[KUALA LUMPUR] Malaysia’s central bank said the ringgit – which on Tuesday (Feb 20) fell to its lowest level since the Asian financial crisis 26 years ago – did not reflect the “positive prospects” of the Malaysian economy going forward.

The beleaguered currency momentarily slipped below 4.80 against the US dollar to 4.79, the weakest it has been since plunging to an all-time low of 4.8850 in 1998.

Since Jan 1 this year, the ringgit has fallen by more than 4 per cent against the greenback as China’s slower than expected economic recovery continues to dent exports from Malaysia.

Against the Singdollar, the ringgit traded at RM3.568 at 8 pm on Tuesday, extending its record low. The ringgit has depreciated by 2.6 per cent against the Singdollar since Jan 1.

In the last decade alone, the ringgit has plunged by over 37 per cent since the point when one Singapore dollar could buy RM2.60.

In a media statement, Bank Negara governor Abdul Rasheed Ghaffour maintained the central bank’s stance that Malaysia’s economic growth remained resilient, underpinned by the improvement in external demand and strong domestic spending.

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“The recent performance of the ringgit, similar to other regional currencies, has been influenced by external factors,” he said, citing the changing US interest rate expectations, geopolitical concerns and the uncertainty surrounding China’s economy.

The statement was issued just hours after Prime Minister Anwar Ibrahim was pressed by the local media to comment on the dire state of the currency. Anwar, who is also Finance Minister, publicly requested Bank Negara to explain the ringgit’s downward trend.

“On the ringgit, the governor is there. He has promised to answer,” said Anwar.

Rebound expected

With sluggish export performance dragging down Malaysia’s economic growth in 2023, the economy grew at a slower pace of 3.7 per cent – short of the central bank’s 4 per cent forecast.

Bank Negara expects growth to improve this year. The anticipated recovery in external demand, coupled with resilient domestic expenditure, will place growth at between 4 and 5 per cent in 2024, it said.

In his statement, Abdul Rasheed said a rebound in external demand and strong domestic spending will drive Malaysia’s growth this year.

He pointed out that Malaysia’s exports have shown “steady” improvement since the fourth quarter of 2023, adding that the International Monetary Fund had predicted that global trade will pick up later this year.

Malaysia’s statistics agency said on Tuesday that the country’s exports in January grew by 8.7 per cent year on year, which brought 10 straight months of contraction to an end. 

Abdul Rasheed also said that the tourism sector has made a strong recovery since the Covid-19 pandemic ended, and that tourism arrivals in 2024 are expected to exceed the pre-pandemic level of 26 million.

On investment, he said that there has been greater momentum of late due to the implementation of approved projects in the public and private sectors.

“Reflecting these positive developments and the government’s commitment to implement structural reforms and the expected lowering of interest rates in advanced economies, most analysts are forecasting for the ringgit to appreciate this year,” he said.

The falling ringgit has upset many wage earners and business owners in Malaysia due to rising cost pressures.

A recent survey by the Associated Chinese Chambers of Commerce and Industry of Malaysia revealed that over half of the 684 respondents said their profits were shrinking due to the weak currency.