KUALA LUMPUR – Economists have expressed no surprise over Bank Negara Malaysia’s (BNM) decision to maintain the overnight policy rate (OPR) at 3.0%.
Bank Muamalat analyst Mohd Afzanizam Abdul Rashid said that the slowdown in China’s economic growth has had a significant impact on the global economy.
“As a nation deeply integrated into international trade and investments, we have felt the repercussions,” he explained.
“This is evident in our second-quarter GDP figures.”
Malaysia’s GDP growth has decelerated to 2.9% compared to the robust 5.6% recorded in the first quarter of the year.
In light of this, Afzanizam argued that there is no justification for raising the OPR.
“Monetary policy should remain supportive to stimulate domestic economic growth,” he said.
He also noted that maintaining the OPR at 3% would benefit borrowers, especially those with variable rate contracts, as stable monthly payments would sustain their spending power, aiding the overall economy.
Furthermore, this decision fosters stability and predictability, providing businesses and investors with a conducive environment for commercial decision-making.
“For instance, businesses seeking to expand and requiring loans can now do so with greater confidence since the interest rate remains unchanged,” Afzanizam said.
Shankaran Nambiar, an economist at the Malaysian Institute of Economic Research, concurred that the decision to maintain the OPR was prompted by the global economic slowdown affecting domestic growth.
Nambiar anticipated this outcome, citing various global factors, including the challenges facing the Chinese economy, reduced Chinese tourism inflows, and a moderated global demand for semiconductors.
He also expressed concern about the risks to inflation due to these developments.
Nambiar highlighted that the US Federal Reserve’s indications of not increasing its rates played a role in BNM’s decision.
“Thus, there is no pressure on BNM to factor in the Fed’s actions. The decision to allow our rates to stand pat was made without having to balance the consequences of a hike by the Fed – it was a much easier decision to make.
“By maintaining the rates, BNM is providing a more conducive environment for borrowing.
“Businesses won’t be deterred from borrowing. This will help keep domestic demand on a positive note,” he added. – September 8, 2023