Published September 24, 2009

Bank Negara sees signs of economic recovery

It's only unsure on whether rebound will be modest or sharp: Credit Suisse

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(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 Ooi Sang Kuang.

Clearer sky: Malaysia's contraction eased to 3.9% last quarter from a 6.2% decline in Q1 and policymakers expect GDP to resume growth at the end of the year

Bank Negara'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 per cent last quarter from a 6.2 per cent decline in the first three months, and policymakers expect gross domestic product 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$195 billion 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 Mr Ooi as saying. He had said in June that the economic improvement in the second quarter may not be sustainable, according to the report.

The central banker also noted that retrenchments have slowed and there has been evidence of re-hiring in some industries, Credit Suisse said.

The central bank's monetary policy will be 'supportive of growth,' and the reductions in the benchmark interest rate in the past year have worked well in bringing about lower lending rates, Mr Ooi was cited as saying. Inflation is expected to remain 'benign,' he said.

Bank Negara Malaysia, which has cut its benchmark interest rate from 3.5 per cent in mid-November to 2 per cent to revive growth, may lower its inflation forecast for this year, Governor Zeti Akhtar Aziz said on Aug 27. The central bank kept interest rates unchanged for a fourth straight meeting last month.

Malaysian banks are well capitalised and banks aren't under pressure to further strengthen their capital, Mr Ooi was cited as saying. The worst appears to be over for non-performing loans in the banking system, he said. -- Bloomberg