Statement by the Bank Negara Malaysia:
The global economy continues to expand at a moderate pace. In the major advanced economies, broader signs of improvement have emerged. The Asian economies have continued to experience sustained growth although growth in domestic demand in some economies are showing signs of moderation. In recent weeks, shifts in global liquidity have resulted in increased volatility and uncertainties in the international financial markets. Looking ahead, global growth will be supported by the emerging economies and the recovery in the advanced economies. Nevertheless, global economic and financial conditions remain vulnerable to shifts in sentiments and heightened volatility in the international financial markets.
For the Malaysian economy, indicators suggest that the economy registered sustained performance in the fourth quarter of 2013. Improvements in exports have supported economic growth during the quarter while domestic demand remained firm. Going forward, the growth momentum is expected to continue in 2014, amid better performance in the external sector. Investment activity is also projected to remain robust, led by capital spending by the private sector, particularly in the mining, manufacturing and services sectors. Domestic demand, however, is expected to moderate, reflecting the ongoing public sector consolidation and a slower growth in private consumption.
Inflation rose to 3.2% in December 2013 to average at 2.1% for the year as a whole. Inflation has been gradually rising due to disruptions in supply following adverse weather conditions and higher domestic costs. Going forward, inflation is expected to average higher largely due to domestic cost factors. The subdued external price pressures and moderate domestic demand conditions will help contain the impact of these cost factors on underlying inflation.
The MPC will continue to carefully evaluate the global and domestic economic and financial developments and their implications on the overall outlook for inflation and growth of the Malaysian economy. The MPC remains focused on ensuring medium-term price stability that would contribute to sustainable economic growth.