Economy still strong, Bank Negara assures amid weak ringgit worries

Economy still strong, Bank Negara assures amid weak ringgit worries

Bank Negara Malaysia (BNM) has dismissed concerns that the depreciation of the ringgit is a “tell-tale” sign that Malaysia will have trouble settling its external debts, as is the case with some countries.

“Let me stress that Malaysia is nowhere near that position,” BNM governor Nor Shamsiah Mohd Yunus told Bernama.

Nor Shamsiah said Malaysia was expected to record a current account surplus exceeding RM75 billion in 2022.

It was also exporting more than it was importing, which meant that there was more inflow than outflow of foreign currency, she added.

Nor Shamsiah stressed that Malaysia was also a net creditor to the world.

“Today, we have more foreign assets than foreign liabilities – unlike during the Asian Financial Crisis (in 1997).

“There should be no concern that Malaysia might not be able to meet its foreign currency obligations given the recent fluctuations in the ringgit,” the national news agency quoted her as saying.

Last Friday, it was reported that the ringgit dived to 4.32 against the greenback, the lowest since May 29, 2020, when it was trading at 4.3465 against the US dollar.

Nor Shamsiah attributed the weakening of the ringgit to external factors, namely the US dollar appreciating against most major and regional currencies; investor nervousness about the conflict in Ukraine and signs of weakness in the global growth momentum; and, increased concerns over the slowdown in China, particularly arising from the recent imposition of Covid-19 restrictions in major cities.

She went on to say that a weaker ringgit “can be both a negative and a positive, depending on where you are in the economy”.

And while the country could expect some price increases as imports become more expensive, it will not see hyperinflation.

A weaker ringgit, Nor Shamsiah said, would prompt consumers to switch to more domestically produced goods and services.

“This helps spur the local economy.”

She assured that BNM would continue to manage the risks arising from both domestic and external developments.

“While we do not target any level of exchange rate, our role is to ensure movements in the exchange rate are orderly. By that, we mean that there are no sharp or wide swings in the value of the ringgit.

“We are ready to use the tools at our disposal to ensure these outcomes. This will help businesses plan and undertake business and investment decisions with more certainty, which will help to support a more sustainable recovery.”

Malaysia, she said, was still expected to register a strong economic recovery this year.

“Borders are open, businesses are resuming activity and our job market is improving. Our flexible and market-determined exchange rate is supporting us on this recovery path.

“Beyond this, Malaysia has a healthy current account surplus, a net external creditor position, and also an adequate level of international reserves. Our economic and trade structure is also highly diversified, allowing us to count on many sources of growth.” FMT

Economy still strong, Bank Negara assures amid weak ringgit worries

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