Continued high oil prices and a rebound in the international palm oil price have boosted the mining and agriculture sectors together with their allied processing industries. But on the downside, consumer confidence has slumped to a two-year low as a result of retrenchments in the electronics industry, and investment expenditure is down due to overstocking by firms last year. But only 200m ringgit of the package announced in March has been spent. Exhortations from the Prime Minister and a fast tracking of infrastructure projects by the Ministry of Finance may see the package finally kick-in towards the end of the year. Most of this revenue increase is from the oil sector, but direct taxes are also slightly up.
Monetary policy remains loose as part of the government's plan to boost consumer sentiment.
Any pressure for an increase in rates waned as the Fed cut US rates. BNM released some RM15.5bn of liquidity into the economy during the first half of the year. An influx of foreign funds into the economy in July saw a reversal of this as BNM had to absorb some RM1.2bn in excess liquidity. Against the background of falling demand there is little by way of inflationary pressures in the economy at present. The ringgit peg came under sustained pressure in May and June as concern grew that the countries real effective exchange rate was worsening and was having an impact upon Malaysia's exports.