KUALA LUMPUR (May 17): Partial pension fund withdrawals are expected to boost economic activity, while having little impact on inflation, Bank Negara Malaysia (BNM) said on Friday.
"The impact of the newly introduced [flexible] Account 3 of the Employees Provident Fund (EPF) is going to be quite minimal," according to the central bank's governor Datuk Shaik Abdul Rasheed Abdul Ghaffour. “But this would contribute to growth of the economy.”
Further, a planned increase in civil servant salaries would also have limited impact on price growth pressure, he said at a press conference after announcing the first-quarter gross domestic product data.
EPF member accounts have been restructured into three separate accounts effective from May 11, with 10% of the monthly contributions going into Account 3 that would allow withdrawals at any time. The pension fund projected withdrawals of RM25 billion in the first year, following the roll-out of Account 3.
The government, meanwhile, has announced an increase of at least 13% in civil servant salaries from December this year involving an additional allocation of more than RM10 billion.
BNM kept its projections for headline inflation to average between 2.0% and 3.5% in 2024, as well as for Malaysia’s economic growth to pick up to 4%-5% in 2024, from a 3.7% expansion in 2023.
Potential upside to growth could come from greater spillovers from the tech upcycle, more robust tourism activities, and faster implementation of new and existing investment projects, the central bank flagged.
Downside risks to economic growth, on the other hand, are weaker-than-expected external demand, further escalation of geopolitical conflicts, and a larger decline in commodity production, it cautioned.
The current monetary stance is supportive of the economy, and remains consistent with the current assessment of inflation and growth prospects, Abdul Rasheed said.
Current forecasts of economic growth and moderating inflation provide “a very good window of opportunity” for the government to implement the planned subsidy rationalisation, he added.
The comments follow remarks by Prime Minister Datuk Seri Anwar Ibrahim earlier this week that any move to cut fuel subsidies widely panned by economists for being wasteful would have to be done “at the right time”.