“We have to look at the growth of the economy,” he told Bloomberg Television’s Haslinda Amin at the World Economic Forum in Davos yesterday. “Malaysia’s growth will have a bearing on the strength on the ringgit this year, I think. That will be the key determinant.”
The ringgit opened lower today, at 4.3210/4.3250 against the US dollar from yesterday’s close of 4.3130/4.3185.
Zafrul, who was the country’s finance minister until late last year, cited a forecast for expansion of 4% to 5%, as projected by Bank Negara Malaysia. That would come after a rapid, reopening-driven rebound last year, which saw gross domestic product jump by 14.2% in the September quarter from a year earlier — the fastest pace in more than a year.
“We are seeing that the ringgit has actually strengthened,” Tengku Zafrul said. “It is markets that dictate the value” and “from the trade perspective, from the investment perspective, as long as we are comparatively moving in the same direction with the basket of countries that are trading with us, we should be OK,” he added.
Malaysia Ranks 32 for Global Competitiveness
Against the backdrop of a slowing economy, the minister reckons Malaysia does need to take steps to make itself more amenable for companies to operate in.
“The focus will have to be on making it easier — ease of doing business,” he said. “I think that’s one of the key opportunities for Malaysia to improve itself.”
China’s reopening after Covid lockdowns might suggest tailwinds for Malaysia this year. But Tengku Zafrul insisted a target of raising foreign direct investment by 20% isn’t that conservative, “given the global economic landscape”.
The country received RM194 billion in approved investments in the first nine months of 2022, up 2.5% from the year-ago period, according to the Malaysian Investment Development Authority. Foreign direct investments (FDIs) made up more than 67% of the flows, with China being a major investor.
“No-one knows of the impact of China for 2023,” he said. “I think 2024 is clearer. But 2023, there will be challenges” and “for the manufacturing sector, there will be a lag”.
Malaysia records a trade surplus for a 25th consecutive year
Tengku Zafrul spoke hours after the country revealed its 25th consecutive annual trade surplus, and on the eve of Bank Negara’s first decision of the year. Most economists anticipate the central bank will tighten further, with a quarter-point interest-rate increase to 3%.
Regarding the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which Malaysia signed days before Parliament was dissolved in October, Tengku Zafrul said that the government will stick with it.
“We will monitor this closely, but we have also made a fair public announcement that we are continuing with CPTPP,” he said.
The accord widens Malaysia’s access to new markets such as Canada, Mexico and Peru, which are not covered by any existing free trade agreements, providing access to a wider range of raw materials at competitive prices.