NO REQUIREMENT TO TIGHTHEN MONETARY POLICY NOW, SAYS BANK NEGARA

By Farazira Amira Yusof

KUALA LUMPUR, March 25 (Bernama) -- Based on current data, Malaysia's central
bank, Bank Negara Malaysia (BNM), does not anticipate inflation to rise to a
level that would require it to start tighthening monetary policy over the medium
term.

"We would look at all the data available to us to determine our
stance on the monetary policy," BNM Assistant Governor Dr Sukhdave Singh told
reporters on the sidelines of a seminar and panel discussion Friday on Governor Dr
Zeti Akhtar Aziz’s address yesterday on the Malaysian economy.

As emphasized by the governor, the central bank does not have a definite plan on
where the interest rate is going, Sukhdave said.

"We are constantly assessing the environment.

"It depends on the development that have been highlighted on the macro economic
side, as well as for example, the economic imbalances," he said.
Asked whether the introduction of Goods and Services Tax (GST) will cause a
high inflation, Sukhdave said the GST will substitute the existing tax system.

"The GST, when it comes in, is a one time event. In other countries, when the
GST is introduced, there is a temporary spike and how high the spike is depends
on the magnitude of the increase in GST," he explained.

He said the government was sensitive to the matter and had indicated that the
GST would be introduced in a moderate level.

"If it (GST) is to be introduced in a moderate level, we will see a temporary
moderate increase in inflation rate. But, if there is no secondary impact, then
the inflation rate will come down very quickly because there is nothing to
support it," he said.

"So, the introduction of GST will not be significant in terms of
monetary policy, but certainly it will be steadying the development in the economy
after the introduction," he added.

On the country's projected gross domestic product (GDP) growth of between 4.5
per cent and 5.5 per cent this year, Sukhdave said the country was doing very
well based on the economic performance last year and had a high potential to
achieve the target.

Meanwhile, Institute of Strategic and International Studies Director-General
and Chief Executive Officer, Dr Mahani Zainal Abidin said any new measures to
be implemented in future should be "significant enough" to create confidence
among investors.

She said this in response to a question on whether the country could surpass
the projected GDP and see continuous higher economic growth.

"We need a strong impetus, either in the form of new policy or measure, so that
in the long run, we will have a foundation for future growth," she said, adding
that one of the most important factors to boost growth was investment.

"It can be either in the form of foreign direct investment or domestic private
investment or the government introduces some privatisation measure," she said.

"These will increase investment and will be the impetus that can produce
higher economic growth," she added.

Dr Mahani also said that the other impetus could be an improvement in
government regulations, particularly in making investment approvals or
investment processes easier.
-- BERNAMA