BUTTERWORTH: Malaysia is not alone in mitigating the weakness of its currency against the US greenback as the world struggles to cope with the prolonged uncertainties from the US spat with China over trade.
Its effects are spilling over globally and as a result, many countries now prefer to position their currencies strategically lower against the US dollar in view of the concerns over the rising tariffs from the US-China trade war, said Finance Minister Lim Guan Eng.
If the trade is affected, the ringgit should be kept at a competitive levels to deal with the punitive tariffs which US or China may impose on each other. So Lim described the value of the ringgit as a delicate balancing act, which Bank Negara Malaysia is actively monitoring.
“There are pros and cons over the ringgit’s value if we bear in mind both the external and internal factors. On one hand, it is good for a stronger ringgit but on the other, it is also not a great prospect.”
He cited that the attacks by militants on the Saudi Arabia oil production facilities, were now also external factors on the country’s economy.
Lim was speaking after the launching of the “Kampungku” health campaign by Health Minister Datuk Seri Dr Dzulkefly Ahmad at Padang Datuk Haji Ahmad Badawi.
He said that the ringgit’s value was also affected by China’s renminbi, as the latter was now Malaysia’s largest trading partner.
“If the renminbi goes down or up against the US dollar, the ringgit may likewise follow the trend because China is now our largest trading
partner.”
It does not help matters when US also labelled China as currency manipulator because the ringgit’s value is intrinsically linked to both countries, he noted.
Instead, Lim said that what is the important stimulus indicator moving forward is Malaysia’s determination to register economic growth despite the challenging external conditions.
He hinted that the Budget 2020 may see a slight expansion despite concerns over the trade war and a slowing global economy.
To sustain growth, Lim spoke of the importance in keeping costs low, which can be helped with a low ringgit value and keeping inflation in check.
He also spoke of the country’s policy of shared prosperity, saying the main impetus was to continue to register growth so quality jobs can be created. It can later also improve the purchasing power of the average income earner.
One of the strategies involves moving higher up the job value chain by investing in technology and reducing the dependence on foreign labour. With better purchasing power, it can boost the country’s domestic consumption rate and inject market confidence.
To this, Lim said that the country’s prosperity must expand as without it, the government will struggle to share wealth with the people.
