While the Malaysian Ringgit (MYR) ended 2024 on a high note, with the economy accelerating
better than expected, its erratic behaviour has Malaysians pondering what will be off the dinner
table tonight.
Johor Baharu’s businesses and traders, where Singaporeans do their weekend shopping because
of the favourable exchange rate (1 SGD = 3.3051727 Feb 14, 2025), are the only ones revelling.
The rest of ordinary Malaysians are being burdened with rising costs, household debts, the
prospect of reduced subsidies and increased power rates as well as Trump’s blunt force tariffs.
A senior Bank Negara (BNM) official in 2024 told a forum that the Ringgit has been unfortunate and unfairly assessed against the US dollar.
He added that “The continued uncertainties over China’s economic growth prospects and the
recent geopolitical crisis has increased US dollar demand as a safe-haven asset.”
Geopolitical tensions blamed
Blaming the world’s geopolitical situation, the China-US rivalry, the Gaza and the Ukraine wars,
among others, are now the standard replies in explaining the declining value and its erratic
behaviour of the Ringgit.
BNM continually denies that the value of the Malaysian currency is a barometer or indicator of
the real picture of the economy.
But, economists and political analysts believe otherwise.
A currency’s exchange rate is typically determined by the strength or weakness of the underlying
economy. As such, a currency’s value can fluctuate from one moment to the next.
To a certain extent, the Ukraine war has affected the supply of certain commodities like wheat, which
then has a domino effect on other things, such as the cost of shipping and substitute crops like corn.
The connection between the falling supply of commodities, the economic rivalry between two
powerhouses and the erratic behaviour of the Ringgit is, at best, tenuous.
Political and social stability
The socks controversy involving KK Mart, a local-based convenience store which was hit by a
boycott, and two of its outlets had Molotov cocktails thrown near their premises, ostensibly as
warning to those who broke the boycott has left a lasting impression that things are pretty much
volatile.
Public perception in Malaysia is that not enough has been done by the administration to stop such
wilful acts of violence and economic disruptions that boycotts have on businesses, both local
foreign enterprises.
Countless employees have been disenfranchised, taken pay cuts or retrenched by boycotts that
will affect demand for the overall goods and services. Not to mention the economic duress faced
by families affected by such wanton acts of foolishness.
The conspicuous silence by the authorities on racially sensitive rhetoric by both members of the
government coalition and senior Opposition leaders have led to a general lack of confidence by
the public on whether this administration is really in control of the nation’s economic and
political security.
Economic fundamental mumbo jumbo
The interplay of macro and microeconomics determines the stability and health of a nation’s assets
including its currency, in this case, the Ringgit.
Foreign investors look at information such as profitability, revenue, assets, liabilities, and growth
potential, which are considered fundamentals before investing in a country or its assets.
In addition, a lot of confidence and faith is also placed in the nation’s criminal and justice
systems and their effectiveness in dealing with corruption, crime, and punishment.
Investors want to know that in the event of fraud, will the felons be caught, and their money and
properties returned, and will they be appropriately compensated and the thieves punished?
On paper, Malaysia has strong economic fundamentals like projected positive growth rates,
increasing exports and rising economic activity.
But all this is just as good as the paper it is written on.
Confidence and public perception in the judicial and criminal process took several hits when
several leading government-linked politicians and one head of a political party had all their
corruption and money laundering charges dropped unexpectedly.
This has left both locals and foreigners gasping in disbelief that an ongoing trial that lasted for
more than a year suddenly was halted two-thirds of the way, and the accused was given a discharge
not amounting to an acquittal.
The biggest elephant in the room must surely be Najib Pardon’s debacle that is now
threatening to get worse.
The world’s worst convicted kleptocrat and former prime minister, Najib Razak, may now be
allowed to spend the remaining discounted jail sentence of six years (from 12 years after a royal
clemency) in the comfort of his commodious home.
It is a combination of these non-economic factors that determine how the local populace and
foreign investors view and perceive the nation’s overall health.
Any advertising executive will tell you that it is the perception that will sell your product.
Stop blaming the world and its remote troubles for the mercurial Ringgit’s fortunes and decline.
The only people benefiting from the Ringgit’s behaviour are our southern neighbours and tourists
from China.
But even they will start worrying when criminals are let off the hook for no apparent reason.
Get the real fundamentals right, and the Ringgit will see better days.
It’s all in the perception and not wonderfully packaged numbers and statistics that people will
buy into.
One dreads to find out what the real value of the Ringgit really is.