KUALA LUMPUR: Malaysia’s resilient economy is likely to help the ringgit strengthen against the US dollar amid a challenging global outlook, said the World Bank.
“It's hard to predict the ringgit but certainly the resilience of the Malaysian economy will help,” said World Bank lead economist for macroeconomics, trade and investment Richard Record.
The ringgit reversed from a year weakness of RM4.20 at the end of November 2018 to trade between RM4.09 and RM4.10 today.
Year-to-date, the ringgit’s performance against regional peers has been mixed, appreciating 0.13 per cent and 0.09 per cent against the Philippine peso and Singaporean dollar respectively, but trading 1.6 per cent and 0.42 per cent weaker against the Indonesian rupiah and Thai baht.
The Monetary Policy Committee of Bank Negara Malaysia is scheduled to meet next week to decide on the Overnight Policy Rate.
“Bank Negara would likely be balancing both growth and inflation. I think the central bank will be cautious when it come to monetary policy being supportive of economic growth,” Record said.
Recently, the World Bank revised downward 2019's forecast for Malaysia’s economic growth to 4.7 per cent from 4.9 per cent, after factoring in rigorous cuts in government spending and slowdown in private and public investment.
“Our projection is that it will continue to grow at 4.7 per cent for 2019,” Record reiterated, adding that Malaysia’s economy remained solid compared to regional economies, given the external risks of the US-China trade tension and volatile commodity prices.
“I would say Malaysia’s fundamentals is intact because the economy is diversified,” Record told reporters on the sidelines of International Conference on Globalisation: Contents and Discontents organised by the World Bank here today.
Bank Negara data showed Malaysia’s economic growth rate had slowed for four consecutive quarters.
In the July-to-September 2018 quarter, the central bank said, Malaysia's gross domestic product (GDP) grew 4.4 per cent.
Last week, in its report to investors, Nomura Global Research anticipated Malaysia to post a fiscal deficit of 3.9 per cent in 2018 and 3.7 per cent in 2019.
It justified the poorer forecast on Malaysia's debt position on falling crude oil prices and shortfall of Malaysia's government’s revenue after the zero-rating of the Goods and Services Tax.
The report went on to downgrade Malaysia’s equity market to “underweight” from "neutral", on poor earnings growth prospects, amid higher valuations and lack of major expansionary reforms.
In response, Malaysia’s Finance Minister Lim Guan Eng slammed Nomura’s report.
“Our fiscal position is well within the 3.7 per cent of GDP deficit target for 2018. Nomura’s report that 2018 fiscal deficit would worsen to 3.9 per cent of GDP is simply untrue.”
Lim added that the Sales and Service Tax collections had exceeded the government’s initial projection by 34 per cent at RM5.4 billion, compared with the projected figure of RM4 billion."
Asked to comment on this, economist Jomo Kwame Sundaram concurred with Lim.
“Some of these researchers and rating agencies are notoriously useless. I don't believe in their forecasts,” said Jomo, a former economics professor and United Nations assistant secretary-general for economic development.