1MDB, lack of competitiveness since 1998 financial crisis behind ringgit's decline, says economist

  • Nation
  • Friday, 23 Feb 2024

PETALING JAYA: The ringgit’s poor performance can be attributed to the lack of competitiveness in Malaysia over the past 28 years, according to a World Bank economist.

According to Apurva Sanghi, this was partly a consequence of the Malaysia Development Berhad (1MDB) financial scandal.

“Weak ringgit is ultimately a symptom of long-term decline in Malaysia’s competitiveness,” Apurva said on X, formerly known as Twitter.

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Apurva said that while many Asian countries also slid following the 1998 financial crisis, Malaysia’s lack of reform affected its economy in the long run.

He added that Malaysia opted for short-term solutions to boost the ringgit in the immediate aftermath of the financial crisis.

It however consequently hurt the currency in the long run, he said, adding that the government’s measures resulted in its GDP and exports falling.

Apurva said that the Thai baht and South Korea’s won outperformed the ringgit as those countries arguably reformed the most after the financial crisis.

The economist added that China’s economic deceleration alongside the recent hike in the United States’ interest rates only impacted the ringgit’s value slightly.

“1MDB shock also severely dented the ringgit,” he said.

He said that a country’s currency also reflected its societal, economic, and political vibrancy.

“External factors (United States, China) are clearly important but affect different countries differently. Why? Because of differences in domestic conditions & response,” he said.

The ringgit has been on a slide for months and hit its lowest this year on Feb 20, when it traded briefly at 4.7965 against the US dollar.

The ringgit was at its lowest value during the Asian financial crisis in 1998 when it traded at 4.7965 to the greenback.

At noon on Friday (Feb 23), the ringgit traded at 4.775 against the United States dollar.

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