An economic research group predicts the Malaysian ringgit could slump to as low as 3.95 agains the US dollar in the third quarter of this year, before recovering slightly to 3.82 by year’s end.
Macquarie Research’s Asean economist PK Basu said the plummeting value of the ringgit could provide a welcome boost to Malaysia’s exports and trade surplus, however.
“Malaysia is indeed a net exporter of oil (the only one in East Asia apart from Brunei), but its net exports of oil are small (the value of crude-oil exports being partly offset by imports of refined product). Sluggishness in palm oil and rubber prices, as well as plunging crude oil prices, clearly hurt sentiment toward Malaysia and had a negative impact on the earnings of listed companies in the oil services and plantation sectors,” he said in a reseach note, quoted by The Sun Daily.
He added that Bank Negara seems to be okay with the ringgit falling further, as Malaysia’s terms of trade have not deteriorated.
Basu also said that while a depreciation of the ringgit at this scale has not been common in the past 20 years, whenever it has dropped by 8-10% year-on-year, Malaysia’s exports and trade surplus would reap the benefits within six months of the drop.
He pointed to the sharp drop in the value of the ringgit duriung 1998’s Asian financial crisis, which brought about a dramatic rebound in exports and trade surplus in 1999 and 2000.
“The recent episode of ringgit depreciation should similarly boost exports by Q2 2015, and allow a widening of the trade surplus in April-September 2015,” he said.
The ringgit is currently the worst-performing currency in Asia, due to the stronger US dollar and the global plunge in oil prices. Speculation on the poor performance of the Federal Government’s sovereign development fund 1Malaysia Development Berhad (1MDB) has also contributed to a loss of confidence on the ringgit in global exchange markets.
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