KUALA LUMPUR – The current level of the ringgit does not reflect the positive prospects of the Malaysian economy going forward, said Bank Negara Malaysia (BNM).
In a statement, BNM governor Datuk Shaik Abdul Rasheed Ghaffour has said growth in 2024 will be driven by the improvement in external demand and strong domestic spending.
Rasheed said the latest International Monetary Fund forecast was for global trade to improve from 0.4% in 2023 to 3.3% in 2024.
He said for Malaysia, exports had shown steady improvements since the fourth quarter of 2023. In fact, the recently released January 2024 exports have turned positive (+8.7%).
“The recent performance of the ringgit, similar to other regional currencies, has been influenced by external factors,” Rasheed said.
“Some of these factors include market adjustment to changing US interest rate expectations, geopolitical concerns and uncertainty surrounding China’s economic prospects”
Rasheed added that the tourism sector had recovered strongly with tourist arrivals in 2024 expected to exceed the pre-pandemic levels of 26 million.
“Investment momentum has picked up with the implementation of approved projects both in the private and public sectors,” he said.
“Reflecting these positive developments and the government’s commitment to implement structural reforms and the expected lowering of interest rates in advanced economies, most analysts are forecasting for the ringgit to appreciate this year.”
The ringgit reached its lowest point since the Asian financial crisis, driven by China’s economic slowdown negatively impacting Malaysia’s exports, according to Bloomberg earlier today.
The local currency declined by 0.2% against the US dollar, hitting 4.7965, marking its weakest level since the all-time low of 4.8850 in 1998 during the aftermath of the regional financial crisis.
In 2024, the ringgit has already depreciated by over 4%, adding to losses from the past three years.
Meanwhile, Reuters has reported that the ringgit’s 26-year low follows the trend of weakening emerging Asian currencies against the dollar.
The yuan also experienced a decline after China unexpectedly reduced its benchmark mortgage rate, but managed to find support through state bank purchases.
The Chinese currency stabilised after initially touching its lowest level in three months, with major state-owned banks reportedly selling dollars to counter the yuan’s weakness.
This move came in response to China’s significant cut to the five-year loan prime rate, reducing it by 25 basis points to 3.95% in an effort to stimulate credit demand and revive the property market, as per sources cited by Reuters. – February 20, 2024