The global research unit of Standard Chartered Bank revised its earlier forecast of the overnight policy rate (OPR) adjustment to the later part of the first quarter of 2017 (1Q17).<\/p>\n
StanChart first predicted the Bank Negara Malaysia (BNM) to cut the OPR by 25-basis point at the final Monetary Policy Committee meeting for the year on Wednesday.<\/p>\n
However, it later released a statement changing its earlier forecast.<\/p>\n
\u201cThe Malaysian economy remains soft; however, we see room for BNM to keep the OPR unchanged at 3% on Nov 23,\u201d it said.<\/p>\n
Although the economy is weak, the research unit saw signs of stabilisation in Malaysia\u2019s recent economic data.<\/p>\n
\u201cGross domestic product (GDP) growth for 3Q16 surprised to the upside at 4.3% year-on-year (y-o-y), bringing the nine months ended September 2016 GDP growth to 4.15% year-on-year.<\/p>\n
\u201cThis was within the government\u2019s growth forecast of 4% to 4.5% for 2016, whereas first half of 2016 (1H16) growth of 4.05% was just above the low end of the range,\u201d StanChart said in the statement.<\/p>\n
It also state that the risks to the Malaysian economy remain to the downside.<\/p>\n
\u201cPrivate consumption may have been boosted by measures such as voluntary cuts to the employee pension fund and minimum wage hikes, [while] one-off payouts to civil servants may have helped bolster spending.<\/p>\n
\u201cHowever, labour metrics continue to soften. In September, the seasonally adjusted unemployment rate rose to 3.5% and employment growth remained lacklustre at 0.7% y-o-y.<\/p>\n
\u201cHigh household leverage may also encourage people to save as labour conditions deteriorate further,\u201d it said.<\/p>\n
Investment sentiment is also expected to continue to be lacklustre, as suggested by the loan performance.<\/p>\n
\u201cLoan growth slowed to 4.2% y-o-y in September. Outstanding loans may have stabilised month-on-month, but loans disbursed continued to contract for the fourth consecutive month in September,\u201d it said.<\/p>\n
The country\u2019s external demand remains weak, with merchandise export volumes falling 1.1% y-o-y in 3Q16, from 6.1% y-o-y growth in 1H16.<\/p>\n
Based on GDP data, exports of goods and services fell 1.3% y-o-y in 3Q16, deteriorating from the 0.2% decline in 1H16. However, the GDP growth was mitigated as imports declined more than exports in 3Q.<\/p>\n
\u201cAlthough BNM recognises the challenging global economic conditions, we believe that further deterioration will require a monetary policy adjustment.<\/p>\n
\u201cPotential trade protectionist policies from the US and a hard impact on euro-area growth from Brexit are key risks that need monitoring.<\/p>\n
\u201cChina remains the elephant in the room, but growth risks in the country appear stable for now,\u201d it said.<\/p>\n
The statement also noted that StanChart will be closely monitoring the impact of the related uncertainty of Donald Trump\u2019s victory in the recent US presidential election on Asian financial markets.<\/p>\n