BNM says Israel-Palestine conflict has minimal impact on economy

KUALA LUMPUR: Bank Negara Malaysia (BNM) today said the Israel-Palestine conflict, as it stands, has minimal impact on the growth of the Malaysian economy.

Bank Negara governor Datuk Shaik Abdul Rasheed Abdul Ghaffour said the nation only has minimal direct trade exposure to West Asia, accounting for only 4.9 percent.

Similarly, Abdul Rasheed said Malaysian banks' exposure stands at a modest 1.7 percent.

"If the conflict escalates, global growth can be affected by volatile financial markets, higher commodity prices, and supply chain disruption like what we have seen in Ukraine and Russia.

"At this juncture, the influence on global growth is rather contained with a very manageable impact to our growth. And we shall watch this development," he said at the press conference on the country's GDP announcement for the third quarter (Q3) 2023.

On export performances, Abdul Rasheed Ghaffour said while exports declined in Q3 2023, as the slowdown in global trade in goods and a high base in 3Q 2022, this is offset by the higher travel receipts during the quarter.

Notwithstanding this, he said Malaysia's diversified exports structure has also partly contributed to export resilience.

"This is reflected in our export performance, which started to decline much later than some regional economies, with smaller magnitude of contraction.

"There are also some signs of stabilisation in export growth as reflected in the turnaround in the quarter-on-quarter seasonally adjusted export growth," he said.

Moving forward, Abdul Rasheed said exports are expected to gradually recover in the near term.

He said the global semiconductor sales, which have been declining in 1H 2023, is showing some signs of turn-around recently.

"In addition, tourism-related activities are expected to pick up further. In Q3 2023, travel receipts have reached 78 per cent of the corresponding period in 2019.

"This is expected to continue to recover moving forward and return to pre-pandemic level in 2024," he added.

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