Malaysia’s Finance Minister Zafrul Aziz says country’s economy on the ‘right track’, room to raise rates
- Malaysia’s economy gained speed in Q1, as the country dropped most virus restrictions allowing the central bank to raise borrowing costs to fight inflation
- A high vaccination rate, and a pivot to living with the virus, nudged the government to reopen its borders buoying optimism in Malaysia’ economic recovery
The economy gained speed in the first quarter of this year, as the country dropped most virus restrictions. That allowed the central bank room to raise borrowing costs this month to preemptively fight inflation, even though consumer prices are gaining at the slowest rate in Southeast Asia.
The central bank may resume hiking the benchmark policy rate again in the third quarter, according to a Bloomberg survey.
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He said pegging the currency wasn’t being considered and that he is “comfortable” with where the ringgit is now trading.
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Risks to that outlook remain in the form of global tensions, especially the war in Europe. Malaysia, a net food importer, is taking steps to secure its supplies with food costs surging to all-time highs as the war in Ukraine worsens a global hunger crisis.
Soaring food costs will continue to dominate Malaysia’s inflation in the coming months amid elevated global commodity prices and domestic supply chain disruptions, analysts at TA Securities wrote in a note Thursday. The country is also affected by high import prices aggravated by the weak ringgit, they added.
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Zafrul said the government has been spending more on subsidising prices than it did last year to support Malaysia’s most vulnerable, but the impact on the government’s budget had been buffered by the commodity price surge.
“Our coffers will be OK,” he said.
That would require the support of parliament, which would mean any change wouldn’t occur before the middle of next year at the earliest, Zafrul said.