BNM assesses risks, impact from West Asia conflict

KUCHING (March 31): Bank Negara Malaysia (BNM) is actively assessing the economic impact of the West Asia conflict as the outbreak could last up to six months, affecting oil supplies and energy prices, said Governor Datuk Seri Abdul Rasheed Ghaffour.

He said Malaysia and Asean member countries must urgently deepen domestic and regional reforms to navigate an increasingly unpredictable global landscape shaped by geopolitical tensions and shifting economic dynamics.

The BNM governor warned that geoeconomic shifts are evolving with long-lasting implications, as geopolitical considerations play a greater role in influencing economic outcomes.

He noted that the developments in the Middle East have introduced additional uncertainty with potentially far-reaching spillovers, given implications on commodity prices and financial market conditions.

The overall impact on growth and inflation, he said, will depend on the duration, intensity and severity of the conflict.

“This underscores the urgency for Malaysia and Asean to deepen domestic and regional reforms. We must work closely together, including through the Asean Geoeconomics Task Force, to navigate this evolving environment.

“We also need to mindfully position ourselves to face the challenges and capitalise on opportunities to come,” he said in the central bank’s latest annual report.

Amid these challenges, Abdul Rasheed said Malaysia’s domestic resilience and diversified export structure provide a solid foundation to withstand external headwinds.

He said the economy is projected to grow between 4 and 5 per cent in 2026, supported by household spending, continued investment expansion, sustained global demand, particularly for electrical and electronics (E&E) exports and steady tourism flows in conjunction with Visit Malaysia Year 2026.

Malaysia’s position as a net energy exporter is also expected to offer some buffer against rising global commodity prices, he said.

Meanwhile, he said inflation is forecast to remain moderate at between 1.5 and 2.5 per cent.

“While upside risks stemming from developments in global commodity and energy prices remain, targeted policies are in place to help cushion the impact on households and businesses,” he added.

He also said rapid advances in artificial intelligence could boost productivity and efficiency, but warned of risks including potential market corrections and heightened financial volatility stemming from overvaluations.

He emphasised that Malaysia must remain focused on strengthening its economic fundamentals and policy buffers, including improving fiscal sustainability and attracting quality investments.

“These efforts have created space to further advance much needed urgent reforms for social protection and the labour market.

These reforms may involve some short‑term adjustments, but they are necessary to ensure that growth is more inclusive and benefits the rakyat – including generations to come,” he said.

On the central bank’s role, Abdul Rasheed said the bank will remain vigilant and responsive to evolving risks without losing sight of longer-term priorities to enhance the nation’s economic prospects.

“The Monetary Policy Committee will continue to closely monitor developments and assess the balance of risks to the growth and inflation outlook. We also stand ready, as we have through successive periods of heightened uncertainty, to ensure orderly markets and manage risks of excessive volatility,” he added.