KUALA LUMPUR: Bank Negara Malaysia (BNM) will continue to monitor the prevailing economic and financial developments before deciding on further adjustments to the Overnight Policy Rate (OPR) and Statutory Reserve Requirement (SRR) in 2020.
BNM governor Datuk Nor Shamsiah Mohd Yunus said the central bank had cut the OPR by 100 basis points to the current 2%, translating into a lower lending rate, noting: “As 75% of loans in the banking system are floating-rate loans, the lower borrowing cost will reduce the debt burden of household and businesses, and support credit expansion as the economy improves in the second half of 2020.”
She told a virtual press conference on the first quarter 2020 gross domestic product (GDP) today that the OPR reductions also translated into a lower rate of the domestic bond market, which subsequently would support capital market financing.
On the SRR adjustments in March and May, she said the move had collectively released about RM46 bil worth of liquidity into the banking system as “part of the bank’s continuous efforts to ensure sufficient liquidity of banks to support financial intermediation activities, allowing the flow of credit to continue uninterrupted.”
Asked to compare the current economic situation with those during the 1997-1999 Asian financial crisis (AFC) and 2007-2009 global financial crisis, Nor Shamsiah said every crisis is different, and the current economic fallout caused by Covid-19 is mainly due to the containment measures implemented on an unprecedented global scale.
“The pain of the ordinary citizen is direct and their incomes are badly affected also as Covid-19 is a pandemic; it means that nearly all economies in the world experience supply-demand disruptions.
“Unlike the AFC which originated from a financial crisis in Asia, global demand was still intact back then to allow the local factories to open,” she added.
Meanwhile, Nor Shamsiah said, Malaysia’s financial sector is in a much stronger position today, which enabled banking institutions to implement extensive relief measures and lend their support to businesses and households during the current highly challenging period.
“The underlying productive capacity in Malaysia remained largely intact.
“Our priority is to contain the pandemic and ensure the relief measures are able to alleviate the hardships faced by the affected segments of society, and this will allow us to avoid permanent displacements in the current economic situation,” she said.
Moving forward, the central bank would focus on the economic recovery of the country, she added. – May 13, 2020, Bernama
