RINGGIT POISED TO RISE FURTHER? KUALA LUMPUR

Easing of MCO expected to boost demand for assets, says market analyst

bt@mediaprima.com.my

THE ringgit may rise further following the resumption of most domestic economic activities starting today.

FXTM market analyst Han Tan said Bank Negara Malaysia was also expected to lower its benchmark policy rate by another 50 basis points tomorrow, which should help shore up economic recovery.

He said the release of Malaysia’s March export and import data, along with the expected 2.5 per cent year-on-year contraction in the March industrial production, would unlikely have a major bearing on the ringgit’s performance.

“Markets will likely remain focused on the economy’s trajectory, with the easing of the Movement Control Order (MCO) expected to buoy demand for assets,” he said.

The World Bank said the country must ensure that firms returned to their pre-crisis production and employment levels as safely as possible as this would set foundations for longer-term productivity-driven growth, resilience and competitiveness.

Its senior economist Smita Kuriakose said a detailed plan for the post-MCO phase would require close coordination between the private sector and the government.

“The unprecedented scale of the pandemic means that the return to work will need to be gradual and phased, and heightened caution is necessary to prevent further waves of infection,” she said in a statement yesterday.

Kuriakose said it was important to ensure that the burden of the Covid-19 prevention was not placed solely on small and medium enterprises (SMEs) that were already struggling to stay in business.

“Going forward, measures should be identified to further increase the rate of digitisation among SMEs in Malaysia.

“Subsidised or free broadband access and direct technical support could be provided to the SMEs to accelerate the transition to digital platforms, including business-to-consumer and business-to-business transactions,” she said, adding that renewed efforts to support workers’ reskilling and upskilling would be particularly important.

Kuriakose said once businesses could safely operate, efforts should focus on boosting demand and reactivating supply chains.

“Adopting broadbased fiscal stimulus consistent with available fiscal space can help lift aggregate demand. In this regard, measures announced to accelerate and increase allocations for large public investment projects.

“Programmes such as the East Coast Rail Link, Mass Rapid Transit 2 and the National Fiberisation and Connectivity Plan should have a positive impact on demand during construction and could benefit growth in the longer run.”

Adopting broad-based fiscal stimulus consistent with available fiscal space can help lift aggregate demand.

SMITA KURIAKOSE

World Bank senior economist

On foreign direct investment, Kuriakose said immediate efforts should focus on the retention of foreign investors and the preservation of supply chains connecting foreign and domestic (often SME) suppliers.

“With supply chains and client relations disrupted by the crisis, government agencies can help SMEs reintegrate into supply chains and find new domestic and export markets to help reduce the time to recovery.”

She said special attention should be placed to ensure firms in the electrical and electronics industry, retail and tourism sectors that were exposed to demand and supply shocks were supported.

“This is key to preventing an exodus of investments and subsequent job losses. It is important for the government to communicate how the current financial support measures for firms will evolve as the post-MCO reopening phase continues,” she said.