SINGAPORE: Beset by woes over the past year, Malaysia’s currency hit an all-time low against the Singapore dollar, with a rate of S$1 to RM3.5418 on Friday (Feb 2), noted The New Straits Times.
The ringgit’s previous low had been S$1 to RM3.5333 on Jan 23. NST also noted that 20 years ago, S$1 had been equivalent to RM2.24, showing that Singapore’s currency has appreciated by 60 per cent over this time period.
In the last year, the SGD has appreciated by 9.16 per cent; and in the last six months, by 4.41 per cent, noted Mothership on Feb 3.
A number of factors have caused the ringgit’s dive, including the COVID-19 pandemic, and the slowing down of the economy of Malaysia’s biggest trading partner, China. Lower commodity prices are also one reason why the ringgit has been affected, including the price of palm oil, crude, and natural gas, which form a large portion of Malaysia’s shipments.
The situation is unlikely to improve in the short term, Geoffrey Williams, Professor of Economics at the Malaysian University of Science and Technology, told NST, saying, “We will likely see these historically low levels for some time as there is no minimum value for any currency and Bank Negara Malaysia does not target exchange rates.”
However, one factor that could improve the ringgit’s performance would be political stability, said Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid.
NST quotes him as saying, “It is essential for the consistent implementation of economic reforms. It also encourages foreign investment, which in turn will boost the demand for the ringgit.”
He also said that Malaysia can boost local agri-food production, which would reduce the country’s dependence on low-skilled foreign workers “who contribute to substantial outward remittances.”
Saying that this would be “vital,” he added that “the government should encourage businesses to enhance productivity through incentives focused on activities like research and development, rather than targeting specific sectors.”
The ringgit was the worst-performing currency in South East Asia for 2023.
In October of last year, however, Mr Abdul Rasheed Ghaffour, the governor of Bank Negara Malaysia (BNM), the country’s central bank, said that Malaysia’s economy was not in a crisis despite the ringgit’s fall. Mr Rasheed reasoned that Malaysia has a resilient banking sector and strong fundamentals. /TISG