Malaysia’s Economic Growth on A Firm Footing
Bank Negara Malaysia believes that Malaysia’s economic growth is on a firm footing, anticipating possibly two or three OPR hikes by year-end.
Predictions by economists are that by the second half of this year, the overnight policy rate (OPR) is expected to go up by two 25 basis points (BPS).
Central Bank Raises Rates to 2%
Bank Negara Malaysia has increased its OPR in an unexpected move. The increase was 25 bps to 2%, the first increase since January 2018. This has caused many researchers to believe that there is the possibility of “two or three” OPR hikes that may very likely happen by the end of the year.
Especially with the current recovery pace the country is experiencing. Malaysia’s economic growth has certainly been good. If there is robust GDP (gross domestic product) growth in the second quarter of this year, more OPR hikes are very likely. This follows the large EPF (Employees Provident Fund) withdrawals recently, as well as high-commodity related income.
However, if there is a sudden global slowdown, rate hikes could very likely come to halt. The last time this happened was in 2010 when rate hikes were stopped because of the global market uncertainty. Experts predict that a 2.5% OPR rate will be the most consistent with the current recovery pace. There are still lingering effects from the Covid-19 pandemic period.
Rate Projections Moving Forward
Given how things are going with Malaysia’s economic growth and recovery, the next rate hike will be in July and the following one in September. This will be by another 25 bps each.
The primary reason for the raised rates recently is to address the differential interest rate. If the Ringgit keeps weakening, there will be a significant impact on importers.
Private investments are needed to help put Malaysia’s economy on the path to recovery.
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