KUALA LUMPUR, Nov 18 – Bank Negara Malaysia (BNM) will look at the future prospects of the global economy, alongside the current recession in Japan, before adjusting monetary policy to support the country’s economic growth, said its Governor, Tan Sri Dr Zeti Akhtar Aziz. “Monetary policy is forward looking. So, we will look at not just current conditions, which are important, but the future as well,” she told reporters on the sidelines of the ISI Regional Statistics Conference in Kuala Lumpur, Tuesday.
She said other factors to be looked at is policy flexibility and whether the major economies have the capability to adjust measures to shoulder any slowdown. “For example, if you look at China, they have a fiscal surplus. Therefore, the country will be in a position to provide support, if the economy slows down by more than what was earlier anticipated,” she said.
Zeti said the central bank would have to make an assessment of the factors leading to the softening in oil prices and as to whether it is temporary or permanent. “If it is a permanent trend, then to what level will it stabilise. This trend has just begun and we are monitoring it closely to see where it settles,” she said. On Malaysia’s balance of payments, she said the narrowing current account surplus was better than expected, as an earlier forecast anticipated a current account deficit.
“We thought that in some quarters, because of the rapid investment growth, it (current account under balance of payments) would actually result in a deficit. But it didn’t. So this year, we’ll have an overall surplus,” Zeti said. Meanwhile, on Malaysia’s export performance, she said in this regard, there had been greater diversification, both in terms of market as well as products.
“But 60 per cent of exports is to the Asian region and it will still be the growth centre,” she noted. Zeti said Malaysia had also become a role model for other economies in promoting domestic demand to drive the economy and achieving strong growth despite a slight moderation. “Our growth moderated from more than six per cent to 5.6 per cent. This is strong growth in a challenging environment,” she added.