Excerpt from the statement by the Bank Negara Malaysia:
The global economy continues to improve at a moderate pace. In the major advanced economies, recovery remains gradual and uneven. In Asia, growth has been sustained by improvements in export performance amid moderating domestic economic activity. Although volatility in the global financial markets has receded, markets remain vulnerable to setbacks and changes in sentiment. Looking ahead, there remain considerable risks that could affect the pace of the global recovery.
In the Malaysian economy, the expansion in domestic activity was supported by improvements in exports. Private consumption and investment activity also continued to sustain domestic demand amid a slower pace in public sector spending. Going forward, the growth momentum will benefit from the expected improvement in the external sector amid some moderation in domestic demand. Domestic investment activity will however continue, led by private sector capital spending and the ongoing implementation of infrastructure projects. Domestic demand is expected to moderate, reflecting the public sector consolidation and some moderation in private consumption. Uncertainties in the global environment may also affect the overall growth momentum.
Inflation rose to 2.6% in September, reflecting mainly the increase in petrol prices. For the first nine months of the year, inflation remained low at 1.8%. Looking ahead, inflation is expected to edge up driven by domestic cost factors. However, the inflation outlook is expected to be tempered by a stable external price environment, moderate domestic demand pressures, expansion in domestic capacity and improvements in food production and distribution.
In the MPC’s assessment, there continue to be uncertainties in 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.