IMF: Malaysia's economy well-placed to face external challenges

The International Monetary Fund (IMF) says Malaysia is well-placed to face external challenges, pointing to the country's sound financial system which is well-capitalised and resilient.

The IMF Executive Board said this in its latest report after the annual Article IV of the IMF's Articles of Agreement consultation with Malaysia last Monday.

Under the arrangement, an IMF staff team will make annual visit to member countries to obtain economic and financial information and hold bilateral discussions with officials on the country's economic evelopments and polices.

The IMF, which is known to be conservative with its economic growth forecast, has projected a 4% gross domestic product (GDP) growth for Malaysia in 2012 while the country's inflation is expected to be contained.

The Fund also backed Bank Negara Malaysia's current monetary policy as it noted avenue for lowering the policy rate in the event that growth prospects decline significantly.

The IMF also noted that allowing the exchange rate to move flexibly in tune with the fundamentals while limiting excessive volatility will let the real exchange rate appreciate over the medium term.

The move will support the structural reforms introduced to rebalance the sources of growth and a re-allocation of resources toward dynamic and high productivity industries, according to the Fund.

Noting the need to enhance the business environment and competition as well as upgrade skills and generate economic opportunities in the country, the IMF Directors were receptive to Malaysia's transformation programme to spur potential growth.

They also observed that while credit growth in Malaysia has accelerated given the economic rebound, there are no indications of overheating or asset prices excesses.

Local economists have welcomed the IMF"s assessment of the Malaysian economy, which is expected to sustain growth driven by domestic demand.

AmResearch Director of Economic Research, Manokaran Mottain was confident that Malaysia's Economic Transformation Programme (ETP) as well as the Government Transformation Programme would boost domestic activities, in addition to the existing sound financial measures that have been introduced.

Adapted from NST Business Times 13 and 14 Feb 2012