HSBC Global Research does not expect Bank Negara Malaysia (BNM) to slash its Overnight Policy Rate (OPR), which currently stands at 1.75% in its third Monetary Policy Committee meeting this Thursday (6 May).
Despite downside risks to the economic growth forecast of BNM, Joseph Incalcaterra, HSBC Global Research’s Chief Economist for ASEAN, believes there was a high bar for further monetary policy accommodation.
“BNM can count on manufacturing growth to provide support to the economy and employment,” he said as quoted by Bernama.
“The government has also secured enough vaccine doses to enable the country to achieve some form of herd immunity by end-2021, despite supply challenges and signs of vaccine hesitancy in the short term.”
Interest Rate Is At Historical Low! Should I Buy A Property Now?
Malaysia is one of a few economies in Asia that could achieve herd immunity this year, despite the country’s slow start to vaccinations, he said in a research note.
HSBC Global Research predicts export’s upward momentum to be sustained, after Malaysia registered a 31% year-on-year hike in March, which was driven by the 47.1% increase in electronic exports, reported Bernama.
Activity in the country’s export and manufacturing sectors continued to roar, in line with expectation that export growth would accelerate on the back of soaring demand for semiconductor exports.
Incalcaterra attributed this partly to a large share of automotive chip production and higher commodity export volumes.
He also expects headline inflation to continue increasing this year due to higher energy prices and base effects.
“While BNM can look through this volatility, it would reduce the likelihood of further easing as the real policy rate buffer evaporates,” he said.
“BNM also remains focused on elevated household debt growth and can rely on still-expansionary fiscal policy to provide targeted support to the economy.”
Malaysia appears to be in the midst of a fourth wave of COVID-19 infections, with alarmingly high occupancy rates at hospital around Kuala Lumpur and daily new COVID-19 cases exceeding 3,000.
“Some degree of further restrictions appears likely, and mobility and consumer spending may soften further in the coming weeks,” said Incalcaterra.
“This could significantly derail the pace of the recovery in the second quarter,” he added.
Have a question about the property market? Post them on AskGuru and let our experts help you!
