M'sia's outlook stable on high degree of monetary flexibility
Published on: Tuesday, July 28, 2015
Kuala Lumpur: Malaysia's outlook remained stable given its high degree of monetary flexibility despite the ringgit touching a 17-year low at the 3.81 level against the US dollar Monday.Even though Malaysia is going through a tremendous challenge right now, Standard & Poor's Ratings Services (S&P) has maintained a stable outlook on the country, reflecting its strong external position, the result of years of current account surpluses. Bank Negara Malaysia's (BNM) international reserves amounted to RM379.4 billion as at July 15, 2015, which is sufficient to finance 7.9 months of retained imports and is 1.1 times the short-term external debt.
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S&P Asia-Pacific sovereign analyst, Kim Eng Tan, said the country's high degree of monetary flexibility reflected BNM's track record in controlling inflation. "This is strengthened by the deep domestic bond market, compared with most of its peers, which reduces its reliance on external financing. "Policymaking in Malaysia has generally also been effective, which is another supportive rating factor, in our view," he said.
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Furthermore, he said the government's measures to rationalise oil subsidies and introduce the Goods and Services Tax would accelerate the country's fiscal consolidation and allow for a reduction in government debt over time. This move also signals the government's willingness to implement policy measures that could help reverse the trend of rising government debt of the recent past.
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Meanwhile, the downward pressure on the ringgit is also currently being felt by other emerging market currencies such as Brazil, Chile, Colombia, Indonesia, Mexico, South Africa, Turkey and Russia.ForexTime Ltd Chief Market Analyst, Jameel Ahmad said this was due to a combination of the threat of slowing trade from China, the price of commodities having not yet found a floor and the expectations of a hike in the US interest rates.Stay up-to-date by following Daily Express’s Telegram channel.
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