At the Monetary Policy Committee meeting today, Bank Negara Malaysia decided to leave the Overnight Policy Rate (OPR) unchanged at 2.00 percent.

The deterioration in the world economy during the first quarter was worse than expected as the global financial turmoil became more prolonged. While certain segments of the international financial markets have stabilised, and further progress has been achieved in the financial sector resolution, the spillover effects have led to a severe contraction in economic activity in the advanced economies.The full effect of these global developments is being felt by the regional economies during the first half of 2009.

The domestic economy continues to be adversely affected by the significant contraction in external demand, resulting in steep declines in exports and industrial production. This has resulted in a marked contraction in the Malaysian economy in the first quarter of 2009. These conditions have continued into the second quarter. However, a more modest pace of decline in the latest indicators of global economic activity suggest the potential for a gradual improvement in the second half of the year. This stabilisation in the external environment is also supported by the accelerated implementation of fiscal measures, the further moderation in inflation and continued access to financing, thereby increasing the prospects for a resumption of growth in the Malaysian economy.

The current assessment is that the accumulated monetary policy initiatives and measures to enhance access to financing are sufficient to provide support to domestic demand. With sizeable and sufficient liquidity in the system, continued emphasis will be given to ensure an adequate flow of credit to all segments of the economy.