Is The Ringgit In For Another Rough Year In 2024?

By now it goes without saying that 2023 was not a good year for the Malaysian ringgit. Earlier this year, ringgit fell to its lowest level in 25 years, and was rated as the worst performer in Asia this year after the yen.

The weak ringgit made its impact felt even in Malaysian households, as a combination of the weak ringgit and rising inflation meant that purchasing power was significantly decreased for Malaysians.

But what does the upcoming new year have in store for ringgit? Will we continue to see it plummet or will it start to bounce back and stabilise itself at a respectable level?

Rafizi explains ringgit’s situation

Malaysia’s economic minister, Rafizi Ramli took to social media website X (formerly known as Twitter) to explain that ringgit’s downfall has to be looked at from a broader perspective.

Sementara nilai matawang sesebuah negara adalah salah satu dari petunjuk kedudukan ekonomi, ia hanyalah satu petunjuk berbanding petunjuk-petunjuk lain. pic.twitter.com/aPKNXX7jwP

— Rafizi Ramli (@rafiziramli) November 29, 2023

“Currency value needs to be analysed along with other economic indicators such as economic growth, inflation rate, interest rates, unemployment rates, pay scale, and other indicators.”

“In Malaysia’s case, since this administration (Madani government) took over, every other indicator showed positive growth.”

“But ringgit’s downfall should also be analysed from a broader perspective, not just by comparing it to the US Dollar (USD) as the majority of currency in the world is showing deterioration when compared to USD due to the Federal Reserve’s aggressive increase of interest rates,” said Rafizi in his X thread.

Rafizi then went on to show that when compared against other major currencies of the world, ringgit is showing positive growth.

And finally, Rafizi wrapped his thread up by saying that the ringgit will stabilise in 2024.

MIER expects ringgit to float around 4.40 in 2024

Meanwhile, the Malaysian Institute of Economic Research (MIER) recently stated that driven by the resurgence of the tourism sector, an improved labour market, and a rebound in the electrical and electronics sector, the Malaysian gross domestic product (GDP) will grow between 4.3% to 4.6% in 2024.

MIER board member Tan Sri Dr Sulaiman Mahbob shared his views at the launch of the National Economic Outlook Conference organised by MIER, The Edge reports.

“There are also some signs of inflation reduction, as the latest consumer price index (CPI) data showed [that] the country’s inflation has dropped to 1.8%, the lowest in two years. For 2023, I think we can achieve around 3.9% of GDP [growth],” he added.

Speaking on the performance of the ringgit, Sulaiman said that he expects the local currency to hover around 4.40 in 2024 compared to the greenback.

He shared insights on why he sees that the ringgit is likely to strengthen. One of the factors he highlighted was the upcoming increase in the SST (sales and service tax) to 8%  which will help the government generate more revenue.

Ringgit will appreciate towards year end, said MIDF

MIER’s views on ringgit is also echoed by MIDF Research, the research arm of the Malaysian Industrial Development Finance Berhad.

“Given OPR already at the normal rate supportive of sustained growth in Malaysia’s economy, we expect BNM will continue to maintain OPR at 3.00% next year,” said the research house.

The analysts highlighted that the Malaysian ringgit appreciated +2.2%% month on month to RM4.661 as the dollar weakened. On a monthly average, the ringgit appreciated +1.3% month on month to RM4.688. The ringgit also saw an intra-month high on November 6 at RM4.637, the strongest level since mid-August 2023.

“Despite the external challenges, the ringgit is expected to appreciate further towards year-end as the market viewed the Fed is already at the end of its tightening cycle, which explained the recent declines in demand for dollar.

“We opine that the ringgit will benefit from the reversal of fund flows back into EMs and the recovery in regional trade as China’s economy (and demand) continues to recover,” the research house stated.

Adding on the ringgit’s performance, MIDF also stated that they are confident that the elevated global commodity prices will benefit the ringgit.