‘There is also the advantage of raising the rate overnight before this apparently.’
The World Bank Group expects that the interest rate hike in the United States (US) will not have a significant impact on Malaysia compared to other East Asia and Pacific (EAP) countries.
According to a World Bank Group statement, flexible exchange rate factors including Malaysia's large international reserves could contain the shock of interest rate hikes by the Federal Reserve (Fed).
Detailed that Malaysia's flexible exchange rate, low dollar -denominated external debt with gross domestic product (GDP) of 0.9% and international reserves of $ 115.6 billion or import protection for 5.9 months, could offset the negative impact of US policy tightening.
In addition, the deep investor base of domestic institutions as well as the prospect of economic recovery with high commodity prices also protected the country against the rate hike.
Commenting on the Malaysian Economic Monitoring report for June 2022, the recent increase in Bank Negara Malaysia's (BNM) policy rate has built up more monetary space in the event of unforeseen shocks in the future.
Meanwhile, the World Bank projects Malaysia's GDP to grow by 5.5% in 2022 from 3.1% the previous year as a result of a strong rebound in consumer demand.
In addition, the projection for 2023 is at 4.5% and for 2024 at 4.4%.
At the same time, the consumer price index (CPI), which measures Malaysia's inflation, is also forecast to rise but remains relatively flat between 2.5% and 3.5% in 2022 compared to 2.5% in 2021.
