This article first appeared in The Edge Malaysia Weekly on January 16, 2023 - January 22, 2023

Much is happening in Malaysia this week — especially on Tuesday and Thursday — even as global leaders, the well-heeled and well-connected descend on the Swiss Alpine ski resort town of Davos for the World Economic Forum (WEF).

Former prime minister Datuk Seri Najib Razak’s application to review his conviction and 12-year jail sentence and RM210 million fine for the SRC International Sdn Bhd portion of the 1Malaysia Development Bhd (1MDB) trials will be heard at the Federal Court on Jan 19. Should the court be convinced that there was injustice and abuse of court process in upholding Najib’s conviction, an appeal would be re-heard on another date, which could include new Federal Court judges, who will be elevated on Jan 17 by the Yang di-Pertuan Agong. The King will also be elevating a new Court of Appeal president and a new Chief Judge of Malaya. (See “Najib’s last attempt to appeal against SRC conviction” on Page 60)

The WEF, which kicks off on Monday, Jan 16, with the theme “Cooperation in a Fragmented World”, aims to advance forward-thinking solutions to global challenges amid a complex geopolitical and economic backdrop of “low growth, low investment and low-cooperation”.

China’s Vice-Premier Liu He is reportedly among the global leaders attending the meeting held in person at its usual time of the year, post-Covid-19 pandemic. The US delegation reportedly includes special presidential envoy for climate John Kerry. Elected leaders attending Davos for the first time in their current roles include South Korea’s President Yoon Suk Yeol and Philippines President Ferdinand Marcos Jr. The WEF resumed in-person meetings at Davos last year but in May instead of the winter month of January.

Minister of International Trade and Industry Tengku Datuk Seri Zafrul Abdul Aziz, who attended Davos last May, is on the panel of speakers on Jan 20 for the session “Living with Risk” on how leaders can prepare for the future while ensuring that the impacts of recent crises do not impose a burden on societies and economies, according to data on the WEF website. At a panel session at the WEF last May as Malaysia’s finance minister, Zafrul said the country’s subsidies bill may hit RM71 billion in 2022 but headline inflation was low relative to global levels.

Back in Kuala Lumpur, Bank Negara Malaysia’s monetary policy committee (MPC) is expected to raise the overnight policy rate (OPR) by 25 basis points to 3% from the current 2.75% following the conclusion of its first scheduled meeting for the year this Thursday.

The 3% rate would match the level the OPR was at before Bank Negara made its “pre-emptive” 25bps OPR cut to 2.75% in January 2020, the first of four consecutive cuts totalling 125bps that sent the OPR to a record low of 1.75% in July 2020. With Malaysia’s economy set to grow above 8% year on year and unemployment trending lower in 2022, the MPC reduced the amount of monetary accommodation by lifting the OPR a full percentage point in four back-to-back 25bps instalments at each of its scheduled meetings between May and November 2022.

“Given that headline inflation remains elevated and core inflation showed no signs of easing amid ongoing demand side pressures, we expect the OPR to be hiked by another 50bps to 3.25% in 1Q2023 and thereafter staying unchanged at this level for the rest of the year. We expect the next 25bps rate hike at the Jan 18-19 monetary policy meeting followed by another 25bps hike on March 8-9,” UOB Bank told clients in a Jan 13 note.

Economists at Maybank Investment Bank and Kenanga Investment Bank also expect the OPR to be raised to 3% this Thursday, according to Bloomberg data at the time of writing.

Bank Indonesia, which raised its key rates by 200bps last year, is also expected to raise rates by 25bps to 5.75% on Jan 20.

The US Federal Reserve’s Federal Open Market Committee (FOMC), which had raised key rates by 425bps from 0% to 0.2% at the start of 2022 to 4.25%-4.5% in December, is expected to raise rates by at least another 25bps to lift rates closer to 5% in about two weeks (Feb 1), despite US headline inflation falling for a sixth straight month from 9.1% in June to 6.5% in December 2022, its lowest in more than a year.

The fortnightly updates on Bank Negara’s foreign reserves for mid-January and the Consumer Price Index (CPI) for December are scheduled for release on Friday (Jan 20), even as stock markets in Vietnam and Taiwan close early in advance of the Lunar New Year’s Eve on Jan 21 (when the US Fed blackout period begins) and holiday over the long weekend (Jan 22-24).

Malaysia’s headline inflation was flat at 4% in November and October, bringing the year-to-date headline reading to 3.4%, but food inflation reached 7.3% in November.

Bank Negara’s foreign reserves stood at US$114.6 billion as at Dec 30, 2022, enough to finance 5.2 months of goods and services imports (6.2 months of retained imports under the old measure) and is a one-time short-term external debt. The reserves, which “has taken into account the quarterly foreign exchange revaluation changes” are down about 2% from end-2021 but had gained US$9.4 billion over two months versus US$105.2 billion at end-October 2022. 

The Department of Statistics Malaysia will release exports and trade balance readings for December on Wednesday (Jan 18).

Other key data releases this week include the fourth-quarter GDP reading for China and Taiwan on Tuesday (Jan 17), the Bank of Japan’s rate decision (Jan 18), Japan’s December trade data (Jan 19) and December CPI (Jan 20) and China’s 1-year and 5-year Loan Prime Rate fixing on Friday (Jan 20). Also of interest are the US Federal Reserve’s latest Beige Book and details on the European Central Bank’s December policy meeting on Jan 19.

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