Maybank IB projects 100bps OPR hike over 12 months


MAYBANK Investment Bank Bhd (Maybank IB) is forecasting 100 basis points (bps) increase in the Overnight Policy Rate (OPR) for the period of 12 months, namely between the second half of 2022 (2H22) until 1H23.

Chief economist Suhaimi Ilias said this was following Bank Negara Malaysia’s (BNM) accommodative monetary policy process which began with the increase of 25bps in May.

He expected the central bank to announce 2bps within this week’s Monetary Policy Committee (MPC) meeting and another 25bps by the fourth quarter of 2022 (4Q22), and a further 50bps in 1H23.

“Our estimation is every 25bps hike will basically shave real GDP growth by 0.2 percentage points spread over 12 months.

“And the implications of increasing the OPR include the raising of mortgage repayment by 3%,” he said at the Maybank IB 2H22 market outlook briefing today.

He noted that BNM would increase the OPR due to the growing domestic demand and rising core inflation rate.

On another note, Suhaimi said the government is still able to bear the cost of subsidies which is expected to reach almost RM80 billion this year with the expectation of higher estimated revenue from oil and gas (O&G) revenue, prosperity tax collection and the expectation of a larger dividend from Petroliam Nasional Bhd (Petronas).

He added that the subsidy liability was under the government’s operating expenses, which could only be financed using tax revenue and non-tax revenue, not through loans or debts.

According to him, revenue collection for this year was expected to be higher as the government benefitted from the strengthening of commodity prices such as crude oil which surpassed US$100 (RM441) per barrel, higher than the US$66 per barrel targeted in the Budget 2022.

“The fuel subsidy alone is expected to reach RM37 billion this year compared to RM4 billion previously. Half of the fuel subsidy is expected to be funded by O&G-related revenue and the other half from Petronas dividends.

“Petronas will also be among the companies that will contribute to the high collection of prosperity tax,” he noted.

Commenting on the performance of the Malaysian economy for the whole of this year, Suhaimi said Maybank IB has maintained the country’s real GDP growth forecast of 6% following the reopening of economic activities and the international border on April 1, as well as the fourth round of Employees Provident Fund withdrawals.

Maybank IB has revised upwards its inflation rate forecast for this year to 3.4% from 2.7% previously and increased the inflation rate projection for 2023 to 4.1% from 2.5%.

Meanwhile, Maybank IB head of equity research Anand Pathmakanthan said the research firm had revised its projection of the benchmark index, FTSE Bursa Malaysia KLCI (FBM KLCI) to 1,500 points by the end of this year from 1,710 points previously.

He said this was due to high inflation and interest rates, as well as uncertainty ahead of the 15th General Election.

At 5pm, the FBM KLCI closed down 12.22 points, or 0.84% to 1,437.52, its intraday low.


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