False Confidence or Just Plain Gungho?

KUALA LUMPUR: Malaysia’s central bank has become more confident the South-East Asian nation is recovering from the global recession, Credit Suisse Group said, citing a meeting with deputy governor Datuk Ooi Sang Kuang.

The central bank’s “view is that the signs of an economic recovery seem evident,” Danny Goh, an analyst at Credit Suisse, said in a report yesterday.

It “is only unsure on whether the economic rebound will be modest or sharp,” he said.

Malaysia’s economic contraction eased to 3.9% last quarter from a 6.2% decline in the first three months, and policy makers expect gross domestic product (GDP) to resume growth at the end of the year.

The country’s export and manufacturing slump has abated as economies from Singapore to China emerge from the world’s deepest recession since the Great Depression.

The US$195bil economy may post “mild positive or negative GDP growth” this quarter from a year earlier and may expand in the next three months as the government’s stimulus measures take effect, Credit Suisse cited Ooi as saying.

He had said in June that the economic improvement in the second quarter may not be sustainable, according to the report.

Ooi also noted that retrenchments had slowed and there had been evidence of re-hiring in some industries, Credit Suisse said.

The central bank’s monetary policy would be “supportive of growth,” and the reductions in the benchmark interest rate in the past year had worked well in bringing about lower lending rates, Ooi was cited as saying.

Inflation was expected to remain “benign,” he said. Bank Negara, which has cut its benchmark interest rate from 3.5% in mid-November to 2% to revive growth, may lower its inflation forecast for this year, Governor Tan Sri Dr Zeti Akhtar Aziz said on Aug 27.

The central bank kept interest rates unchanged for a fourth straight meeting last month.

Malaysian banks were well capitalised and banks weren’t under pressure to further strengthen their capital, Ooi was cited as saying. The worst appeared to be over for non-performing loans in the banking system, he said. — Bloomberg