UOB Malaysia expects ringgit to move up to RM4.10
United Overseas Bank (Malaysia) Bhd (UOB Malaysia) is optimistic the ringgit will appreciate against the US dollar this year to the 4.10 level, providing a much-needed relief to Malaysian companies and consumers relying heavily on imported goods.
Economist Julia Goh said the market had responded relatively well to Malaysia's new fiscal measures introduced as part of the country's recalibrated 2016 Budget announced in January.
Goh said the government's move to improve the country's fiscal position from declining prices and weaker US dollar contributed to the ringgit's strength.
The current rate is RM4.24 to US$1, as against RM3.80 in July last year.
"We think the receding of domestic (political and economic) headwinds for Malaysia last year will also pave the way for the ringgit's improved outlook this year.
"We have seen the ringgit performing at its worse last year against the US dollar, but it has quickly turned around to be among the strongest at the end of the last quarter," she told a press conference in Kuala Lumpur today.
In the coming months, Goh said, the ringgit would be supported by the country's diversified export base and sustained current account surplus.
Moderate slowdown expected in China's growth
However, in the short term, she expects the ringgit to be volatile due to external factors.
"Generally, on the external front, we expect a moderate slowdown in China's growth, a gradual movement of US interest rates and oil prices (Brent crude) to hover between US$30 and US$35 per barrel," Goh said.
On Malaysia's Gross Domestic Product (GDP), she said the fourth quarter 2015 GDP growth of 4.5 percent showed a degree of underlying resilience for the Malaysian economy.
"But given that there are a lot of external risks in the picture, we are holding on to our growth outlook at 4.2 percent this year.
"We are generally expecting growth to ease further in the first half of this year, but with government support measures expected to take off in the second quarter, we expect things to improve in the second half of the year to an average of about 4.5 percent and, subject to external developments," she added.
Meanwhile on interest rates, Goh said UOB Malaysia was keeping its year-end forecast of 3.25 percent for the Overnight Policy Rate (OPR).
"We don't expect any adjustments this year but in any case, there could be a 50-50 chance in the middle of the year, depending on growth conditions which are very much dependent on external factors.
"If external conditions remain stable and there is no slowdown in economic growth, it is likely that Bank Negara Malaysia may decide to keep interest rates on hold," she added.
- Bernama
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