ICAEW Expects BNM To Raise Interest Rates In 2H2017

KUALA LUMPUR, April 26 (Bernama) --The Institute of Chartered Accountants in England and Wales (ICAEW), a London-based organisation, expects Malaysia’s Central Bank (BNM) to raise interest rates in the second half of this year. In its Economic Insight: South East Asia report, ICAEW said the increase is due to rising inflation, on the back of higher fuel and import costs. “BNM’s likely interest rate hike will weigh on investments within the country. The overall rise in yields and corporate loan rates, wipe out the positive impact from the central bank’s policy rate cut last July,” it said. It said business investments are expected to be relatively sluggish due to increased financing costs and significant uncertainty over the state of external demand, but an improvement in global conditions might support a modest recovery in the second half of this year. Nevertheless, it said Malaysia’s economy is expected to pick-up slightly this year to register a gross domestic product (GDP) growth of 4.4 per cent, driven by exports and household spending. It said this was in line with the projected growth of ASEAN’s gross domestic product of 4.4 per cent as anticipation of an interest rate hike in the US and appreciation of the greenback is expected to constrain recovery in the region. “An anticipated rise in US interest rates and appreciation of the US dollar are expected to lead to a tightening of monetary conditions and trigger capital outflows, for conditions that are likely to put stress on Malaysia, given its high proportion of foreign bond holdings and current account deficit,” ICAEW added. It said the ringgit is expected to hover around RM4.4 to RM4.5 against the US dollar for most of the year. (US$1 = RM4.34) The report said the country’s economy would continue to face challenges as the possibility of declining global trade and commodity prices threaten to weigh on consumer and business spending. “There is also the risk of accelerated government spending ahead of the general election, which is expected to take place before August 2018, and which could result in an overshoot of the three per cent fiscal deficit target,” it added. -- BERNAMA