply disruptions and the military conflict in Ukraine.
Nor Shamsiah said given the outlook for inflation remains largely supply-driven, the bank is closely looking out for any signs of potential second-round effects whereby price pressures could become more entrenched as domestic demand recovers.
“Ultimately, any potential adjustments to the degree of accommodation will remain data-dependent and be undertaken in a measured and gradual way that is commensurate with the appropriate level of support needed by the economy,” the governor said.
Talks on the need to increase minimum wage in Malaysia have been rampant as of late and the central bank is glad there is a lot more public discourse on the need to raise incomes.
Under current circumstances, the governor advised the implementation of the new minimum wage to take into account the uneven recovery across industries.
She called for a clear and transparent roadmap to ensure all firms can implement the minimum wage increase accordingly.
“On this front we should give some time for affected firms to adjust. However, over time the minimum wage would need to converge to minimise distortions in the job market such as workers going to jobs that are offering higher wages.
“There should be a clear and transparent roadmap so that all affected parties, large or small firms can plan accordingly for the road to recovery.”
She added that to improve the quality of economic growth, structural reforms are needed to address the challenges of reinvigorating growth opportunities and strengthening economic fundamentals.
The bank’s monetary and financial policies alone would not be sufficient to accelerate the underlying drivers of growth, which she said are more dependent on other forms of economic policies to secure broader macroeconomic outcomes.
“In carrying out structural reforms, the bank acknowledges the realities confronting domestic policymakers. The challenge lies in balancing the need to continue providing policy support amid an uneven economic recovery and rebuilding policy buffers while expediting structural reforms that require strong commitments from all stakeholders.
“Given this, Malaysia urgently needs a comprehensive roadmap on the prioritisation, sequencing and execution of reforms that cuts across both public and private sectors,” she added.