No change in monetary policy for now despite Japan’s recession: Zeti

KUALA LUMPUR: Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said the central bank has to be forward-looking before making any decision on its monetary policy following the Japanese third-quarter economy unexpectedly fell into recession.
"Of course, the current condition is important, but we've to look at the future condition, therefore we need to make an assessment whether temporary factors led to the slowdown in growth in Japan or any other major countries," she said when asked if there will be any change in the country's monetary policy after the world's third largest economy slipped into negative territory.
Japan reported a 1.6% correction in its economy for the third quarter on Monday despite massive monetary stimulus measures.
Zeti noted that major economies' capacity in adjusting policy measures also has to be taken into consideration in deciding Malaysia's monetary policy.
"For example, if you look at China, they have a fiscal surplus, therefore they will be in a position to support if the economy slows down by more than earlier anticipated.
"So, you have to look at all this policies and conditions to see what's the future prospect going to be," she told reporters after delivering her keynote address at the ISI - Regional Statistics Conference here yesterday.
Malaysia's Overnight Policy Rate (OPR) remains unchanged at 3.25% when the monetary policy committee met early this month. The latest 25-basis-point hike in OPR was in July this year.
Zeti believes the diversification of exports markets and products has helped Malaysia to weather headwinds in the external front, whereby 60% of the country's exports are for the Asian region, which is supported by domestic demand.
"Yes, there is a moderation (in economic growth), but there is still a strong growth. Our growth moderated from more than 6% to 5.6% to 5.7%, this is a strong growth in a challenging environment," she said.
Over the softening oil prices, she said the central bank still has to make an assessment on the factors that contribute to the drop in oil prices.
Meanwhile, Zeti opined that Malaysia's current account surplus still looks positive and even better than expected despite full-year surplus is projected to narrow for 2014.
"In some quarters, because of rapid investment growth, that actually resulted in deficit, therefore this year we've a narrowed surplus," she said.
According to Zeti, the country's 3% current account surplus of gross domestic product is considered a "good sign".