Expansionary budget critical for recovery, says BNM

Bank Negara says it is confident the recent measures introduced by the government will ensure employment creation and income growth.

Chew said the measures are critical in the current environment to support the country’s recovery, and the government remains committed to the consolidation over the medium term and it has a strong track record of delivering results over the medium to long term. Malaysia has recently raised its debt-to-gross domestic product ceiling to 60% from 53% and the revision was made following the anticipation of a higher fiscal deficit this year amid a fiscal injection into the economy, which stands at 20% of its GDP.

“More importantly, greater visibility on loan performance from the transition to more targeted repayment assistance remains important to reduce risk aversion and improve credit supply during the recovery phase.” Nevertheless, the central bank said risks to financial stability from external borrowings remained manageable as borrowings are mostly medium to long term in nature and hedged against exposures to currency movements.BNM also said banks are expecting some recovery in household loan growth in 2H2020 amid low borrowing costs and improving labour market conditions.

The report also revealed that the banking system continues to be well-positioned to support credit flows to the real sector as the economy gradually begins to recover.

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