The ringgit can rebound in the near term

What we have articulated in the main article are the long-term decline in the value of the ringgit, the reasons behind it and what needs to be done to reverse this secular trend. Within this broad downtrend, however, there will be short periods in which the ringgit will strengthen. The following are some positives that could drive a near-term ringgit rebound.

Better domestic economic growth outlook

Bank Negara Malaysia forecasts gross domestic product growth of 4% to 5% in 2024 (3.7% in 2023) on the back of:

Recovery in exports

Expectations for a stronger global economy and trade are positive for Malaysia’s manufacturing and exports. In January, the International Monetary Fund raised its global economic growth forecast to 3.1%, from 2.9% in October 2023. Global trade is also projected to rebound to 3.3%, from 0.4% last year. Importantly, global semiconductor sales — an important sector for Malaysia — are turning around.

Higher tourist arrivals

Arrival numbers are expected to increase to 27.3 million this year, from 20.1 million in 2023. The tourism sector is planning measures to attract more tourists, and promote longer stays and higher spending.

Higher current account surplus

The recovery in exports and growth in tourism should boost the current account surplus, estimated at 3.2% of gross national income in 2024, up from 1.3% last year.

More investments to drive growth

These include key infrastructure projects such as the East Coast Rail Link, Johor Bahru–Singapore Rapid Transit System Link and MyDIGITAL as well as healthy pipeline projects. The Malaysian Investment Development Authority has approved a record level of planned investments of more than RM300 billion.

Federal Reserve interest rate cuts

US interest rates are expected to fall in the coming months. The resulting narrowing in interest rate differentials should attract capital flows to Asia, including Malaysia.

Greater fiscal discipline

Plans to reduce the fiscal deficit, including through subsidy rationalisation and the enactment of the Public Finance and Fiscal Responsibility Act. The government intends for subsidy rationalisation to release more funds for education and infrastructure, which would bode well for Malaysia’s longterm economic potential and productivity.