The global economic expansion remains moderate. While there have been improvements in the advanced economies, the recovery has been modest and uneven. In Asia, growth is supported by improvements in the external sector amid moderating domestic demand in some economies. Conditions in the international financial markets continue to be volatile as markets adjust to policy shifts in a number of major economies and to geopolitical developments.
For the Malaysian economy, latest indicators point to further improvement in exports and continued expansion in private sector investment spending. Going forward, this trend is expected to continue. Exports will continue to benefit from the recovery in the advanced economies and from regional demand. Investment activity is projected to remain robust, led by capital spending by the private sector, particularly in the manufacturing and services sectors. Domestic demand is, however, expected to moderate, reflecting the ongoing public sector consolidation and as private consumption growth trends towards its long term average.
Inflation has been gradually rising due to disruptions in supply following adverse weather conditions and increases in domestic costs. Going forward, inflation is expected to be affected by higher domestic costs. The subdued external price pressures and moderate domestic demand conditions will, to some extent, contain the impact of these cost factors on the underlying inflation.
The MPC will continue to evaluate the global and domestic economic and financial developments and their implications on the overall outlook for inflation and growth of the Malaysian economy. At the same time, the MPC will also continue to monitor for signs of destabilising risks of financial imbalances. The MPC remains focused on ensuring that the monetary policy stance is consistent with price stability and continues to foster sustainable economic growth.
Bank Negara Malaysia
06 March 2014
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