KUALA LUMPUR: Bank Negara Malaysia (BNM) is mindful of the considerable uncertainties surrounding various countries’ tariff policies, with particular focus on which nations will impose tariffs, the extent of their coverage and how they will be applied.
Governor Datuk Seri Abdul Rasheed Ghaffour said the critical question is how these tariffs will impact the countries that are subject to them.
“To explore this, we analysed the current effective tariff rates the US imposes on its imports and then projected a significant increase, effectively tripling those rates. This would result in tariffs ranging from 10% to 20% for countries like Canada, China, Mexico, and even the UAE (United Arab Emirates), with tariffs potentially covering anywhere from 50% to 100% of their imports.
“We also considered the conditions within these countries, as these will inevitably influence US growth. This, in turn, will impact overall growth rates and price dynamics. All of these factors have been incorporated into our baseline forecast,” he told reporters during the release of BNM’s flagship publications today.
The central bank released its Annual Report 2024, Economic and Monetary Review 2024, and Financial Stability Review for the Second Half of 2024.
In its Economic and Monetary Review, it reaffirmed its outlook for steady economic growth this year, citing strong domestic demand despite increasing external challenges.
BNM has also maintained its forecast for Malaysia’s gross domestic product (GDP) to grow between 4.5% and 5.5% in 2025. This projection aligns with the Ministry of Finance’s estimates in Budget 2025. For 2024, the economy recorded growth of 5.1%.
In 2025, headline and core inflation are expected to average between 2% and 3.5% and 1.5% and 2.5%, respectively.
Inflation is expected to trend higher but will remain manageable, amid easing global costs and the absence of excessive demand pressures.
In 2024, Malaysia’s economy recorded solid growth of 5.1%, with inflation remaining moderate at 1.8%.
The ringgit strengthened by 2.7% against the US dollar and rose 7.5% against major trading partners.
BNM also reinforced its regulatory framework to maintain financial stability and protect consumers.
In 2024, the central bank introduced eleven key prudential and market conduct policies to enhance capital framework reforms, improve risk management standards, and ensure fair financial practices.
Abdul Rasheed said that when BNM developed its forecast, the central bank adopted a balanced approach that reflected optimism and realism.
Elaborating on the impact on the domestic economy, he said domestic demand is expected to remain stable. “It is important to recognise that we are starting from a position of strength. With a solid foundation in domestic demand, we anticipate it will continue to drive economic growth.”
On economic growth, Abdul Rasheed said BNM’s primary objective in market policy is to ensure price stability while fostering sustainable and conducive growth.
“These two elements – growth and inflation – are at the core of our policy considerations.
“In our assessments, we carefully evaluate the balance of inflation and economic expansion risks. This approach helps us navigate potential challenges and uncertainties.
“As I outlined in our growth outlook, we have identified key downside risks while also considering inflation projections and the associated risks on both ends. All these factors are carefully weighed in shaping our market policy decisions,“ he said.
