`


THERE IS NO GOD EXCEPT ALLAH
read:
MALAYSIA Tanah Tumpah Darahku

LOVE MALAYSIA!!!


 


Wednesday, March 11, 2015

Weak ringgit REFLECTS Malaysia’s weakened monetary conditions?

Weak ringgit REFLECTS Malaysia’s weakened monetary conditions?
KUALA LUMPUR - A weaker ringgit could help ease Malaysia’s monetary concerns, says Credit Suisse.
“We think a weaker ringgit may help deliver some easing in overall monetary conditions.
“We believe the central bank is pragmatic enough to accept that a weaker exchange rate is a needed adjustment mechanism to deterioration in the current account balance and falling oil prices, “ Its economist, Michael Wan said.
Lower oil prices, said Wan, will offset the pass through from a weaker currency, implying limited risk to inflation.
There may be an incentive for Bank Negara Malaysia to replenish forex reserves on any pullback in dollar-ringgit, which may set a natural floor to the pair although the ringgit is expected to continue to underperform the region.
Credit Suisse also expects that the low oil prices are likely to weigh on Malaysia’s growth prospects, affecting investment and trade channels significantly.
While softer inflationary pressures should provide some support to private consumption spending, it is unlikely to offset completely the negatives, Wan said.
“The implementation of the Goods and Services Tax (GST) will likely drag consumer confidence while it will take some time for the positive impact of lower domestic fuel prices to actually result in a significant pick-up in private consumption spending.”
The research house expected Malaysia to grow by 4.4 per cent in 2014 and for 2016, it forecasts a 5.4 per cent growth.
“We could nonetheless see some upside risks to our 2015 forecasts if the boost to exports come earlier than we anticipate,” he said in a report.
Wan described inflation as a bright spot for Malaysia.
“Although we are nudging our CPI (consumer price index) forecasts up slightly to reflect bigger fuel price adjustment in March, our forecast is still materially below consensus at 2 per cent compared to the consensus at 3.2 per cent.”
He expects the February number to likely fall into negative territory, driven by the downward adjustment for domestic fuel prices in the same month, coupled with the electricity tariff cuts by Tenaga Nasional Bhd.
“For the rest of the year, we see inflation remaining below 3 per cent, reflecting low commodity prices coupled with the expansion of the GST exempt goods list, and also weak domestic demand.”
Credit Suisse has maintained its current account forecast at 1.9 per cent of gross domestic product.
“We believe that we have not seen the worst in Malaysia's trade balance and current account numbers yet. This is because the bulk of energy net exports come from liquefied natural gas, which reflect crude oil prices with some lag.”
The current account is seasonally weaker in the second quarter and Wan expects it be near the deficit territory in the second and third quarters.
If that happens, the government will likely react by spreading out some of the less important government investment projects, asking Petronas to repatriate foreign exchange earnings, encouraging government linked corporations to reduce investment abroad.
The research house expects the central bank to keep rates on hold in 2015, given still elevated household debt.
It said Malaysia’s sovereign rating remains under pressure, with uncertainty surrounding the resolution of government contingent liabilities such as 1MDB, coupled with a deteriorating current account surplus. - NST

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.