Malaysia economy could grow above 4% in 2017

Nov 29, 2016
Growth rates in Malaysia are still seen as significantly stronger than those in the developed world
Growth rates in Malaysia are still seen as significantly stronger than those in the developed world

The Malaysian economy could grow above four per cent in 2017, despite global economic headwinds, with strong support for domestic spending.

ForexTime Vice-President for Corporate Development and Market Research Jameel Ahmad said the Malaysian economy was still robust and resilient despite many challenges such as currency market volatility and sluggish global economic environment.

He also attributed this to the current norm of slow growth among all emerging markets, the strengthening greenback against major currencies and uncertainty over Donald Trump’s victory in the United States Presidential election.

Growth rates in Malaysia are still seen as significantly stronger than those in the developed world, he told a briefing on ‘The Malaysian Economy and Ringgit’ here today.

“With so many currencies getting hit by the US dollar, Malaysia will not be alone in facing renewed inflation risks,” he elaborated.

Jameel said Bank Negara’s move to cut key interest rate by 25 basis points to 3% in July, also helped support domestic demand and spur the economy against a backdrop of a weak global economic environment.

As for the impact of currency headwinds on the economy, Malaysia was not alone, as all other major currencies were also pressured by the greenback’s rally.

“Bank Negara can stay calm. Any knee-jerk reaction from any central bank following the incredible dollar run, would signal to investors that the central bank is panicking,” he explained.

If investors panic, he said, the local markets would face further turbulence and this could then increase potential risks to the economy.

“In periods of uncertainty, stability can go a long way towards reassuring investors,” he said, adding that the central bank had adequate foreign exchange reserves to protect the ringgit.

Jameel agreed that some intervention in the market was fine.

“However, it can spell concern to investors, if this becomes a regular occurrence,” he said, adding that pegging the ringgit was not the approach to take as it showed that Bank Negara would be expecting currency weakness for the longer-term.

“Like every other central bank, there is nothing that Bank Negara can do to prevent the US dollar’s strength. It is the current investment trend, markets are simply going long on the dollar,” Jameel explained.

Against the backdrop of Donald Trump taking office in January and the uncertainty surrounding his trade policies and its effect on the greenback was expected to pressure the ringgit to cross the 4.50-4.60 level per US dollar.

He said Malaysia, could then look at opportunities with other trading partners, such as the United Kingdom, once it starts the process of leaving the European Union.

Malaysia can benefit from stronger relations with the United Kingdom, Jameel added.

Source: Bernama