Bank Negara may hike rates
Q1's 6.2% growth may prompt move; economists re-rate full-year figures
BY S JAYASANKARANIN KUALA LUMPUR
PUBLISHED MAY 20, 2014
MALAYSIA'S sharply higher 6.2 per cent in real gross domestic product (GDP) growth in the first quarter is likely to see the central bank raising rates for the first time in three years amid a re-rating of the full-year growth figure among economists.
The expected rate hike as well as a rise in the current account surplus also impacted the local currency. The ringgit appreciated 0.5 per cent yesterday to RM3.217 against the greenback.
Bank Negara Malaysia had already hinted at a rate hike at its last monetary meeting, warning that inflation was "above its long-run average" and that "financial imbalances" continued to persist in the system. Most analysts expect a 25 basis points hike as early as July, a move that will likely hammer the beleaguered property market, already reeling under the weight of government measures aimed at cooling the sector.
Even so, the move can also be seen as a part of a normalisation process as the central bank moves to raise rates ahead of a similar move by the US Federal Reserve. Bank Negara is also trying to corral growing household debt which, at 86 per cent of GDP, is among the highest in Asia.
The first-quarter growth has also led some economists to revise their full growth figures upwards.
Both Bank of America-Merrill Lynch and AmResearch raised their 2014 GDP forecasts to 5.3 per cent from 5 and 5.1 per cent respectively.
They are in good company. Notwithstanding the impressive first-quarter figure, Bank Negara stuck to its initial 5 to 5.5 per cent growth figure for the whole of 2014. Indeed, central bank governor Zeti Akhtar Aziz acknowledged that the first quarter had been "exceptional", but saw growth in the subsequent quarters as being back at the 5 to 5.5 per cent range.
Bank of America agreed. "Going forward, we see consumption and investment growth moderating on electricity and (likely) fuel price hikes, as well as tighter monetary conditions," the bank noted in a report out last Friday.
Analysts were also heartened by a rise in the current account surplus which rose to RM19.8 billion (S$7.7 billion) or 7.7 per cent of GDP, from RM14.8 billion or 5.6 per cent of GDP in the fourth quarter last year.
Whether this can be sustained is, however, unclear. The reason: net outflows which increased sharply to RM37.6 billion in the first quarter as against an outflow of RM9.7 billion in the fourth quarter last year. It was mainly caused by reverse investments of over RM20 billion and net portfolio outflows.
"We expect the current account surplus to remain flat in 2014 at RM40 billion or about 3.5 per cent of GDP," Barclays Bank said in a note on Friday.
http://www.businesstimes.com.sg/premium/malaysia/bank-negara-may-hike-rates-20140520
Q1's 6.2% growth may prompt move; economists re-rate full-year figures
BY S JAYASANKARANIN KUALA LUMPUR
PUBLISHED MAY 20, 2014
MALAYSIA'S sharply higher 6.2 per cent in real gross domestic product (GDP) growth in the first quarter is likely to see the central bank raising rates for the first time in three years amid a re-rating of the full-year growth figure among economists.
The expected rate hike as well as a rise in the current account surplus also impacted the local currency. The ringgit appreciated 0.5 per cent yesterday to RM3.217 against the greenback.
Bank Negara Malaysia had already hinted at a rate hike at its last monetary meeting, warning that inflation was "above its long-run average" and that "financial imbalances" continued to persist in the system. Most analysts expect a 25 basis points hike as early as July, a move that will likely hammer the beleaguered property market, already reeling under the weight of government measures aimed at cooling the sector.
Even so, the move can also be seen as a part of a normalisation process as the central bank moves to raise rates ahead of a similar move by the US Federal Reserve. Bank Negara is also trying to corral growing household debt which, at 86 per cent of GDP, is among the highest in Asia.
The first-quarter growth has also led some economists to revise their full growth figures upwards.
Both Bank of America-Merrill Lynch and AmResearch raised their 2014 GDP forecasts to 5.3 per cent from 5 and 5.1 per cent respectively.
They are in good company. Notwithstanding the impressive first-quarter figure, Bank Negara stuck to its initial 5 to 5.5 per cent growth figure for the whole of 2014. Indeed, central bank governor Zeti Akhtar Aziz acknowledged that the first quarter had been "exceptional", but saw growth in the subsequent quarters as being back at the 5 to 5.5 per cent range.
Bank of America agreed. "Going forward, we see consumption and investment growth moderating on electricity and (likely) fuel price hikes, as well as tighter monetary conditions," the bank noted in a report out last Friday.
Analysts were also heartened by a rise in the current account surplus which rose to RM19.8 billion (S$7.7 billion) or 7.7 per cent of GDP, from RM14.8 billion or 5.6 per cent of GDP in the fourth quarter last year.
Whether this can be sustained is, however, unclear. The reason: net outflows which increased sharply to RM37.6 billion in the first quarter as against an outflow of RM9.7 billion in the fourth quarter last year. It was mainly caused by reverse investments of over RM20 billion and net portfolio outflows.
"We expect the current account surplus to remain flat in 2014 at RM40 billion or about 3.5 per cent of GDP," Barclays Bank said in a note on Friday.
http://www.businesstimes.com.sg/premium/malaysia/bank-negara-may-hike-rates-20140520
1mth abt rm175 in e bank.
