KUALA LUMPUR – Feb 5, 2016: The International Monetary Fund (IMF) team who recently visited Malaysia had come up with a positive review of the country’s economy.
In its recent statement on “IMF Staff completes 2015 Article IV Mission to Malaysia”, IMF had concluded that the country’s recent growth, high investment and improvements in business environment scorecards are impressive.
The team which was led by the division chief Dr Alex Mourmouras made the conclusion during its discussions with the government, Bank Negara Malaysia (BNM) and representatives from the private sector, think tanks and academia, last month.
Mourmouras in the report stated that Malaysia’s economic growth should remain solid in the coming year, despite challenging external and domestic conditions last year.
He added, the implementation of the Goods and Services Tax (GST) was among the things that have helped limit the impact on government finances amid oil price decline.
“Despite challenging external and domestic conditions last year, the authorities have been able to maintain macroeconomic and financial stability, while making significant progress in improving the foundations for sustained economic growth over the medium term.
“Malaysia’s economy has been affected by multiple shocks since late 2014, including a sharp fall in commodity prices, weak external demand, political developments and capital outflows.
“However, the implementation of the goods and services tax (GST) last April, along with cuts in subsidies and operational expenditures, limited the impact on government finances of the oil price decline,” he added.
The IMF division chief also said that the exchange rate flexibility has helped cushion the real economy and financial system from the sharp fall in commodity prices and instability in global financial markets.
“The country’s practical monetary policy had also helped contain inflationary pressures arising from exchange rate depreciation and the implementation of the GST,” he added.
He pointed out that although the external environment for this year is covered in uncertainties, including the continued strength of the US dollar and China spillovers, Malaysia’s economy continues to perform well.
IMF has also assured that the country’s economic growth should remain solid this year, edging down to around 4.4 per cent from an estimated 4.8 per cent last year.
The report also applauded BNM’s move to allow the ringgit to depreciate following the oil and commodity price shock, saying that this was to ensure orderly conditions in foreign exchange and financial markets.
“While headline inflation is expected to rise temporarily this year, core inflation is well anchored, and BNM’s current monetary policy stance is appropriate.
“The mission agrees with BNM’s stance that reserves should be rebuilt over time,” Mourmouras added.
Mourmouras added, the implementation of reforms envisaged in the 11th Malaysia Plan and commitment to freer trade policies, including in the context of the Trans-Pacific Partnership Agreement, ASEAN Economic Community, and the proposed Regional Comprehensive Economic Partnership, should all help anchor structural reforms and raise Malaysia’s potential growth over the medium term.