KUALA LUMPUR - Malaysia’s central bank on March 20 called for an acceleration of structural reforms to ensure long-term strength, with economic growth set to benefit from a recovery in exports and robust domestic spending in 2024.

Favourable economic conditions expected in 2024, including moderate inflation and a projected pickup in trade activity, provided a window for the government to carry out much-needed changes such as subsidy rationalisation, Bank Negara Malaysia (BNM) said in documents released along with its annual report.

Malaysia’s government plans to shift away from blanket subsidies to a targeted system that aids mainly low-income groups but has not finalised when it will introduce the measures, which could see a spike in fuel costs.

“We can be cautiously confident that a good year is ahead of us,” BNM governor Abdul Rasheed Ghaffour said in the foreword to the central bank’s 2023 economic and monetary review.

“But for us to secure our future in the years to come, the time is now for Malaysia to implement vital structural reforms.”

BNM maintained its 2024 growth forecast at between 4 per cent and 5 per cent, the report showed. Exports were projected to rise 5 per cent, rebounding after an 8 per cent contraction in 2023.

New taxes and changes to utility tariffs aimed at boosting government revenue were expected to have a marginal impact on inflation, BNM said.

Headline inflation was forecast to remain stable at between 2 per cent and 3.5 per cent in 2024, compared with 2.5 per cent in 2023, though upside risks remained due to increased prices from subsidy and price control adjustments, and higher input costs stemming from Malaysia’s weakened currency.

The ringgit has gained since falling to a 26-year low in February, but is still down about 3.2 per cent to the US dollar so far in 2024.

Mr Abdul Rasheed, who has said the currency is undervalued, stressed that reforms which tackled longstanding structural issues and investments in decarbonisation and high-value industries would help support the ringgit and better reflect Malaysia’s strong economic fundamentals.

“We are mindful that persistent and material undervaluation of the ringgit, if not addressed, could have permanent implications on the economy,” he said. REUTERS