Release of 3Q GDP figures by Bank Negara Governor Datuk Muhammad Ibrahim..
KUALA LUMPUR: The dynamic and challenging environment facing the global economy and the financial markets calls for new strategies and approaches to support the existing monetary and fiscal policies, said Bank Negara governor Datuk Muhammad Ibrahim.
While new developments have brought renewed optimism that fiscal policies would move centre stage to support economic growth, he cautioned that the policies might lose their effectiveness as the governments’ fiscal positions get more stretched.
In his inaugural introduction to a Bank Negara annual report, Muhammad stressed the need to consider and renew our resolve.
“First, there is a need to reflect on and examine the current state of play and policy choices at hand,” he said in the 2016 report released on Thursday, noting that there were limits to monetary and fiscal policies.
“With greater challenges, new strategies and policies are therefore needed to support existing policies.”
Muhammad suggested that the use of technology would most likely give alternative sources of growth.
Secondly, he said, the country must continuously pursue and carry out renewals proactively before events dictated its course of action.
“Bold, but pragmatic, renewals may be warranted to reduce short-term vulnerabilities, build future resilience and raise productivity,” he said.
“Finally, once these strategic renewals on policies had been agreed upon, there should be strong resolve and perseverance by all stakeholders to carry these policies to their finality.”
Reflecting on the country’s performance, Muhammad said the domestic economy continued to record commendable growth despite the challenging times, driven by domestic demand.
According to him, the central bank’s policy adjustment in 2016 was a pragmatic decision.
“Timing was key,” he said. “The Bank took advantage of the window of opportunity to restore the degree of monetary accommodativeness and leveraged on the benign domestic inflationary environment. The policy move was further made possible given the subdued risks of destabilising financial imbalances.”
Bank Negara formed the Financial Markets Committee (FMC) within two weeks after Muhammad assumed the governor’s post on May 1 last year.
Muhammad said that since it was set up, the FMC had introduced proactive measures to develop the onshore foreign exchange (forex) market, ease speculative activities and correct imbalances found in the onshore forex market.
Fintech
Malaysia, he said, must stay disciplined in pursuing the required reforms to maintain its economic and financial resilience.
He called for the economy to be further diversified and deepened to encourage private investments, allowing the public sector to shift resources to other priorities such as infrastructure.
“New and diversified sources of revenue are also required to fund new infrastructure that can advance Malaysia’s transition towards becoming a high value-added, high-income nation. Malaysia must create a competitive niche in the rapidly evolving new economy,” he said.
Bank Negara, according to him, is playing its role by providing a conducive regulatory environment that harnesses the potentisal of financial technology (fintech) tmo modernise, deepen and inject competition to the domestic financial and funding markets.
Muhammad said the bank gives priority to financial inclusion in order to strike the right balance between innovation, stability and equality. “All segments of society should enjoy the benefits (of technological advancements) and not be dislocated in the process.”
He said the bank would strive to adapt its approach to maintain relevance in managing macroeconomic policies and understanding of issues faced by households and businesses.
On the use of data analyses for better and more effective policy prescriptions, Muhammad said moving forward, exploration into big data could become an effective tool to support macroeconomic abd finabcial stability analyses.
Muhammad said the country must remain steadfast to ensure public policy objectives were met.
He said plans to develop Malaysia into a progressive high-income nation would have a high probability of success if we remained resolute in our reforms and policies.
“This cannot be done single-handedly. It requires collective effort from all policymakers to advance agreed public policies that are well-designed and inclusive,” he added.
In a tribute to former governor Tan Sri Dr Zeti Akhtar Aziz, Muhammad said the central bank owed Zeti a deep debt of gratitude for her “vast and invaluable contributions.”
“Despite these testing times, the foundations laid have accorded us stability and continuity in our policies,” he said.
“Her visionary leadership has brought the organisation to new heights, setting the Bank on a sure and strong footing to deliver our mandates.
“The Bank has always adopted an agile and innovative approach and will continue to embrace the necessary changes to ensure we stay relevant and effective.”
Related articles:
* Highlights of Bank Negara Annual Report 2016
* Highlights of Bank Negara Financial Stability Report 2016
* BNM Annual Report 2016: Economic growth projected to pick up
* Banking and insurance sector remained resilient to shocks in 2016
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