KUALA LUMPUR: The Malaysian Institute of Economic Research (MIER) said the ringgit’s depreciation is temporary and reiterated that the local note’s intrinsic value against the US dollar should be at around 4.05 to 4.10.
Executive director Dr Zakariah Abdul Rashid said the ringgit should return to the equilibrium level once the real factors set in and speculative forces that led to its current weakness fade.
“Bank Negara Malaysia is currently taking some measures to create demand for the ringgit and stabilise its movement, minimise the hardship (volatility) to households and the business community.
“The actual exchange rate will be determined by the real factors, among which is the flow of goods and services,” he said on the sidelines of the National Economic Outlook (NEOC) conference here yesterday.
The conference was officiated by Plus Malaysia Bhd Chairman Tan Sri Mohd Sheriff Mohd Kassim.
Zakariah said while the demand and supply for the ringgit from the offshore market is important, the country can survive without its speculative element.
He added the ringgit’s current weakness was also influenced by the ‘Trumponomics’ effect following US President-elect Donald Trump and the performance of crude oil.
In a presentation on Malaysia’s economic outlook, Zakariah said MIER has projected a growth of between 4.5 to 5.5 per cent in the country’s real Gross Domestic Product (GDP) for 2017, driven by domestic demand.
“The domestic demand is expected to continue next year amid a continued expansionary fiscal policy to boost spending and accommodative monetary policy,” he said.
For the full-year 2016, he said MIER has maintained its projection of 4.2 per cent growth in GDP amid a sluggish external sector.
On downside risks for next year, he said a slower than expected recovery in the advanced economies and a continued slowdown in China and emerging economies may weaken global demand while Brexit’s contagious effect could lead to more uncertainty in the European Union.
“Trump’s economic policy risks the return of protectionism among developed economies, and a further drop in oil prices may happen due to cheaper production cost for shale oil producers and if OPEC’s quota is not effective,” he said.
On the bid to become a high-income nation, Zakariah said Malaysia has to work 22 per cent harder with the ringgit rate used in the earlier projection at 3.60 to the US dollar compared to the current rate of circa 4.40. — Bernama