KUALA LUMPUR: Malaysia’s third quarter (3Q) GDP growth has shown improvements based on domestic and external indicators during the period, Bank Negara Malaysia (BNM) governor Tan Sri Dr Zeti Akhtar Aziz noted.
Zeti said external trade indicators apart from data on domestic consumption, implementation of government projects here, and strong financing patterns had helped the country achieve a better year-on-year (y-o-y) growth in its 3Q GDP compared to 2Q.
“There is improvement but we have to see to what extent the growth is,” Zeti told reporters on the sidelines of the Asian Central Banks’ Watchers Conference here yesterday. She declined to elaborate, only indicating that Malaysia’s full-year GDP was expected to expand by some 5% this year.
BNM will announce the country’s 3Q GDP numbers on Nov 18.
In 2Q this year, the country’s GDP rose at a slower rate of 4% y-o-y as domestic demand growth moderated during the quarter amid a volatile external landscape as weaker fundamentals in advanced economies in the US and Europe hurt global trade.
Malaysia’s 1Q GDP had expanded at a revised 4.9% y-o-y.
Looking ahead, Zeti said it was pivotal for the central bank to strike a balance in its assessment of the country’s growth and inflation risks to ensure economic expansion is sustainable in the next three years.
Zeti said BNM would carefully assess the current situation and that its policies would not be tailored solely to spur GDP growth. This is because rising inflation would curb domestic consumption and stifle the country’s economic expansion, according to her.
“We look at both economic growth and inflation risks,” Zeti said.
Asked whether BNM is more concerned about growth or inflation risks, the governor said the central bank has to determine whether inflation here has peaked.
The country’s inflation as measured by the consumer price index (CPI) rose 3.4% y-o-y in September. In August, the CPI climbed 3.3%.
Economists have, however, said inflation was seen to be on a declining trend towards year-end. This comes against a backdrop of easing cost-push and demand-pull factors amid weaker global economic fundamentals.
This is due to falling prices of commodities such as crude oil and food crops, and slower domestic and external demand factors as debt-laden advanced economies with high jobless rates trigger slower growth prospects across the globe, they said.
Zeti said across Asia, regional economies are still resilient and the region would still post economic expansion, albeit, at a slower rate.
She expects Asia’s GDP growth this year to come in less than the average of 6% to 7%. Growth in the region would be supported by domestic consumption as rising income, positive employment numbers and private sector investment boosted demand.
“Asian economies have prudent fiscal policies and are not over-leveraged,” Zeti said. She said Asia has seen less impact from weaker fundamentals across advanced economies as Asian countries have regional economic and financial linkages which helped boost intra-regional trade.
In her speech earlier, Zeti said Asian policymakers have emphasised on building their respective economies resilience to better mitigate external shocks and sustain economic growth.
For central banks, she said the focus is on preserving monetary and financial stability, apart from domestic financial infrastructure.
“Every financial crisis has prompted the review of the role, function and authority of central banks. Indeed developments in this recent four years have had profound implications on the central banks of crisis-affected countries.
“The mandate of central banks for financial stability has generally been strengthened considerably to deal more effectively with risks in the financial system and economy,” she said.
A crucial aspect for central banks’ policies is that they are “anticipatory”, according to Zeti, as delays in policy action or exit will result in higher costs and unintended consequences.
This article appeared in The Edge Financial Daily, November 2, 2011.
Zeti said external trade indicators apart from data on domestic consumption, implementation of government projects here, and strong financing patterns had helped the country achieve a better year-on-year (y-o-y) growth in its 3Q GDP compared to 2Q.
“There is improvement but we have to see to what extent the growth is,” Zeti told reporters on the sidelines of the Asian Central Banks’ Watchers Conference here yesterday. She declined to elaborate, only indicating that Malaysia’s full-year GDP was expected to expand by some 5% this year.
BNM will announce the country’s 3Q GDP numbers on Nov 18.
In 2Q this year, the country’s GDP rose at a slower rate of 4% y-o-y as domestic demand growth moderated during the quarter amid a volatile external landscape as weaker fundamentals in advanced economies in the US and Europe hurt global trade.
Malaysia’s 1Q GDP had expanded at a revised 4.9% y-o-y.
Looking ahead, Zeti said it was pivotal for the central bank to strike a balance in its assessment of the country’s growth and inflation risks to ensure economic expansion is sustainable in the next three years.
Zeti said BNM would carefully assess the current situation and that its policies would not be tailored solely to spur GDP growth. This is because rising inflation would curb domestic consumption and stifle the country’s economic expansion, according to her.
Zeti says rising inflation would curb domestic consumption
and stifle the country's economic expansion.
and stifle the country's economic expansion.
“We look at both economic growth and inflation risks,” Zeti said.
Asked whether BNM is more concerned about growth or inflation risks, the governor said the central bank has to determine whether inflation here has peaked.
The country’s inflation as measured by the consumer price index (CPI) rose 3.4% y-o-y in September. In August, the CPI climbed 3.3%.
Economists have, however, said inflation was seen to be on a declining trend towards year-end. This comes against a backdrop of easing cost-push and demand-pull factors amid weaker global economic fundamentals.
This is due to falling prices of commodities such as crude oil and food crops, and slower domestic and external demand factors as debt-laden advanced economies with high jobless rates trigger slower growth prospects across the globe, they said.
Zeti said across Asia, regional economies are still resilient and the region would still post economic expansion, albeit, at a slower rate.
She expects Asia’s GDP growth this year to come in less than the average of 6% to 7%. Growth in the region would be supported by domestic consumption as rising income, positive employment numbers and private sector investment boosted demand.
“Asian economies have prudent fiscal policies and are not over-leveraged,” Zeti said. She said Asia has seen less impact from weaker fundamentals across advanced economies as Asian countries have regional economic and financial linkages which helped boost intra-regional trade.
In her speech earlier, Zeti said Asian policymakers have emphasised on building their respective economies resilience to better mitigate external shocks and sustain economic growth.
For central banks, she said the focus is on preserving monetary and financial stability, apart from domestic financial infrastructure.
“Every financial crisis has prompted the review of the role, function and authority of central banks. Indeed developments in this recent four years have had profound implications on the central banks of crisis-affected countries.
“The mandate of central banks for financial stability has generally been strengthened considerably to deal more effectively with risks in the financial system and economy,” she said.
A crucial aspect for central banks’ policies is that they are “anticipatory”, according to Zeti, as delays in policy action or exit will result in higher costs and unintended consequences.
This article appeared in The Edge Financial Daily, November 2, 2011.
