Bank Negara Malaysia (BNM) decided to maintain the Overnight Policy Rate (OPR) at 1.75% yesterday after seeing the global economy continue to recover, driven by a recovery in manufacturing and export activities.
According to a statement issued by BNM yesterday, economic activity is seen to increase in most developed and regional economies as well as more significant recovery momentum in China.
"For Malaysia, the latest indicators show that economic activity increased significantly in the third quarter. The introduction of targeted measures to curb COVID-19 in some states could affect the recovery momentum in the fourth quarter. However, growth for 2020 is expected to be in the previous projection range.
"For the year 2021, economic activity is projected to improve. This increase will be driven by recurring global demand, recovering private and public sector spending in a state of ongoing support from policy measures, and higher production of existing and new facilities, ”BNM said.
However, BNM warns that the recurrence of the Covid-19 case will result in the global economic recovery remaining uneven in the near future.
“The recovery rate is expected to be uneven across sectors, with economic activity in some industries continuing to be below pre-pandemic levels and slower increases in the labor market. The low growth risk still exists, mainly due to the ongoing uncertainty in relation to global and domestic pandemics, ”the statement added.
In terms of inflation, BNM informed that the overall inflation is expected to be negative in 2020 as world oil prices are much lower while for 2021, the overall inflation is projected to be higher.
"However, the outlook will continue to be significantly influenced by world oil and commodity prices.
"Basic inflation is expected to remain low by 2021 in the face of continued overcapacity in the economy," BNM explained.
Meanwhile, the Monetary Policy Committee (MPC) described the cumulative reduction of the OPR by 125 basis points this year will continue to stimulate the economy.
“The MPC will continue to assess the ever-changing situation and its impact on the outlook for inflation and domestic growth as a whole.
"BNM remains committed to using its appropriate policy tools to create conditions that support continued economic recovery," according to the statement.
