KUCHING: Central Bank Malaysia’s (BNM) latest rate cut is a sign of trouble ahead, with deeper concerns driving the move to 2.75 per cent.
In stating this, Universiti Malaysia Sarawak (UNIMAS) senior lecturer, Dzul Hadzwan Husaini, said the move shows BNM is responding proactively to both global and domestic risks that could threaten Malaysia’s growth path.
“Geopolitical tensions, particularly in the Middle East, remain highly volatile, affecting global energy markets and pushing up energy costs.
“The ongoing uncertainty creates risks for inflation and trade-dependent economies like Malaysia,” he told Sarawak Tribune.
He also pointed to the prolonged Russia-Ukraine conflict, which continues to disrupt supply chains, food security, and commodity prices – adding another layer of uncertainty to the global economic landscape.
“Domestically, the government’s policy to broaden the Sales and Services Tax (SST) coverage and raise rates could increase the cost of living and operational expenses for businesses, adding pressure on household spending and profit margins,” he said.
He said the rate cut is aimed at spurring spending and investment.
While some may view the move as cautious or reactive, he believes it could help cushion the impact of global risks on households and businesses.
“On the brighter side, it eases the financial burden on households by reducing debt servicing costs, which could improve consumer welfare in the short term.
“Ultimately, this rate cut sends a message: Malaysia is taking preemptive steps to safeguard the economy and protect the people’s welfare amid growing global uncertainty,” he added.
On Sarawak, Dzul said the impact may mirror national trends, but certain state-driven efforts could amplify the benefits.
“Sarawak has been proactive through what I often call ‘Zoharinomics’, a distinctive approach by the state government that focuses on direct financial assistance and robust support for local industries,” he opined.
He said initiatives such as cash aid to households and small businesses align well with BNM’s move, enhancing the welfare of Sarawakians beyond what is seen in other states.
“Furthermore, Sarawak’s active support for the event-based economy – such as tourism, exhibitions, and conventions – positions local small and medium enterprises (SMEs) to benefit directly from improved liquidity and consumer confidence,” he explained.
As a result, he said additional capital from both federal monetary easing and state interventions could result in a more vibrant business environment, stronger consumer spending, and greater resilience.
“In this sense, Sarawak may actually emerge in a stronger position than other regions,” he added.
On whether the rate cut would stimulate lending and consumption in East Malaysia, Dzul said the impact would be meaningful, especially in areas where household debt remains high.
“Reducing the cost of borrowing will directly increase purchasing power, free up disposable income, and make credit more accessible for both consumption and business investment,” he said.
He added that the spillover effects would benefit SMEs, support expansion, create jobs, and help cushion the impact of the expanded SST.
“In short, the move is timely and essential for maintaining economic momentum in East Malaysia, particularly as global headwinds intensify,” he stressed.
He also dismissed concerns that the policy shift came too early.
“This is not a premature move. In fact, it is a prudent and preemptive step, in line with actions taken by other economies such as Singapore,” he said.
He noted that while early loosening could risk inflation or asset bubbles, Malaysia’s current inflation remains manageable.
“The economic slowdown risk is more pressing than inflation at this stage. More importantly, this decision serves as an early warning and a call to action for all stakeholders – businesses, households, and policymakers – to prepare for potentially tougher times ahead,” he concluded.
