“Over the mid-term, potential output is expected to revert to a pre-crisis level of 4%-5%, driven by higher investments.

“As Malaysia’s GDP is expected to improve to 4.8% amid a modest demand-led inflation prospect of 2.6%, we maintain our expectation for Bank Negara Malaysia (BNM) to keep the overnight policy rate (OPR) unchanged at 3% for the rest of the year,” HLIB said in a note today after attending a briefing on the central bank’s Economic and Monetary Review (EMR 2023) recently.

Maybank Investment Bank (Maybank IB) also expects the OPR to be kept at 3% this year.

“BNM stated that having normalised its monetary policy to the pre-pandemic level of 3%, the growth-inflation development in 2023 and outlook in 2024 outlined in EMR 2023 present the appropriate landscape for the government to implement key policies announced earlier,” it said.

Maybank IB said the policies consist of economic restructuring and reforms, including fiscal measures especially given the currently low and stable monthly inflation rate of 1.5% from November 2023 to January 2024.

Meanwhile, Public Investment Bank said despite a negative output gap in 2023, projections indicate a reversal to positive territory in 2024.

“This shift is anticipated as actual output is expected to outpace potential output growth, supported by ongoing expansion in domestic and external demand.

“Over the medium term, potential output is anticipated to be buoyed by heightened investments and productivity enhancements stemming from the continued implementation of multi-year investment projects and national master plans, with growth rates reverting to pre-crisis levels,” it said.