BNM TO CONTINUE MONITORING ECONOMIC SITUATION BEFORE DECIDING ON FURTHER OPR, SRR ADJUSTMENTS

KUALA LUMPUR, May 13 -- 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 2.00 per cent, translating into a lower lending rate.

“As 75 per cent of loans in Malaysia’s 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 in conjunction with the announcement of the first quarter 2020 gross domestic product (GDP), today.

Nor Shamsiah said the OPR reductions also translated into a lower rate of the domestic bond market, which subsequently would support the capital market financing.

On the SRR adjustment in March and May 2020, she said the move had collectively released about RM46 billion worth of liquidity into the banking system.

“This is 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,” she said.

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 at 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 experienced 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, she 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.

-- BERNAMA