M'sian monetary policy to remain unchanged this year, MARC expects

  • Tuhan Harun case postponed again to July 22 – Bernama
    Tuhan Harun case postponed again to July 22 – Bernama

    The Lower Shariah Court today postponed again the case of leader of the “Tuhan Harun” deviant sect, Harun Mat Saat, to July 22. Judge Abdul Wahid Mohd Ali set the date after hearing the application from Pahang Islamic Religious Department deputy prosecutor Mohd Fahmi Abd Jalil that he needed more time to examine the legal representation... …

  • What if flight MH370 is never found?
    What if flight MH370 is never found?

    Despite assurances from Malaysia and Australia that the search will continue for Malaysia Airlines flight MH370, the lack of significant leads after almost seven weeks are leading many to ask: What if the jetliner that disappeared over the southern Indian Ocean is never found? At the start of the massive international search effort, such a... …

  • New law to give Sarawak natives freedom in purchasing customary rights land
    New law to give Sarawak natives freedom in purchasing customary rights land

    Bumiputera from Sarawak could eventually buy Native Customary Rights (NCR) land outside their ethnic group or community when the state amends its Land Code in November. Chief Minister Tan Sri Adenan Satem (pic, right), in disclosing the government's intention to table the amendment at its Budget sitting, said with the amendment the Iban, for... …

  • Cops cannot declare May Day rally illegal, lawyer says
    Cops cannot declare May Day rally illegal, lawyer says

    KUALA LUMPUR, April 24 — There are no provisions under the Peaceful Assembly Act (PAA) 2012 that allows the authorities to declare the anti-GST rally planned for May 1 as illegal, human rights... …

  • On May Day, trade unions to rally against GST, TPPA
    On May Day, trade unions to rally against GST, TPPA

    SUBANG JAYA, April 24 — The Malaysian Trades Union Congress (MTUC) announced today a May Day rally to protest against Putrajaya’s newly-approved consumption tax system and a US-led free trade... …

  • Rafizi rips apart deputy minister's grant denial

    A PKR leader has pointed out that Abu Bakar Mohamad Diah referred to grant recipients from a different time period when denying that RM100 million was allocated to a firm purportedly favoured by Prime Minister Najib Abdul Razak. Rafizi Ramli also questioned if this was an oversight on the part of the science, technology and innovation deputy minister or a deliberate attempt to put a lid on the matter. In a statement today, the PKR director of strategy said Abu Bakar (left) disclosed to the …

Petaling Jaya (The Star/ANN) - Malaysia's monetary policy will remain unchanged this year with a slight upside bias unless the growth momentum declines a lot, according to Malaysian Rating Corp Bhd (MARC).

It noted in its 2013 economic outlook report that the central bank, Bank Negara, had kept the overnight policy rate unchanged at 3 per cent contrary to pressures to lower it amid the weakening external sector.

Among the primary factors behind the central bank's decision were the upside surprise in gross domestic product (GDP) growth in the first three quarters of 2012, strong consumer sentiment, evidenced by the Malaysian Institute of Economic Research's rising consumer sentiment index, as well as high household indebtedness, it said.

The rate has been normalised from as low as 2 per cent in 2009.

"Based on its rhetoric, we sense that the Bank Negara is not willing to endanger the financial system by inducing more over-leveraging practices through lower interest rates, especially among households," MARC said.

It added: "As household debt-to-GDP has topped 60 per cent in the past one decade, premature reductions in the policy rate will not be in line with the central bank's intention to curb households' appetite for debt."

As the US Federal Reserve is planning to keep the rate unchanged for a considerable period, raising the policy rate will also lure more capital inflows which are dominated by portfolio flows.

"This may lead to a continuous surge in foreign holdings of Malaysian securities, especially Malaysian Government Securities (MGS). As of September, foreign holdings of MGSs have reached an all-time high of 42.1 per cent of total outstanding MGS."

Local economic growth prospects will largely hinge on the global economic momentum, which at this time is still clouded by the prospects of the recovery in the eurozone.

However, it said, the bottoming of Malaysia's exports would likely lead to a mild rebound in external trade performance as exports to Asian economies stabilise.

However, MARC pointed out two major imbalances to be concerned about: the elevated levels of property prices, which to some extent signify speculative activities, and the overstretched household sector.

"Rising property prices have not abated despite the implementation of some measures by the government and the central bank."

While raising the real property gains tax and curbing loans through net income assessment are commendable measures, prices have not softened materially as these measures do not hit the groups which are buying properties on a large scale," it said, highlighting that incomes for most people have not increase in tandem with prices of residential properties.

Another minor factor to note was the declining current account surplus which may cause uneasiness among financial market players. MARC felt that the mediocre performance of Malaysia's export sector and rising imports due to the ongoing mega projects will put more pressure on the current account (CA) balance,

It said that the CA balance as a percentage of GDP had shrunk from 17.1 per cent in 2008 to 11 per cent in 2011 and would likely drop further this year.

"Although the shrinking savings-investment gap in theory would not cause significant changes in the fundamentals of Malaysia's economy as investment is mainly channeled towards productive sectors, investors' perception may not be too kind especially when the economy is already saddled with persistent budget deficits," it explained.

The ratings agency said this would be one of the factors placing the ringgit under pressure despite having strong fundamentals in the long term.

Despite these concerns, Malaysia's domestic demand would likely remain resilient amid rising contributions from private investment and private consumption, it said.

Follow @YahooMalaysia on LINE for daily news updates.

Comments on Yahoo pages are subject to our link to Comments Guidelines. You are responsible for any content that you post. Yahoo is not responsible or liable in any way for comments posted by its users. Yahoo does not in any way endorse or support comments made by its users.

  • MH370 passenger’s partner tells of strange email from sacked Fox officer The Malaysian Insider
    MH370 passenger’s partner tells of strange email from sacked Fox officer

    The partner of an American passenger aboard the missing Malaysia Airlines flight MH370 has spoken about how a Fox executive who was recently sacked by the news station had contacted her offering to raise funds on her behalf. Sarah Bajc, whose partner Philip Wood is among the 239 people on board the missing plane, told the Sydney Morning Herald... …

  • My last moments with Pa: Ramkarpal Singh The Malaysian Insider
    My last moments with Pa: Ramkarpal Singh

    A week after the tragic crash that took the lives of veteran lawyer and politician Karpal Singh and his personal aide, Michael Cornelius, his son Ramkarpal recounts the final hours with his father that fateful day. This is his story, as told to V. Anbalagan, assistant news editor. “My parents (Karpal and Gurmit) had gone to Pantai Hospital... …

  • Absolute power corrupts absolutely, Dr Mahathir reminds current leaders The Malaysian Insider
    Absolute power corrupts absolutely, Dr Mahathir reminds current leaders

    Malaysian leaders have been reminded not to look down on the public’s capability to topple a corrupt government as what had happened in the Middle East during the Arab spring, warned Tun Dr Mahathir Mohamad (pic). In his latest blog posting today, the country’s longest serving prime minister said that monarchs and dictators in the Middle East... …