Zeti: Malaysia’s economy to remain resilient
The Star - 27 Mar 2008
KUALA LUMPUR: Despite challenging external conditions marked by the downturn in the United States, Malaysia's
economy is expected to remain resilient this year because of the country's strong fundamentals, diversified export base,
and low exposure of local financial institutions to the US subprime market, Bank Negara governor Tan Sri Dr Zeti Akhtar
Aziz said.
She said the domestic economy had been on a steady growth path for several years.
Zeti forecast that gross domestic product (GDP) this year would be between 5% and 6%, (versus 6.3% last year) under
current global economic conditions.
“But if the US economy worsens, Bank Negara has the capacity to implement policies that can add 0.5% to 1% to prop up
the country's GDP, if it falls below 5%,” she told reporters after the release of the Bank Negara Annual Report 2007 and
Financial Stability and Payment Systems Report yesterday.
However, Zeti declined to reveal the policies.
Asked if the GDP forecast took into account the political scenario after the recent election, she said: “We do not see any
political developments posing a risk to our economic outlook.
“This is a democratic process and we have a solid foundation. If we had a weaker or fragile financial system or unsound
economic conditions, we could be affected.”
On inflation concerns, she said Bank Negara had projected inflation at around 2.5% to 3% on average per month and
possibly rising above 3% in certain months in the first year.
Zeti said there was also a need to address “other factors” in dealing with inflation.
“First, we need to increase the supply.
There are structural problems we have to confront to produce more locally. Open up more land for food production, and
improve production techniques to enhance yield.
“All these efforts will help address the issue of supply and, hence, mitigate food price increases.
“We also need to improve distribution efficiency – better storage, warehousing, prevent wastage and strengthen
distribution channels to reduce costs and mitigate inflationary pressures.
“Other areas include encouraging greater competition to bring down costs, increasing retail business opportunities and
providing incentives to recognise efficiency,” she said.
She said improving efficiency required resources and, more importantly, professional expertise, adding that the
Government had allocated funds for this initiative and continued to support human capital development via various
training programmes.
On the reduction of subsidy and removal of price controls, she said it should be done gradually as the Government did not
intend for the subsidy cuts to negatively impact the economy.
She also emphasised that there should be incentives for efficiency and cost reduction as most of the price increases
originated from overseas.
Zeti said Malaysia was supportive of and accommodative to the private sector and Bank Negara had seen strong growth
in financing and bonds in the banking sector and bond market respectively.