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Malaysia ‘no longer in financial crisis’

Malaysia ‘no longer in financial crisis’

With the economy growing at 6.9% in the first half of the year, Malaysia is “no longer in a financial crisis”, with businesses absorbing the impact of the overnight policy rate (OPR) rise relatively well, Bank Negara Malaysia (BNM) governor Nor Shamsiah Mohd Yunus has said.

Shamsiah made the comment in reference to Malaysia’s second quarter (Q2) 2022 gross domestic product (GDP) performance in a press conference by BNM and the Department of Statistics Malaysia (DOSM).

The BNM governor said: “It is very clear that we are no longer in a crisis. Growth continues to be supported by firm domestic demand amid better labour conditions, recovery in tourism activity, and improved investment activities and prospects.”

The central bank had increased the OPR by 50 basis points in two consecutive meetings in May and July this year. Shamsiah said that the first increase in May was due to the high level of support for businesses struggling due to the pandemic, which was no longer needed.

The overnight policy rate is the interest rate at which a depository institution lends immediately available funds (balances within the central bank) to another depository institution overnight.

Shamsiah stressed that, with the country on a recovery path, BNM is committed to adjusting monetary policy in a gradual manner.

 

Digital economy booming

The communications and multimedia ministry has attracted more than RM7.2 billion ($3.9bn) in investments in the first half of the year, according to the Malaysia Digital Economy Corporation (MDEC). This is in addition to the RM10.94 billion in investments recorded last year, bringing the total to RM18.14 billion.

Government minister Annuar Musa said that, combined, foreign direct investment (FDI) and domestic direct investment (DDI) were expected to create close to 10,000 jobs.

“This accomplishment has proven that Malaysia is in the best position to achieve the digital investment target of RM70 billion by 2025, in line with the Malaysia Digital Economy Blueprint [MyDigital],” he said.

The digital investment came from 53 companies from around the world, including Australia, China, Japan, Singapore, Switzerland, the Netherlands, the UK and the US.

Musa also said that the “efforts to attract investors were part of the national push to make Malaysia the digital hub of Asean, as well as help in accelerating economic recovery from the effects of the Covid-19 pandemic”.

He said: “Digital investments are important in the economic recovery process, as they create knowledge workers and help to expedite innovation as well as technology adaptation during the Fourth Industrial Revolution, and propel the digital economy further.”

 

Closer integration with China

Malaysia is expected to strengthen its ties with China, following “outstanding trade achievements and business cooperation between the two countries during the pandemic”.

That’s the view of Malaysia’s ambassador to China, Raja Dato’ Nushirwan Zainal Abidin, who was speaking at the launch session of the recent Malaysia Truly Asia Festival.

He said Malaysia has been one of the top travel destinations in terms of tourism, education and business for the Chinese community, and on 1 April this year Malaysia fully reopened its borders after two years, enabling visitors from all over the world to visit.

“It is very difficult to imagine a situation in which the economies of Malaysia and China are decoupled. I think we will continue to see a closer integration of both our economies. So that is why at the political level it is very important for us to work together, to make sure that our mutual interests are always defended,” he said.

According to Chinese statistics, trade between Malaysia and China to July this year was $114.5 billion, an increase of 20.7% year-on-year. Last year alone, bilateral trade reached $176.8 billion, an increase of 34.5% year-on-year. This made Malaysia China’s ninth-largest trading partner, according to the ambassador.

However, Covid-19 has left a mark, the ambassador said. About 3.1 million Chinese citizens visited Malaysia in 2019, with the numbers falling drastically in the past few years because of the pandemic. The ambassador expects a resurgence in the number of Chinese tourists, saying that he is “confident and hopeful that the situation will recover to what it was before, albeit in a new normal”.