Thursday, March 21, 2002

Brighter days ahead for Malaysians, says Bank Negara


KUALA LUMPUR: Malaysians can expect better times ahead, said Bank Negara, which is projecting the economy to grow by 3.5% this year, with inflation staying low.
The figure appears to be conservative, and a number of foreign research houses are forecasting a growth rate of 5% for this year, and 6% and above for 2003. Last year, the Malaysian economy managed to stave off recession by managing a 0.4% growth.
Speaking at a news conference to release its 2001 annual report yesterday, Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz said growth in the first half of this year was expected to come from private consumption and investment, while stronger growth in the second half would be driven by a recovery in exports.
She said there were also “positive indicators” that there could be further upside potential for the economy in 2003.
Dr Zeti ruled out the possibility of repegging the ringgit, adding that the current foreign exchange regime had served the country well. She explained that the value of the ringgit was not determined by the fluctuations in the Japanese yen.
“In the debate on the appropriate exchange rate regime, it needs to be recognised that these current more uncertain and turbulent times impose challenges and pressures on exchange rates, regardless of the exchange rate regime,’’ she said, adding that there were three criteria to consider.
First, the ringgit exchange rate had to be supported by strong domestic fundamentals; second, the economy must have the ability and strength to withstand external shocks; and finally, the country’s competitiveness is achieved not through currency depreciation but through efficiency and productivity.
“Given the openness of our economy and vulnerability to the external environment, Malaysia has done well,’’ Dr Zeti said.
“The country is poised to tap on the global economic recovery against strengthened fundamentals,’’ she said.
For this year, the surplus in the trade and services account is expected to remain large at 7.9% of Gross National Product (GNP) and foreign direct investment inflows are expected to be higher in line with improved global economic conditions.
International reserves have increased further to US$32.6 billion (RM123.8bil) as at March 14, 2002. This is sufficient to finance five-and-a-half months of retained imports.
Within the banking sector, the capital position of banks have improved with the risk-weighted capital ratio increasing to 12.5% as at end of January this year.
Banks recorded a pre-tax profit of RM7.5bil last year, and this will further strengthen their capital position.
The net non-performing loans (NPLs) ratio stood at 8.4% as at the end of January while loan loss provisioning was at 58.7% of NPLs.
For this year, interest rates are expected to remain at the current levels.
“These are appropriate levels to support the investment process,’’ said Dr Zeti.
“The immediate policy concern in 2002 is to ensure that recovery gathers momentum and that any downside risks minimised,’’ she added.