Report: Bank Negara to maintain 3pc OPR following ECRL, Bandar Malaysia project revival

The logo of Bank Negara Malaysia is seen at its headquarters in Kuala Lumpur June 30, 2017. — Picture by Yusof Mat Isa
The logo of Bank Negara Malaysia is seen at its headquarters in Kuala Lumpur June 30, 2017. — Picture by Yusof Mat Isa

KUALA LUMPUR, May 8 — Bank Negara Malaysia (BNM) is expected to maintain its 3 per cent overnight policy rate (OPR) through 2019 as the East Coast Rail Link (ECRL) and Bandar Malaysia project revivals will provide an economic boost to the country, international economic analyst Fitch Solutions reported today.

The research group also predicted a higher Gross Domestic Product (GDP) for Malaysia compared to its initial forecast.

“While our real GDP forecast for 2019 of 4.2 per cent is below BNM’s 4.3-4.8 per cent range, it is now subject to some upside risk given the government’s successful renegotiation of the ECRL with China at a 33 per cent discount to the project cost which now stands at RM44 billion, as well as the revival of the Bandar Malaysia transport hub project which has an estimated gross development value of RM140 billion.

“We expect these projects to be positive for the construction sector over the coming quarters and also provide spillover effects for the rest of the economy,” Fitch Solutions said in its report.

The expected economic growth means that Malaysia’s GDP for this year is likely to be within BNM’s forecast range instead, it added.

The research group also expected a 1.2 per cent increase in inflation for food, non-alcoholic beverages as well as transportation-related items and services, following a recovery in crude oil prices.

However, the government’s fuel subsidies, which maintains a price ceiling on diesel and the RON95 petrol, could keep fuel prices in check and minimise the impact of rising oil prices, the analyst noted.

BNM had yesterday cut the OPR by 25 basis points to 3.00 per cent.

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