Ringgit tanks to 26-year low as central bank maintains economic prospects remain positive

[KUALA LUMPUR] Malaysia’s central financial institution stated the ringgit – which on Tuesday (Feb 20) fell to its lowest degree for the reason that Asian monetary disaster 26 years in the past – didn’t replicate the “positive prospects” of the Malaysian economic system going ahead.

The beleaguered forex momentarily slipped under 4.80 towards the US greenback to 4.79, the weakest it has been since plunging to an all-time low of 4.8850 in 1998.

Since Jan 1 this 12 months, the ringgit has fallen by greater than 4 per cent towards the buck as China’s slower than anticipated financial restoration continues to dent exports from Malaysia.

Against the Singdollar, the ringgit traded at RM3.568 at 8 pm on Tuesday, extending its file low. The ringgit has depreciated by 2.6 per cent towards the Singdollar since Jan 1.

In the final decade alone, the ringgit has plunged by over 37 per cent for the reason that level when one Singapore greenback may purchase RM2.60.

In a media assertion, Bank Negara governor Abdul Rasheed Ghaffour maintained the central financial institution’s stance that Malaysia’s financial development remained resilient, underpinned by the advance in exterior demand and powerful home spending.

“The recent performance of the ringgit, similar to other regional currencies, has been influenced by external factors,” he stated, citing the altering US rate of interest expectations, geopolitical considerations and the uncertainty surrounding China’s economic system.

The assertion was issued simply hours after Prime Minister Anwar Ibrahim was pressed by the native media to touch upon the dire state of the forex. Anwar, who can be Finance Minister, publicly requested Bank Negara to elucidate the ringgit’s downward development.

“On the ringgit, the governor is there. He has promised to answer,” stated Anwar.

Rebound anticipated

With sluggish export efficiency dragging down Malaysia’s financial development in 2023, the economic system grew at a slower tempo of three.7 per cent – in need of the central financial institution’s 4 per cent forecast.

Bank Negara expects development to enhance this 12 months. The anticipated restoration in exterior demand, coupled with resilient home expenditure, will place development at between 4 and 5 per cent in 2024, it stated.

In his assertion, Abdul Rasheed stated a rebound in exterior demand and powerful home spending will drive Malaysia’s development this 12 months.

He identified that Malaysia’s exports have proven “steady” enchancment for the reason that fourth quarter of 2023, including that the International Monetary Fund had predicted that international commerce will choose up later this 12 months.

Malaysia’s statistics company stated on Tuesday that the nation’s exports in January grew by 8.7 per cent 12 months on 12 months, which introduced 10 straight months of contraction to an finish. 

Abdul Rasheed additionally stated that the tourism sector has made a powerful restoration for the reason that Covid-19 pandemic ended, and that tourism arrivals in 2024 are anticipated to exceed the pre-pandemic degree of 26 million.

On funding, he stated that there was better momentum of late as a result of implementation of accredited tasks in the private and non-private sectors.

“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,” he stated.

The falling ringgit has upset many wage earners and enterprise homeowners in Malaysia resulting from rising price pressures.

A current survey by the Associated Chinese Chambers of Commerce and Industry of Malaysia revealed that over half of the 684 respondents stated their earnings had been shrinking as a result of weak forex.