26-year-low: BNM says falling ringgit doesn’t reflect economy’s prospects
Published on: Tuesday, February 20, 2024
By: FMT Business
BNM governor Abdul Rasheed Ghaffour says the ringgit’s current level does not reflect the positive prospects of the Malaysian economy. (Bernama pic)
PETALING JAYA: Bank Negara Malaysia (BNM) governor Abdul Rasheed Ghaffour said the ringgit’s recent sharp drop does not reflect the “positive prospects” of the Malaysian economy.
In a statement today, he said the recent performance of the ringgit, similar to other regional currencies, has been influenced by “external factors”.
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“Some of these factors include market adjustment to changing US interest rate expectations, geopolitical concerns and uncertainty surrounding China’s economic prospects.
“BNM is of the view that the current level of the ringgit does not reflect the positive prospects of the Malaysian economy going forward,” said Rasheed.
The governor was responding to media reports highlighting that the beleaguered ringgit had extended declines to the lowest level since the Asian Financial Crisis.
The local currency fell 0.2% to 4.7965 against the dollar today, its weakest level since an all-time low of 4.8850 in 1998 following the fallout from the regional financial crisis.
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The ringgit has slid by over 4% so far in 2024, adding to losses from the previous three years.
Rasheed said growth in 2024 will be driven by the improvement in external demand and strong domestic spending. He cited the latest International monetary Fund (IMF) forecast for global trade to improve from 0.4% in 2023 to 3.3% in 2024.
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“For Malaysia, exports have shown steady improvements since the fourth quarter of 2023. In fact, the recently-released January 2024 exports have turned positive (+8.7%).
“The tourism sector has recovered strongly with tourist arrivals in 2024 expected to exceed the pre-pandemic levels of 26 million,” he said.
He also noted that investment momentum has picked up with the implementation of approved projects both in the private and public 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 added.
Despite Rasheed’s optimism, Malaysia’s economy grew slower-than-expected in the three-months through December as exports to China fell.
Manufacturing activity remained weak, with January’s Purchasing Managers’ Index coming in at 49.0 — making it 17 straight months below the 50.0 threshold.
The country’s growth trajectory for 2024 remains fraught with risks both externally and at home, while foreign bond outflows amounting to US$382 million (RM1.76 billion) in January, the largest in five months, also reduce support for the local currency.
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