KUALA LUMPUR (March 28): Bank Negara Malaysia said Malaysia could see second-round demand-pull inflation effects if the economy grew "above potential" at a rate exceeding 4.7% in 2017.

Bloomberg quoted Bank Negara economics department director Fraziali Ismail as saying while the country's economic growth, as measured by gross domestic product (GDP), was operating near its potential rate, there were however no indications now that GDP growth was exceeding that level.

"Typically in the past, there could be second-round effects if the economy is above potential. Yes, the economy is on the up, but we don't see those (demand) pressures emanating at the moment.

"We are operating close to potential, but we don't see signs that we are exceeding. Unless the economy is jolted to an accelerated growth, then there's a higher potential for second-round effects," Fraziali said.

Bank Negara's 2017 Malaysia GDP growth forecast is at between 4.3% and 4.8% from a year earlier. In 2016, the country's GDP expanded 4.2%.

Last Friday, the Statistics Department said the country's inflation, as measured by the consumer price index (CPI), rose 4.5% in February from a year earlier, led by a significant increase in transport prices amid costlier fuel.

According to the department, the CPI's transport segment increased 17.9% in February after rising 8.3% in January.