There is no necessity to recalibrate Budget 2017, as Malaysia is on the right track towards strong growth this year, according to Second Finance Minister Datuk Johari Abdul Ghani.
While acknowledging that more steps might be taken to address the declining ringgit, he stressed that there was no need to make adjustments to the Government’s fiscal spending and revenue projections.
“The ringgit may be low, but this is a factor that the economy will adjust to.
“Fundamentally, I believe that our economy is fine. We just need to give it time so everybody can adjust and the market will come back, the currency will strengthen again,” he told reporters on the sidelines of the Securities Commission’s (SC) International Fund Forum 2017 here yesterday.
Research houses have mixed views on Malaysia’s economic outlook, given the depreciating ringgit and the prospects of president-elect Donald Trump implementing policies that might negatively impact emerging markets. Standard Chartered has projected the country’s gross domestic product (GDP) to grow at a moderate 3.8% this year. In contrast, RAM Ratings has forecast GDP growth at 4.5%.
Malaysia’s GDP for 2016 is forecast at 4.2%.
Johari explained that the current historically low oil prices have a bearing on the ringgit, as the commodity and currency’s movements are closely correlated.
“The correlation still plays a major factor in our currency. When our currency was at RM3 several years ago, the average oil price was US$110, so obviously, when the average was down to US$44 as of last year, it would affect our currency,” he said.
The impact of the lower oil prices would be minimal, as crude oil income constituted just 14% of the total Government revenue compared with 41% in 2009, he added.
During a closed-door meeting with foreign fund managers, Johari said that the reception towards Malaysia was largely positive.
According to the SC, the foreign insitutional investors at the meeting collectively managed over US$19 trillion, representing 26% of the total assets under management (AUM) globally.
“I told the fund managers that we are positive for this year. Most of the negative elements that we are facing now have already been factored into our economy, which is already well-diversified.
“Structurally, we have successfully implemented the goods and services tax compared with other oil-producing countries which are struggling to implement this,” he said. In his keynote speech, Johari said that Malaysia’s capital markets remained robust, with a healthy RM978bil in funds raised over the past 10 years.
Source: The Star