M'SIAN FINANCIAL SYSTEM ABLE TO INTERMEDIATE CAPITAL FLOWS, SAYS

KUALA LUMPUR, Oct 16 (Bernama) -- The Malaysian financial system has reached a level of maturity in terms of development and in its functioning that is able to intermediate capital flows, both surges of inflows as well as reversals, said Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz.

"The effects are disbursed through the financial system rather than concentrated," she said in an interview with Bloomberg recently. Therefore, Zeti said Malaysia can manage capital inflows due to monetary easing in advanced economies.

The country has policy tools and the flexibility to absorb any excess liquidity, she added.

"The Malaysian economy is withstanding the impact of weakening global growth, with gross domestic product forecast to expand about five per cent this year," she said.

Zeti said rising incomes and strong investment should help Malaysia achieve "good growth" in the third and fourth quarters. "Growth in 2013 will be ''much the same'' unless the world economy takes a turn for the worse," she added.

She said Malaysia will probably refrain from selling global sovereign bonds for now.

"The government is very cautious about entering into increased foreign debt and they have significant access to domestic sources of financing without crowding out private investment because there is ample liquidity," she said.

Zeti said currently the risk to inflation doesn't appear to be imminent.

"There is less of a risk of inflation and given that we have excess capacity in our economy, the risk is on growth. But again right now, domestic demand is still relatively strong.

"The country's monetary and fiscal policy is already "quite accommodative," she added.