Monetary Policy Ensures Sustainable Growth

Safeguarding the country’s financial stability remains BNM’s priority following the decision to raise the OPR by 25 basis points to 2% after close to two years of its all-time low rate of 1.75% since July 2020. 

SME Bank Group President/Chief Executive Officer, (Dr.) Aria Putera Ismail commented, “It is apparent that BNM is focusing on ensuring the monetary policy remains accommodative to support sustainable economic growth. This is especially so looking at Malaysia’s strong external position and resilient banking system enabling the economy to withstand external shocks.”

 “Since the domestic economy is growing on a firmer footing, we are anticipating the degree of monetary accommodation will be reduced in a measured and gradual manner, especially in an environment of price stability,” added (Dr) Aria.

Mohammad Azam Ahmad, The Group Chief Risk Officer of SME Bank, who oversees the credit, market, liquidity and operational risk management said, “Through the various efforts undertaken by the government to revive the economy as the country enters its endemic stage, the Malaysian economy registered a positive growth of 5% in Q1 2022 compared to 3.6% in Q4 2021. This was mainly supported by improving domestic demand as economic activities continued to normalise with the easing of containment measures and strong export growth. The improvement also reflects the recovery in the job market, with the unemployment rate declining further to 4.1% (4Q 2021: 4.3%), lifted by labour participation and better income prospects.”

Mohammad Azam added, “Economic activities are expected to strengthen considerably as the positive effects of the transition to endemicity continue to be experienced by all economic sectors, especially with the reopening of international borders. On the supply side, services and manufacturing sectors continued to drive economic growth, expanding by 6.5% and 6.6% respectively.”

On the flip side, inflationary pressures have increased sharply due to a rise in commodity prices, strained supply chains and strong demand conditions, particularly in the US. Several central banks have been tightening their monetary policy settings at a faster pace to reduce inflationary pressures. As at March 2022, Malaysia’s headline inflation was unchanged at 2.2% while core inflation inched up to 2.0% (Feb: 1.8%). This reflects price adjustments amid the higher costs and improving demand conditions, with price increases being more noticeable specifically for food items due to supply-related factors such as higher global commodity prices.

Despite the air of positivity that we are experiencing currently, we must not ignore the downside risks to growth that we are facing which among others include a weaker-than-expected global growth, further escalation of geopolitical conflicts, worsening supply chain disruptions, adverse developments surrounding COVID-19, and heightened financial market volatility.

(Dr.) Aria said, “As the leading development financial institution (DFI) in the country and mandated to nurture and develop SMEs in Malaysia, SME Bank will continue to support the SMEs through its various financing and development programs that are specifically tailored to meet the needs of the SMEs.”

(Dr.) Aria added, “Specifically, through the SME Bank Relief Program, the Bank's customers from the tourism and public transport sectors have received a total of 24 months moratorium from October 2020 to September 2022 with cumulative extention of tenure / period of financing up to 60 months. Assistance is provided in the form of deferment on principal payments and financing profit rates. This effort has greatly assisted the entrepreneurs in managing their financial needs to sustain the businesses.”

To date, SME Bank has approved financing worth more than RM38 billion to more than 21,000 SMEs. Apart from financial assistance, support is also given in the form of entrepreneurs’ capacity building and capability by SME Bank's subsidiary, Center for Entrepreneur Development and Research Sdn. Bhd. (CEDAR). CEDAR has coached and trained more than 62,000 participants in various topics of SME development.

SME Bank customers who are facing difficulties currently are encouraged to communicate directly with their respective Relationship Managers for assistance. Alternatively, they can contact the Bank's Customer Service Centre at 03-2603 7700 or email  .