PM Anwar says Malaysia’s economy, investments booming despite ‘concerning’ ringgit free fall

Prime Minister Anwar Ibrahim said surging investments and falling jobless rate showed the country was in a better shape to tackle currency volatility
He added the central bank would keep monitoring the ringgit, which hit a 26-year low against the US dollar this week

Malaysia

Joseph Sipalan

Published: 1:26pm, 23 Feb 2024

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The ringgit’s decline this week to a 26-year low against the US dollar does not reflect the reality of Malaysia’s strengthening economy, Prime Minister Anwar Ibrahim said on Friday, trumpeting investment, positive unemployment data and solid growth rates.

Markets raised the alarm on Tuesday when the ringgit fell to 4.7965 against the dollar, according to Bloomberg data, its lowest since an all-time low of 4.885 in January 1998 during the Asian financial crisis.

The currency continues to hover close to its lowest-ever level on elevated pressure from expectations of a US Fed rate change and sustained weakness in China’s economy.

But Anwar, who is also finance minister, said the ringgit’s performance was “concerning” but Malaysia’s economy is in a much better position now to manage currency volatility compared to the crisis of the late 1990s.

“They always compare to ‘98. In ‘98 the ringgit was down, inflation was up, unemployment was up and there were no investments,” Anwar told reporters on the sidelines of an event.

“But look at the overall [now]. Investments are the biggest ever in the country, inflation continues to go down, unemployment is down, our growth is sustained as compared to our neighbours.”

The government expects the economy to expand by 4 to 5 per cent this year, accelerating from an estimated 4 per cent in 2023.

By comparison, Thailand this week said it’s growth in 2023 had slowed to 1.9 per cent,

Anwar’s comments came after Bank Negara Malaysia (BNM) on Tuesday moved to squash fears of a wider economic malaise, saying growth remains on a positive trajectory and that current ringgit levels do not reflect the economy’s “positive prospects” going forward.

The ringgit is among the weakest currencies in Asia, having struggled to regain strength as countries in the region exited the Covid-19 pandemic. Last year, it was only second to the Japanese yen as Asia’s worst performing currency.

A weak ringgit historically grants a boon for exporters in Malaysia’s trade-reliant economy, but also fuels inflation as the cost of imported fertilisers and animal feed get passed on to consumers.

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Anwar echoed the central bank’s position, saying that the country recorded the highest level of approved investments in history at 329.5 billion ringgit (US$69 billion) for the whole of 2023, a 23 per cent surge from the previous year.

“If confidence is low due to the ringgit, we would not have attracted these sorts of investments,” he said.

The prime minister, however, said that he has instructed BNM to keep monitoring the ringgit while the government continues with efforts to manage inflation and tamp down on living costs.

This includes plans to manage volatility in prices of basic necessities such as rice, fish and meats, he said.

“What is important to us is to focus on what we can do and what we should do, and we are doing it on a daily basis,” Anwar said.