KUALA LUMPUR (May 8): Malaysia’s central bank said on Thursday the economy will continue to grow this year even as the outlook faces downside risks from external shocks.

There would be both direct and indirect impacts from the sweeping US tariffs, according to Bernama’s transcript of an interview with Bank Negara Malaysia (BNM) governor Datuk Seri Abdul Rasheed Ghaffour. The current growth forecast of 4.5-5.5% for 2025 will be reviewed, he noted.

“But we do not expect a recession,” Abdul Rasheed said. “While outcomes from trade negotiations remain uncertain, we are facing this from a position of strength.”

The interview follows BNM’s earlier move on Thursday to keep the overnight policy rate steady at 3.0%. The central bank flagged rising downside risks in a statement on the decision, which economists say opens the door to rate cuts at a time when inflation would remain manageable.

Malaysia is in talks with the US to drop its plan to levy a steep reciprocal tariff during a 90-day pause.  

“Global developments are beyond our control, but we can shape our response to them,” Abdul Rasheed said. “We have a range of policy tools that allow us greater flexibility and the ability to tailor our response to specific issues,” especially if there is no broad-based domestic impact, he noted.

On Thursday, BNM announced a 100-basis-point cut in the statutory reserve requirement ratio (SRR) — the amount of cash that lenders must keep as reserve at the central bank — to a 14-year low of 1% in a move that will release about RM19 billion in liquidity into the banking system.

The reduction in SRR will “facilitate banks to better manage their liquidity in an environment of greater financial market volatility and provide continued support for financial intermediation activities,” Abdul Rasheed said.

Further, the central bank maintains close coordination with the government on fiscal measures “to ensure we are working towards the same objectives,” he said.

“As the situation unfolds, we aim to continue sharing our assessments of the Malaysian economy and the rationale behind our policy decisions so that the public and businesses can have the information needed to plan accordingly,” Abdul Rasheed added.