Malaysia's inflation to stay low in 2023: Fitch Ratings

Malaysia's inflation to stay low in 2023 (Photo:nst.com)

Kuala Lumpur (VNA) - According to Fitch Ratings, Malaysia's inflation is expected to stay low at 2.8% in 2023 due to price controls and subsidies.

Malaysia's headline inflation averaged 3.3% for 2022.

However, Fitch said the forecast is subject to upside risk from possible policy changes on price controls and subsidies and a renewed momentum in global commodity prices.

It added after raising rates by 100 basis points in 2022, Bank Negara Malaysia left the policy rate unchanged at 2.75% in January 2023 and signalled that further normalisation would balance the risks to inflation and growth outlook.

Malaysia generated current account surpluses for more than two decades and Fitch expects it to continue to do so in the medium term.

Fitch forecasted the current account surplus to widen to 3.2% of gross domestic product (GDP) in 2023, driven by higher services exports, from 2.6% of GDP in 2022.

The firm acknowledged Malaysia is well-positioned for foreign direct investment inflows, with the manufacturing sector being the largest recipient. Its strong manufacturing ecosystem will continue to attract investment in the sector, although competition is increasing from other countries in the region.

It said moderate interest-rate hikes and a robust economy should keep credit impairments manageable (non-performing loans/total gross loans at 1.7% at the end of 2022. Banks' earnings prospects are stable and credit costs continue to normalise, but remain above pre-pandemic levels, it added./.