The government will maintain the ringgit peg at RM3.80 to the US dollar and continue to implement unconventional measures to handle the economy, said Prime Minister Dr Mahathir Mohamad in Parliament today.
Unveiling the 2002 Budget, Mahathir said the government will continue this approach because it has proven to be successful and effective in managing the economy.
"However, the government will continue to monitor domestic and external developments to ensure that the value of the ringgit is consistent with the nation's macroeconomic fundamentals," said Mahathir, who is also the finance minister.
"Given the volatility in foreign exchange markets, the Government will ensure that the ringgit exchange rate remains stable," he added.
Mahathir said the global economic growth and world trade in 2002 are expected to remain uncertain.
"We are unsure whether the United States will be able to avoid an economic recession. However, we also expect that the recovery of the US economy will be delayed. The prospect for recovery of the Japanese economy is also not encouraging," he said.
Economic growth
"Given the less favourable external environment, the nation's economic growth will be driven by domestic economic activities," he added.
Mahathir said the economic growth is expected to increase between four to five percent next year with Gross National Product (GDP) remaining high at RM370 billion ringgit.
He said domestic demand at current prices is expected to increase by 5.5 percent, mainly on account of the growth in private sector expenditure of 6.6 percent.
The public sector, however, he added will continue to grow at a slower rate of 3.1 percent.
Mahathir said with higher GDP growth, per capita income is expected to increase by 4.7 percent to RM13,963 next year compared to last year's RM13,333.
"With inflation at a low level, per capita income in terms of purchasing power parity will increase by 5.1 percent to US9,402 next year from last years USD 8,944, reflecting the higher purchasing power of the rakyat," he said.
