By Danial Azhar
KUALA LUMPUR (Reuters) – Malaysia’s central bank said the recent performance of the ringgit, which hit a 26-year-low on Tuesday, was largely due to external factors and did not reflect the positive prospects of the country’s economy.
Bank Negara Malaysia (BNM) Governor Abdul Rasheed Ghaffour said the ringgit’s fall was influenced by factors such as changing U.S. interest rate expectations, geopolitical concerns and uncertainty surrounding China’s economy.
“BNM is of the view that the current level of the ringgit does not reflect the positive prospects of the Malaysian economy going forward,” Abdul Rasheed said in a statement.
Malaysia’s economic growth in 2024 will be driven by improvements in external demand and strong domestic spending, he said.
He added that with improving exports, a recovery in tourism and an increase in investments as well as the government’s commitment to structural reforms, most analysts were forecasting the ringgit to appreciate this year.
Malaysia’s second finance minister Amir Hamzah Azizan on Monday said he expected the ringgit to strengthen against the dollar in 2024 amid indications that the U.S. Federal Reserve would halt interest rate hikes, state news agency Bernama reported.
Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia, said there was no shortcut to strengthening the ringgit, such as raising key interest rates, as this could backfire and hurt the economy.
“Bolstering confidence would be the right thing to do, especially in areas relating to the implementation of economic reforms,” he said.
The central bank held its key interest rate unchanged at 3.00% last month amid moderating inflation, and warned of risks to growth due to weaker-than-expected external demand and declines in commodity production.
Malaysia’s gross domestic product grew 3% year-on-year during the fourth quarter of 2023, data showed last week, below the 3.4% expansion forecast by the Statistics Department and analysts in a Reuters poll.
Full-year 2023 economic growth was 3.7%, below the government’s projection for a 3.8% expansion and a sharp drop from a 22-year high of 8.7% in 2022.
The government and central bank expect economic growth of 4% to 5% in 2024.
(Reporting by Danial Azhar; Editing by Martin Petty)
