[UPDATED] Govt forecasts ringgit surge to RM4.50 by year-end: Amir Hamzah

KUALA LUMPUR – The government expects the ringgit to strengthen, reaching RM4.50 against the US dollar by the end of the year, supported by the country’s positive economic outlook.

Finance Minister II Datuk Seri Amir Hamzah Azizan highlighted Malaysia’s economic growth, citing a 7% increase in the Bursa this year as evidence of mutual confidence among the country’s companies.

He said that banking analysts had initially predicted that the ringgit’s value would be 8% to 9% lower than its current rate of RM4.80 per US dollar. 

“However, it is the robust economic stability that has prevented a further decline in the ringgit’s value,” he said during the Minister’s Question Time in the Dewan Rakyat this morning.

Amir was responding to the supplementary question from Lim Guan Eng (Bagan-PH) regarding the potential depreciation of the ringgit to RM5 against the US dollar due to its significant decline over the past 26 years.

He added that coordination between the Finance Ministry and Bank Negara Malaysia (BNM), along with fostering collaborative efforts between government-linked investment companies and government-linked companies, will contribute to boosting inflows into the foreign exchange market, thereby fortifying the value of the ringgit.

BNM is also always ready to intervene in the foreign exchange market to curb currency movements that are considered excessive, he added.

“For example, BNM will sell US dollars from its reserves to curb the excessive weakness of the ringgit.

“The efforts made by the government are effective, and there is no need to use instruments such as pegging the ringgit or shutting down the ringgit exchange as was done during the Asian financial crisis,” he said.

Additionally, BNM is monitoring the export produce exchange to ringgit by export companies and, at the same time, encouraging the use of local currency for export processes to reduce the dependency on the US dollar.

Earlier, Amir said that the ringgit’s depreciation was partly attributable to the significant and aggressive surge in interest rates orchestrated by US central banks, escalating from 0-0.25% to 5.25–5.50% within 16 months.

“Despite this, the BNM Monetary Policy Committee only raised the overnight policy rate from 1.75% to 3.00% during the same period.

“The comparatively modest increase in the OPR in Malaysia, in contrast to other nations, can be deemed a key factor contributing to the decline in the value of the ringgit,” he explained.

Amir also stressed that Malaysia’s economy is stable, and the government is confident it will see an economic growth rate ranging between 4% and 5% this year, compared to the previous year’s 3.7%.

He also noted that the unemployment rate also dropped to 3.3% in the fourth quarter of last year, and the inflation rate dropped from 2.0% to 1.6% in the same period, which is among the lowest in Asia.

Additionally, the export performance has been recovering at 8.7% in January after dropping in the ten months before, he said.

“The prospect of investment is also very good, with RM329.5 billion of investments approved last year, marking the highest (value of investment) in our history,” he said.

Amir also affirmed that the government is thoroughly examining the performance of the Malaysian currency and is resolute in its commitment to safeguarding and stabilising its value. 

Meanwhile, during her supplementary question, Salamiah Mohd Nor (Temerloh-PN) pointed out that the government seemed defensive regarding the decline in the value of the ringgit. 

She said, “It’s as if this is not affecting the people, despite 60% of our food sources being imported.”

In response, Amir said that the government has increased its support for the public through expanded and enhanced Sumbangan Tunai Rahmah programmes. These initiatives now offer one of the highest amounts of cash assistance to date.

“This is a proactive measure by the government to alleviate the impact. As per my explanation, we are optimistic that the ringgit’s value will rebound this year, and there shouldn’t be any exacerbation of the current issues,” he said. – February 29, 2024