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Kuala Lumpur: The weakened ringgit and over-expenditure by the government are among the factors that contributed to Malaysia’s drop to 34th position in the World Competitiveness Ranking, says investment, trade, and industry minister Tengku Zafrul Aziz.

He said the weak ringgit had affected many other aspects taken into account by the International Institute for Management Development’s (IMD) index, including productivity and efficiency.

“In 2023, the ringgit was affected, so our competitiveness was affected by that. However, the ringgit has strengthened and, hopefully, the momentum will continue.

“We should be in a better position in next year’s ranking,” he told reporters at Bursa Malaysia’s headquarters here today.

Tengku Zafrul said the government had exceeded its budget last year, pinning the blame on the economic effects of the Ukraine-Russia war.

“What was allocated in the budget was lower than what was spent, so this shows inefficiency. Last year, the Ukraine-Russia war caused the price of raw materials to go up.

“That’s why our (allocation for) fuel subsidies and others did not meet the target. In fact, we had overspent, causing our points (in the competitiveness ranking) to decline,” he said.

He expected the government’s move to rationalise subsidies to improve Malaysia’s ranking next year.

Putrajaya had allocated RM64 billion for subsidies in 2023 but spent RM81 billion, 26% higher than projected, due to the rise of fuel prices amid the Ukraine-Russia war.

Tengku Zafrul also said a decline in exports in the electrical and electronics (E&E) sector had affected Malaysia’s competitiveness, adding that this slowdown was linked to a drop in global trade.

“But this sector has gone up (now). So, if we sustain our growth in trade, especially in the E&E sector, we will gain more points,” he said.

Last year, Malaysia ranked 27th out of 67 countries in the competitiveness index. This year’s rankings saw Malaysia slip seven places.

Malaysia also fell to 10th out of 14 countries in the Asia-Pacific region, ranking lower than Indonesia and Thailand for the first time.