Mar 20 2024: On Wednesday, Malaysia’s central bank called for an expedited implementation of structural reforms aimed at ensuring long-term sustainable economic resilience and bolstering the strength of the ringgit currency.
Bank Negara Malaysia (BNM) highlighted favorable economic conditions expected in 2024, including moderate inflation and anticipated growth in trade activity. This environment provides an opportunity for the government to implement necessary changes, such as subsidy rationalization, as outlined in documents released alongside the annual report.
The government’s plan to transition from blanket subsidies to targeted assistance for low-income groups is in progress, with potential implications for fuel costs. BNM Governor Abdul Rasheed Ghaffour emphasized the importance of carefully calibrating these reforms to minimize adverse effects on growth and inflation.
BNM maintained its growth forecast for 2024 at 4% to 5%, with a projected 5% increase in exports following an 8% contraction in the previous year. The introduction of new taxes and adjustments to utility tariffs is expected to have a limited impact on inflation, forecasted at 2% to 3.5% for the year.
Despite the ringgit’s recent gains from its 26-year low, it remains down around 3.2% against the U.S. dollar this year. Abdul Rasheed reiterated the view that the currency is undervalued and highlighted positive outcomes from measures aimed at increasing inflows and easing pressure on the ringgit.
Long-term support for the ringgit will hinge on addressing structural issues in the labor market and prioritizing investments in decarbonization and high-value industries, according to Abdul Rasheed.