MALAYSIA has enough policy space to weather uncertainties and Bank Negara Malaysia will not hesitate to step in to provide economic support through monetary tools, said Public Investment Bank Research.

In a research note today, it said Malaysia was undergoing rapid and positive transition with the new federal government.

“Any adjustment and rebalancing efforts may in one way or another impact the government’s delivery system, potentially causing a dent to the demand side of economy, such as private and public investment,  especially when the government is committed to reducing wastage and cutting costs.

“As projects like the Kuala Lumpur-Singapore High Speed Rail and Mass Rapid Transit 3 had been looked upon to support investment momentum, the decision to scrap or defer the projects may impact the sector’s performance,” it said.

It said BNM would also not hesitate to step in at any sign of economic weakness, adding that the tepid inflation momentum of 1.7% in 2018 to-date, following the benign global cost factor, gave the central bank comfortable room to intervene in the policy rate, as it could result in competitive real effective interest rate.

“Any policy rate intervention through a cut can spur not only the economy, but also investing appetite, which is a win-win strategy for all,” said PIB Research.

It said Malaysia was known to be unhesitating and acting ahead of the curve in recent times, as shown during the global credit crisis and the United Kingdom’s withdrawal from the European Union.

PIB Research said the new BNM governor, Nor Shamsiah Mohd Yunos’ immediate task would be the Fourth Monetary Policy Meeting on July 11 – which would be closely monitored as the central bank was expected to assess the immediate impact of the brewing United States-China trade war.

The research firm said this could be a source of risk as Malaysia is the US’ eighth largest trade partner.

“The secondary impact should be real as well, especially when it can disrupt the supply and revenue chain due to our close trade integration with China and the US,” it added. – Bernama, June 25, 2018.