Excerpt from the statement by the Bank Negara Malaysia:
In the Malaysian economy, domestic demand has continued to support growth amid the weaknesses in external demand. Going forward, economic growth is expected to be underpinned by the continued expansion in domestic activity. Sustained income growth and stable labour market conditions will support private consumption. The impact of subsidy adjustments on consumption spending is expected to be contained by targeted financial assistance. Domestic investment activity which has been robust will continue to be led by capital spending in the domestic-oriented industries and the ongoing implementation of infrastructure projects. Overall growth prospects, however, could be affected by risks in the global economy and international financial markets.
Inflation remained low at 1.7% in the first seven months of the year. Going forward, inflation is expected to increase in the remainder of the year and into 2014 resulting from domestic cost factors, including subsidy adjustments. The increase in inflation, however, is from a low level and will be mitigated by a stable external price environment, expansion in domestic capacity and moderate domestic demand pressures.
In the MPC’s assessment, there are increased uncertainties to the balance of risks surrounding the outlook for domestic growth and inflation. The MPC will continue to carefully assess the global and domestic economic and financial developments and their implications on the overall outlook for inflation and growth of the Malaysian economy.