KUALA LUMPUR: The ringgit’s fair value is at about 4.20 against the US dollar, but there are no indications that the currency will improve in the near future, said the Malaysian Institute of Economic Research (Mier).
Its executive director Prof Zakariah Abdul Rashid told a press conference that the estimation of the ringgit’s fair value was based solely on the country’s economic fundamentals.
The ringgit was trading at 4.4108 against the US dollar at 5pm yesterday.
Year-to-date the currency has strengthened by 1.66% from RM4.4852.
Zakariah noted that the value of the ringgit against the US dollar had been volatile for a period of time before stabilising at its current levels.
“There is no immediate indication that the ringgit is going to improve. “When you look at our economic fundamentals, they are quite satisfactory, in terms of our growth rate, unemployment rate, balance of payments, and other factors.
“Yet, the ringgit has not performed well,” he said after the institute’s 22nd corporate economic briefing here.
In addition to economic factors, Zakariah stressed that non-economic factors had a major influence on the depreciation of the ringgit compared to other currencies in the region.
“These non-economic factors are the elements of confidence and the sentiments of market players about the economy.
“It can be influenced by perception about the country’s politics, debts, the upcoming general elections and also how our politicians present themselves,” he said.
He noted that currencies in the region had plunged during the same period following which, the ringgit continued to depreciate further in comparison to the rest.
“Wehn the ringgit departed from the same level as other currencies, at that point, it was especially caused by non-economic factors,” he said.
Earlier during the briefing, Zakariah said they had forecast that Malaysia’s real GDP for 2017 will grow at 4.5%.
He said the growth will continue to be driven by domestic demand, particularly by private expenditures.
On another matter, Mier said Malaysia will benefit from higher exports of goods and services this year in line with strengthening demand.
It said the country will see stronger demand from its major trading partners, leading to the export of goods and services to grow by 1.8% per annum, an upward revision of 0.5% percentage points from its earlier forecast.
However, the institute maintained its forecast for growth in imports at 1.5%.
According to data from the Malaysia External Trade Development Corporation, 14.6% of the country’s exports in 2016 were to Singapore, followed by 12.5% to China and 10.2% to the US.