KUALA LUMPUR: The challenging global environment necessitates continued emphasis on enhancing the nation's economic resilience and broadening the sources of growth, said Bank Negara Malaysia (BNM).
Efforts are being intensified to rebuild policy space, proactively address potential vulnerabilities and unlock new growth areas.
The monetary policy in 2017 would continue to ensure that its stance is consistent with sustaining a steady growth path amid price stability, said BNM in its Annual Report 2016 released here today.
It added that the policy environment is expected to remain challenging. "Although growth is expected to improve due to better performance of the external sector, the economy would be challenged by higher inflation, volatile capital flows and lingering uncertainties in the global economic and financial environment," it said. While the risk of destabilising financial imbalances has remained largely contained, it would continue to be closely monitored, the central bank said.
Given the expectation of continued volatility in capital flows, BNM's monetary operations would ensure that domestic liquidity in the financial system remains sufficient in order to support the orderly functioning of the domestic financial markets.
Meanwhile, fiscal policy in 2017 would focus on further strengthening of the government's fiscal position, while ensuring continued support for domestic growth and promoting economic inclusiveness.
The Federal Government's fiscal deficit is expected to narrow further, underpinned by sustained growth in revenue and a modest expansion in operating expenditure.
In the 2017 Budget, fiscal resources have been strategically prioritised towards high-impact infrastructure projects and programmes for capacity building. The budget was also consistent with efforts to ensure inclusive and sustainable growth. In particular, welfare enhancement programmes and socio-economic support are expected to sustain the capacity of lower- and middle-income segments to cope with the rising cost of living and provide support to private consumption, BNM said. -- BERNAMA