Standard Chartered Bank expects continuing support for the ringgit from high commodity prices and the local unit is likely to trade around RM4.40 against the US dollar this year.
Its Asia foreign exchange (FX) research head, Divya Devesh said the bank is maintaining its neutral stance on the ringgit, adding that returning tourist receipts should also support the services balance under the current account (CA).
Goods exports may ease amid weaker external demand, lowering the net goods surplus. “On balance, we forecast a CA surplus of 3.0 per cent of gross domestic product (GDP) in 2023, improving from 2.0 per cent in 2022.
“But low reserve import cover and corporates preference to hold the greenback in a strong US dollar environment may negate positive effects of a CA surplus. The central bank may also opportunistically rebuild FX reserves, he told a media briefing on the global and Malaysia outlook for 2023 in Kuala Lumpur on Thursday.
However, should the US dollar outlook turn sustainably weaker, Divya said the ringgit might outperform as corporates sell their US dollar deposits, which rose to 10.1 per cent of banking system deposits as of end-September 2022 from 8.1 per cent at end-2020.
Meanwhile, Divya said the new government still has to address the need for fiscal consolidation and Malaysia’s relatively low revenue-to-GDP and high debt levels while balancing growth aspirations and low-income household support requirements.
The 2023 Budget will need to be re-tabled as elections were called before the budget could be passed. In the earlier proposed budget, the previous government presented a modestly narrower fiscal deficit of 5.5 per cent versus 5.8 per cent in 2022.
It remains to be seen which new measures may be proposed and whether budget assumptions may change, he said.