KUALA LUMPUR: Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz says there would be a moderation of economic growth but the central bank will try to prevent the country from slipping into a “fundamental” economic slowdown.
She said that a fundamental economic slowdown would occur when there was an increase in unemployment.
Zeti said several central banks particularly in the developed countries have also highlighted the risk of its deepening economy slowdown.
“The risk of slowing economic growth is real and must taken seriously,” she said after launching the Malaysia International Islamic Financial Centre yesterday.
Zeti expected domestic inflation to moderate by next year, particularly in the second half, as weakening growth rate and recent retraction of commodity prices would have a dampening effect on it.
However, she remained cautious on the “second-round” effects from the June fuel hike.
Inflation jumped to a 26-year high of 7.7% in June when local petrol and diesel prices increased by 41% and 63% respectively.
On the weakening ringgit, Zeti said any intervention that Bank Negara undertook was only to maintain orderly market conditions as this was its priority.
“Bank Negara will not intervene to affect the underlying trend of the domestic currency,” she added.
She said the recent US dollar strength against other major currencies was just a part of the international development, and the movement of the ringgit reflected the movement of other currencies. The local currency fell to its lowest level this year against the greenback last week as the ringgit traded above the 3.30 mark.
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