Worries from the international investor community are among the temporary factors contributing to the depreciation of the ringgit at the moment, said Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz.
He said this caused investors to reallocate investments in higher yielding assets in the United States and caused the depreciation of various world currencies, including the ringgit.
He said China’s growth prospects, which were expected to be weaker this year due to movement restrictions in major cities, had weakened the yuan and had an impact on the ringgit.
“This is because the Malaysia-China trade volume is large, with Malaysia’s exports to China representing 10.7% of gross domestic product (GDP) (compared with Indonesia: 2.1% and Thailand: 1.3%),” he said in the 97th Laporan Kewangan Rakyat (LKR) published on Thursday.
In addition, he said the volatile situation of global geopolitical tensions also put pressure on economies around the world.
Tengku Zafrul stressed that the factor was seen as temporary and the value of the ringgit was expected to remain stable and continue to strengthen.
The ringgit is actively managed by Bank Negara Malaysia (BNM) to ensure that ringgit fluctuations are controlled and not excessive so that the economic sector can make investment and expenditure plans based on a more stable ringgit value.
“Actually, what is more important is the strong fundamentals in our economy, such as the country's economic growth prospects that remain strong,” he said.
He added that the expansion of the Malaysian economy by 3.6% in the fourth quarter of 2021 and 5% in the first quarter of 2022 will continue to help strengthen the ringgit.
“This is also reflected in the latest analysis by the International Monetary Fund (IMF) which projects Malaysia’s GDP growth at 5.75% for 2022, driven by pent-up domestic demand and continued strong external demand,” he said.
Tengku Zafrul said the Finance Ministry was confident of the country’s strong economic growth prospects which was expected to grow between 5.3% and 6.3% in 2022, thus contributing to the stability of the ringgit.
Meanwhile, Tengku Zafrul said the Finance Ministry was conducting a Budget 2022 survey to obtain feedback on initiatives that had been launched throughout the year.
“The survey for Budget 2022 is open to the public from May 31 to June 17, 2022 and any feedback can be given at https://budget.mof.gov.my/manfaat/,” he said.
In the meantime, he said Budget 2023 would focus on promoting policies that focus on environmental, social and governance (ESG) principles, based on more sustainable and inclusive economic development.
He said the emphasis on the net zero carbon target would have a strong positive impact on investment, and was expected to generate up to RM60 billion in GDP a year and 300,000 jobs.
“Tax incentives will continue to be reviewed to reward the use of ESG-focused technology and business operations in the next Budget. For this year, the government has provided tax incentives for electric vehicles.
“Through Budget 2023, the scope of this incentive is likely to be expanded to other products and technologies that produce less GHG (greenhouse gas) emissions,” he added.