Ringgit boost
WHEN the third-quarter gross domestic product (GDP) was announced, many were somewhat pleasantly surprised at the growth rate of 6.2%.
It was the highest since the second quarter of 2014 and despite the arguments that the growth rate is not being translated to the ground level, the one thing is that conditions will certainly be worse off if growth was not as robust as it was.
The strong growth rate has certainly at least maintained the sentiment that things are improving in Malaysia. Consumption, investments and net exports that all contribute to the GDP rate are at a sufficiently high enough clip that have translated into the economy chugging along at a decent clip.
Growth would have been much stronger if the domestic housing industry was in better health than it has been in recent times. Housing and construction activity have the highest linkages to the domestic economy and when both perform well, they offer a more than substantial boost to the local economy.
Despite Bank Negara warning of the dire situation of the housing and commercial building industries, the one realisation is that the excesses of the past will need a lot of correction before they resume their upward path in the future.
One beneficiary of better growth has been the ringgit. Benefiting from stronger crude oil prices of late and also strong exports, the ringgit has found itself appreciating nicely against the US dollar of late.
With the ringgit hitting 4.16 against the greenback yesterday and as far as Bank Negara is concerned, it is vindication that efforts to deal with the non-deliverable market has paid off.
Where the ringgit goes from now is anyone’s guess, but with the strong balance of payments as a result of capital flows and export proceeds, the ringgit’s rise will be watched in the months ahead, and it will take some reversal of fortune to derail the path the ringgit has taken in its journey towards what many will consider its true value.