KUALA LUMPUR: Interest rates in Malaysia or the Overnight Policy Rate (OPR) will be increased at a gradual pace as there are “side effects” of raising them too aggressively, the finance minister has said Tengku Datuk Seri Zafrul Abdul Aziz (Photo).
“Our economy grew strongly in the first half at 6.9% and so we can afford to increase the OPR,” Tengku Zafrul said at Bloomberg’s “Recovery and Resilience: Spotlight on Asean Business” forum.
He also said the country’s economic growth could exceed official gross domestic product (GDP) growth estimates of 5.3% to 6.3% this year despite the current weakness in the global economy and the strong dollar. American.
Economic growth trends were strong in the second quarter (2Q) with GDP growing at 8.9%, he added. He said the strong growth is expected to continue in the third quarter of the year.
“The new GDP forecast figures will be announced on October 7. Inflation in Malaysia was around 2.8% in the first seven months. Our monetary policy remains accommodative because although Bank Negara has increased the OPR by 25 basis points to 2.5%, it is still lower than it was before the crisis (Covid) at 3% to 3.25% “, did he declare.
Tengku Zafrul said that while the ringgit weakened against the greenback, it strengthened against currencies such as the British pound and the euro.
However, he acknowledged that the moderator – Bloomberg Television’s chief international correspondent for Southeast Asia and presenter Haslinda Amin – comments that the pressure on the ringgit is still on the downside due to interest rate differentials. between the United States and Malaysia.
“You also have to understand what the inflation rate is in the United States. The monetary tools available in Malaysia or other countries for that matter also depends on the economic scenario of that particular country,” said Tengku Zafrul.
“Because inflation was around 2.8% in the first seven months, we can still have an accommodative monetary policy supported fiscally by subsidies, for example. But what is important at the end of the day are medium and long-term outlook for the economy,” he added.
Tengku Zafrul said the government will focus on these key areas for the upcoming 2023 budget – to support economic growth, ensuring that this growth is inclusive and on fiscal responsibility.
He noted that while subsidies had reached an all-time high of around RM80 billion this year, the country is also supported as it is a net exporter of commodities.
Standard Chartered Group Chief Executive Bill Winters said the ASEAN region still has some way to go towards deeper economic integration.
“One thing ASEAN countries would like to focus on is pursuing economic integration. There are huge benefits here – from trade deals to exchange deals – it’s not quite there yet. I would encourage further steps in that direction,” Winters said at the same forum.
Winters added that the potential for sustainable finance was huge in this region where public-private partnerships could define new development models for ASEAN.
“ASEAN can be a real global hub for sustainable finance or carbon markets,” Winters said.