Malaysia Slashes Rates To Record Low To Fight COVID-19 Impact

A woman walks along the Saloma Link Bridge in Kuala Lumpur on July 3, 2020. (Photo by Mohd RASFAN / AFP)

 

Malaysia’s central bank on Tuesday slashed interest rates to a record low to fight the impact of the coronavirus pandemic, and warned that the pace of economic recovery was uncertain.

The Southeast Asian nation has joined other countries worldwide in aggressively easing monetary policy, after the virus brought the economy to a standstill for weeks.

Bank Negara Malaysia slashed its key rate by 25 basis points to 1.75 percent, its fourth straight reduction, and warned that the economy had contracted sharply in the second quarter because of the strict lockdown.

Most businesses were closed and people were confined to their homes in mid-March as the outbreak accelerated, although authorities have been easing curbs since early May and life is gradually returning to normal.

The country’s outbreak has been small — it has recorded about 8,600 cases and 121 deaths — but the lockdown is nevertheless believed to have cost the economy billions of dollars.

The bank said in a statement that business activity was recovering and that government stimulus packages “will continue to underpin the improving economic outlook”.

It added that “the pace and strength of the recovery, however, remain subject to downside risks”, including future outbreaks and a weaker-than-expected rebound in global growth.

Southeast Asia’s third-biggest economy is highly dependent on trade, and its key exports include palm oil, crude oil and natural gas.

OCBC Bank economist Wellian Wiranto said “the bar for another cut later this year has gotten lower”, with the prospect of new virus outbreaks knocking the global economic recovery off course.

He added that “1.75 percent may not be a historic low for long… especially if global conditions suffer a relapse”.

AFP

Anthonia Orji

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