Excerpts from the statement by the Bank Negara Malaysia:
The performance of the Malaysian economy continues to be affected by the weak external environment. Domestic demand therefore remains the main driver of growth.
Private consumption is, however, expected to moderate as households continue adjusting to the higher cost of living amidst an uncertain economic environment. Household spending will nevertheless be supported by wage growth and stable labour market conditions. Despite the slowing investment activity in the oil and gas industry, investment is being supported by infrastructure development projects and capital spending by the manufacturing and services sectors.
Looking ahead, domestic demand will continue to be the key driver of growth, with an additional lift from exports as global growth improves. The Malaysian economy will continue to benefit from having diversified sources of growth, economic flexibility, low unemployment, manageable level of external debt and a well-capitalised banking system. The prospects are for the economy to expand within the region of 4.5 to 5.5 percent this year and 4 to 5 percent in 2016. It is, however, recognised that the downside risks to growth remain high.
Headline inflation averaged at 2.8% in August and September, and is expected to remain relatively stable for the rest of 2015. Despite the weaker ringgit exchange rate, the impact on overall inflation has been limited by the lower commodity prices and the generally low global inflation. For 2016, headline inflation is expected to be higher, to peak in the first quarter and moderating thereafter.
Global and domestic developments have continued to affect the ringgit exchange rate and domestic financial markets. In this environment, however, domestic liquidity continues to be sufficient and the financial system remains sound with healthy growth in financing. Financial intermediation has therefore continued to support the economy. Bank Negara Malaysia will continue to ensure the orderly functioning of the money and foreign exchange markets.