Malaysia's Overnight Policy Rate (OPR) will be maintained even though the US Federal Reserve (Fed) is expected to start reducing interest rates next year to ease the economy and curb inflation.
According to the Executive Director of the Socio-Economic Research Centre, Lee Heng Guie said Malaysia will not follow the US action in reducing interest rates because the gap between the ringgit and the US dollar is still far.
He also said that the increase in OPR will put pressure on small and medium enterprises (SMEs) and affect the household economy. He expects Bank Negara Malaysia (BNM) to probably maintain the OPR for the time being. However, it still has the opportunity to be changed if there is an economic slowdown next year.
Malaysia should choose to be in a neutral position regardless of the Fed's decision to lower interest rates next year due to the difference in currency values and the scale of the economy.
Lee expects the country's core inflation rate to hover between 2.8% and 3.5% in 2024. Globally, the risk of a US economic recession will cause instability in the Malaysian market.
In addition, the global economic problem in China which is slowing down due to the real estate market as well as the uncertainty in determining the interest rate also prompted BNM to be more cautious. He also predicted that the Fed will start lowering its rates in the second quarter to the third quarter of 2024.
He said again, 2024 is a very challenging year for investors, businesses and consumers due to the reforms and policy setting promised by the unity government this year.
The Madani government under the leadership of Datuk Seri Anwar Ibrahim has outlined its direction through policy frameworks such as the Madani framework, the New Industrial Master Plan 2023, the National Energy Transition Roadmap and the Half-Term Review of the 12th Malaysia Plan.
No more 'honeymoon' for the government next year. It is the year for us to monitor and research the reforms promised at the policy setting as mentioned.
Indirectly, this is an important step for the government to attract the hearts of the people and prove that Malaysia is capable of leading the economy in the future. The country's economic forecast is expected to increase by 4.5% for 2024.
