(AFP) The ringgit peg at RM3.80 to the dollar is here to stay despite pressure from regional currency depreciation due to the weakening yen, economists said today.

The government is likely to view the falling yen as temporary and will remain firm in its commitment not to revise the peg, they said.

Central Bank Negara governor Zeti Akhtar Aziz has previously said there was no need to repeg the ringgit as the economy was in a good position and the financial system was not under stress.

The ringgit was pegged to the greenback as part of capital controls imposed in September 1998 when the economy plunged into a recession. All the curbs have since been lifted except for the peg.

OSK Research economist Lee Soo Kai said he did not expect the government to repeg the ringgit over the next 12 months, even as the risk of regional competitive devaluation increased.

"The pressure will build up but I don't think that will be the basis for a re-peg for the next year or so," Lee told AFX-Asia , an AFP -owned financial news service.

He said the government was "credibly committed to maintaining the ringgit peg despite repeated pressure to abandon it".

Falling Yen

Lee also pointed out that Prime Minister Dr Mohamad Mahathir has said the government would only consider a re-pegging if the local unit appreciates or depreciates by 20 percent against a basket of regional currencies over a period of time.

An economist from Worldsec Securities said the government was not likely to review the ringgit peg unless the yen, currently at around 130 against the dollar, falls to the 140-150 levels.

"The government thinks the weak yen is only temporary ... unless the yen weakens to 140-150 to the dollar, the ringgit peg will probably not come under significant pressure," he said.

"Devaluing the ringgit won't give us a competitive advantage if demand for our exports is not there ... since the ringgit is pegged, other production costs have to be lower."

Mayban Securities said it did not foresee Malaysia re-pegging the ringgit as the country's external reserves were likely to maintain at the current level of about 30 billion dollars to provide a "comfortable cushion moving forward".

"We expect the 30 billion dollar reserves to be defendable throughout 2002," Mayban said in a report.

Affin-UOB's Suhaimi Ilias said a weak yen should reduce import costs from Japan - which would benefit the electronics and auto sectors - and lower the cost of servicing yen-denominated loans for the government and private sector.

Growth predicted

Between 25 and 60 percent of auto companies' total production costs are in yen, while national power firm Tenaga Nasional has some 24 percent of its RM28 billion loans in yen, he added.

Mahathir, who is also finance minister, has predicted the economy to grow 0.5-1.0 percent in 2001, down from an earlier government projection of 1.0-2.0 percent.

The premier said the economy was expected to grow 3.0 percent this year - down from an earlier official forecast of 4.0-5.0 percent.