Economic Crisis : Yet To Hit Bottom

KUALA LUMPUR: The economic crisis has not bottomed out yet but Bank Negara has adopted an aggressive stance on interest rates and its main objective is to ensure banks continue lending, said Tan Sri Dr Zeti Akhtar Aziz.

The Bank Negara governor said on April 15 the central bank's assumption was that the second half would see some stabilisation taking place as fiscal stimulus got under way.

"We expect flat growth because of contraction of external sector that is offset by domestic demand. The financial sector resolutions in the advanced countries are still taking place, so we have to wait and see before we see stabilisation occurs," Zeti said.

On the first quarter's performance, she said 1Q was "very affected by contraction in export numbers, and it will continue to show in the second quarter".

Zeti was speaking to reporters on the sidelines of a conference organised by the Association of Islamic Banking Institutions Malaysia.

However, she said the second half of the year would be better, mitigated by domestic economy demand and lending from banks.

She said non-performing loans (NPLs) were still trending downwards, hitting a historical low of 2.2% currently. Zeti said even if there was a spike, banks would still be able to handle it.
The central bank governor said there was no need to raise banks minimum capital requirement at the moment.

On the exchange rate, Zeti said the central bank does not manage exchange rate as it is not a policy instrument but to facilitate trade and investments.