KUALA LUMPUR, Sept 6 – Bank Negara Malaysia (BNM) is expected to keep the overnight policy rate (OPR) at 3.00 per cent for the remainder of the year and into 2025, according to economists.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the OPR is deemed to be supportive of Malaysia’s economic growth and positive for the ringgit, as the gap between the United States Federal Reserve’s (Fed) Fund Rate and the OPR is expected to narrow in the near term.
“What matters is the sequencing of the policy reforms. Thus far, the government has implemented several fiscal consolidation exercises,” he told Bernama.
These measures include revenue-enhancing initiatives such as a sales tax on imported low-valued goods, an increase in the services tax rate from 6.0 per cent to 8.0 per cent, e-invoicing for large companies, capital gains tax on foreign-sourced income and unlisted shares, and higher excise duties on chewing tobacco and sugared beverages.
Additionally, expenditure optimisation measures have been introduced, including revisions to electricity and water tariffs and the rationalisation of subsidies for diesel and fresh food, he added.
“Perhaps the rationalisation of RON95 prices could be put on hold for now, as the government is mindful of the potential inflationary impact of increasing RON95 prices, given its significant share in the consumer price index (CPI) basket at 5.5 per cent compared to diesel’s 0.2 per cent,” he said.
Meanwhile, Socio-Economic Research Centre (SERC) executive director Lee Heng Guie concurred with the central bank that the economy remained on track for continued positive growth in the second half of this year.
Lee said the economy was stronger than market expectations in the first half of 2024, and this trend is expected to continue, supporting growth in exports, domestic demand, and strong investment activity from both the private and public sectors.
Regarding inflation, he said the central bank believes that headline and core inflation remain under control and are unlikely to exceed 3.0 per cent, as the effects of diesel price adjustments have been effectively managed.
