Commerzbank’s Dr. Henry Hao and Moses Lim report that Malaysia’s stronger-than-expected Q2 Gross Domestic Product (GDP) growth and subdued inflation support an unchanged policy rate of 2.75%. USD/MYR has remained within a 4.05–4.10 range, recently edging higher alongside crude oil prices. The analysts see resilient domestic demand and AI-related exports supporting growth, while supply-chain disruptions and higher commodity prices remain key downside risks.

Ringgit supported but risks rising

"The advance estimate for Q2 GDP surprised on the upside, rising 5.8% yoy (Bloomberg consensus: 5.2%) vs 5.4% in Q1."

"The economy grew 5.6% in H1, exceeding the government’s full-year forecast of 4-5%. While growth is expected to remain resilient due to firm domestic demand and strong AI-related exports, downside risks persist from continued supply chain disruptions and higher commodity prices stemming from the Middle East conflict."

"On monetary policy, Bank Negara Malaysia (BNM) is expected to leave the policy rate steady at 2.75% for the rest of the year."

"Given the tame inflationary backdrop and resilient growth momentum, there is little need for BNM to tweak monetary policy. A neutral stance also preserves policy space for BNM to react to two-sided risks to growth or inflation."

"In FX, USD/MYR rose 0.6% to 4.10 last Friday and over the week, tracking higher crude prices. The pair has remained within the 4.05–4.10 range since late June, supported by firm exports and sustained portfolio inflows."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)