MCA tells govt to start economic support measures after OPR cut

Summary

• MCA urges the government to implement coordinated economic support measures alongside the OPR rate cut.

• Party's economic and SME affairs committee secretary Lee Kah Hing lays out four steps that can be taken.

MCA today urged the government to kickstart coordinated economic support measures, after Bank Negara Malaysia slashed the Overnight Policy Rate (OPR) by 25 basis points to 2.75 percent today.

BNM said the ceiling and floor rates of the corridor of the OPR are correspondingly reduced to three percent and 2.5 percent, respectively.

In a statement, MCA's economic and SME affairs committee secretary, Lee Kah Hing, lauded the move as a proactive response to growing concerns over domestic economic softness and global uncertainties.

"The committee, however, stresses that monetary easing alone is not enough to revive economic momentum or restore public confidence.

“This is a timely and necessary move by Bank Negara. But without coordinated fiscal and structural policies from the government, the real impact on SMEs and ordinary households will be limited," Lee said.

He proposed the following four steps to complement the OPR reduction:

• Introduction of low-interest special financing schemes for SMEs, especially those in manufacturing, retail, and services;

• Providing targeted living cost support or digital vouchers to boost consumer spending;

• Temporary reduction or suspension of indirect taxes on basic goods, including essential food items; and

• Accelerating public sector infrastructure projects, to create multiplier effects across the economy.

Downward pressure on ringgit

Lee further said that while the rate cut may ease financial burdens, it may also exert downward pressure on the ringgit, increase import costs, and weaken savings returns, which need to be carefully managed.

"This is the first rate cut in two years, signalling that the central bank is concerned about near-term risks to growth.

“The government must seize this moment to realign economic priorities, focusing on long-term reforms in taxation, SME development, and domestic consumption," Lee added.

BNM last kept the OPR at 2.75 percent in March 2023. It was increased to three percent in May 2023.

Bernama reported the central bank saying that uncertainties surrounding tariff developments, geopolitical tensions, which have led to greater volatility in global financial markets, and commodity prices are weighing on the outlook.

“For Malaysia, the latest developments point towards continued growth in economic activity in the second quarter, underpinned by sustained domestic demand and export growth,” BNM said, adding that resilient domestic demand growth.

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