The country’s economy is projected to expand between 4.3 and 4.8 percent this year driven by domestic demand and support from the external sector, says Bank Negara Malaysia Governor Datuk Muhammad Ibrahim.
He said domestic demand would remain a key driver with support from an improvement in net exports while private consumption would be supported by continued employment and income growth.
“Households have the capacity and resilience to support expenditure, as well as, have ample liquid financial assets to cover the debt,” he told a briefing on the BNM Annual Report 2016, as well as, the Financial Stability and Payments Report here on Thursday.
Muhammad said private investment would be supported by the implementation of projects in the services and manufacturing sectors.
“Services and manufacturing sectors account for 75 per cent of private investment activity while key quality projects would increase efficiency, productive capacity and employment,” he said.
However, he said risk factors exist such as threats of protectionism, geopolitical developments, cautious sentiment and financial disruption.
“There is risk to growth from slower global growth emanating from global policy uncertainties, volatility in capital flows and exchange rates, as well as, weaker consumer and business sentiment,” he said.
Meanwhile, Muhammad said inflation would range between 3.0 and 4.0 percent on the back of pass-through impact from the increase in global oil prices on domestic retail fuel prices.
“Inflation would be relatively high in the first half of 2017 before moderating toward year-end,” he said, adding that the cost-driven inflation might not significantly spillover given the moderate domestic demand condition.
On monetary policy, he said the focus would be on supporting the sustainable growth of the economy.
“The overnight policy rate of 3.0 percent is currently consistent with steady growth and stable inflation,” he said.
Muhammad said the country’s external debt remained manageable given its currency, maturity and balance sheets profiles.
He said Malaysia was also well-positioned to intermediate volatile capital flows on the back of the diversified economic structure, financial buffers and prevailing robust policy framework.
As at end-2016, BNM’s financial position remained strong with total assets amounting to RM450.98 billion and international reserves at RM423.9 billion.
The central bank recorded a net profit of RM6.48 billion for the financial year ended Dec 31, 2016, and declared a dividend of RM2.5 billion to be paid to the government.