By Malaysiakini
Selena Ling
The ringgit could continue plunging against the US dollar beyond 4.50 this year, said OCBC chief economist Selena Ling.
The ringgit, which has been on a nosedive since 2014 and sinking to an 18-year low, will continue to be a “direct victim” of the slump in world oil prices, she said, according to materials shared with the media and guests at the bank’s 2016 outlook event today.
“While positive news flow suggesting successful divestment of 1Malaysia Development Bhd power and real estate to China has helped to support the currency at the turn of the year, that effect has since been eclipsed by oil prices,” she said.
The Singapore-based economist said Malaysia will continue to be seen as the most sensitive market to negative oil price developments at the present time, because of its nett oil exporter status.
According to OCBC’s chart, the ringgit is expected to remain at 4.37 against the US dollar in March, but will plunge to 4.44 in May.
It could drop further to 4.516 by September and 4.59 by December, estimates the bank.
The US Federal Reserve, which is normalising and strengthening its currency, has caused the slump of others currencies, Ling said.
“It is not to single out the ringgit per se, other currencies are also affected,” she said at a press conference later.
She estimates that the country’s gross domestic product (GDP) growth for 2016 will remain “okay” at 4.7%.
“Malaysia’s dependence on oil-related revenues to fund its fiscal expenses will continue to come under pressure, with the government already announcing a plan to further cut its expenditure as the slump in oil prices looks more protracted than expected earlier,” Ling said.
She said the country’s deficit will deteriorate between 3.3% and 3.5% as compared with 3.1% when the Budget was first announced.
On the possible items that Prime Minister and Finance Minister Najib Abdul Razak expected to slash in revised Budget 2016, Ling said it would be a tough decision.
“This time last year, Malaysia had to reckon with unrealistic assumption about oil prices and was forced to cut expenditure and admit to higher deficit target, to avoid a rating cut,” she said.
The nation’s electronics sector, which performed well last year, has served as the buffer to the oil and gas sectors and the economic downturn, Ling added.
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