Greater spillover from the tech upcycle is expected to lead to more robust export performance for the country.
PETALING JAYA: Bank Negara’s decision to maintain the overnight policy rate (OPR) at 3% following its final monetary policy committee (MPC) meeting came as no surprise.
In general, analysts remain sanguine on the country’s growth outlook underpinned by better export performance, wage growth and various supportive measures outlined in Budget 2025, with inflation expected to remain in check.
Greater spillover from the tech upcycle is expected to lead to more robust export performance for the country.
TA Research said the fuel subsidy rationalisation initiative could have a direct and broad-based impact on inflation, as the prices may rise to reflect market levels, directly affecting consumer costs.
It noted the government’s decision to implement a two-tier pricing mechanism for the targeted RON95 petrol subsidy poses less risk to potential inflation than a cash transfer approach.
CIMB Securities said the positive view on domestic demand also stems from the assessment that Budget 2025 measures will provide additional support to growth.
It added this is likely in reference to the higher allocation of RM13bil (2024: RM10bil) for targeted cash transfers, various forms of individual income tax reliefs, as well as an increase in the minimum wage to RM1,700 effective from Feb 1, 2025 (current: RM1,500), implying little need of support from monetary policy.
CIMB Securities added the MPC does not appear to be concerned with demand-pull inflationary pressures.
Even so, the research house noted inflation risk are tilted to the upside due to factors like the increased sales tax on non-essential items, further expansion of the scope of service tax, and rationalisation of RON95 subsidies by mid-2025, in which the criteria and implementation method are still under discussion.
It shares the same view as TA Research that there may be limited indirect pass-through from the retargeting of RON95 subsidies.
On the ringgit’s outlook, TA Research said the pressure on Malaysia’s capital flows and ringgit valuation could potentially ease.
