KUALA LUMPUR (March 20): The impact of reform measures such as subsidy rationalisation are temporary in measure and as such, do not require monetary policy intervention, said Bank Negara Malaysia (BNM) on Wednesday.

Monetary policy is a “blunt tool” that addresses the demand component of the economy, said Bank Negara Malaysia governor Datuk Shaik Abdul Rasheed Abdul Ghaffour at a press conference in conjunction with the release of the BNM Annual Report 2023, its Economic and Monetary Review 2023 report, as well as the Financial Stability Review for 2H2023.

“However, we will remain vigilant and continue to look at the data, whether there is an anchoring of inflation or demand pressures. Only such situations will require monetary policy interventions,” he said.

Malaysia is slated to expand its subsidy rationalisation efforts through the targeted subsidy for diesel and petrol, which are expected to be rolled out this year, amid ballooning subsidy bills of up to RM81 billion estimated in 2023 alone.

(From left): BNM deputy governor Adnan Zaylani Mohamad Zahid, BNM deputy governor Datuk Jessica Chew Cheng Lian, BNM governor Datuk Shaik Abdul Rasheed Abdul Ghaffour and BNM deputy governor Datuk Marzunisham Omar hold up the digital versions of the BNM Annual Report 2023 ( AR 2023), the BNM Economic and Monetary Review 2023 ( EMR 2023) report and the BNM Financial Stability Review (FSR) for 2H2023 report on their notepads.

The central bank is expecting Malaysia’s GDP growth to rebound to 4%-5% this year, from 3.7% in 2023. Inflation is expected to range between 2%-3.5% in 2024, compared with 2.5% in 2022.

The headline figures have already incorporated the scenario in which subsidy rationalisation continues, Abdul Rasheed said.

The government has already kick-started the subsidy rationalisation exercise, following the rationalisation in electricity tariffs and water tariffs this year and the last.

The overnight policy rate (OPR), Malaysia’s benchmark interest rate, has been kept at 3% since July 2023.