Ringgit Stronger Than The Appreciation Than The Value Of Gold Portends Strong Economy

By Dr. Phar Kim Beng, Expert Committee Member of CROSS

1. While a strong Ringgit Malaysia (RM) has registered the most powerful quarter-to-quarter growth in the last 50 years lately, an enviable record that goes back to 1971 accordingly to a research note by Bloomberg, there is every sign that the RM is not gaining too fast too soon.

2. While the Malaysian economy still has structural and teething problems, such as the lack of 60,000 data scientists and software engineers, that are required to pulsate the transition of the Malaysian economy into a digital one, indeed, one based on the systemic reliance of Green Energy too, up to 98 percent of Malaysia’s economy is composed of Micro Small and Medium Enterprises (MSMEs).

3. Granted that the latter is the backbone of the economy, it is not impossible for the Government Linked Investment Companies (GLICs) and the Government Linked Companies (GLCs) to work with them.

4. MSMEs do not necessarily mean peddlers of cheap produce and street food necessarily. Some of them form the staple of Malaysian exports. Yet only up to 28 percent of the Malàysian Gross Domestic Products (GDP) is affected by the strong RM.

5. To the degree that they are, these exporting companies can defray and reduce their costs by sourcing some of their materials from the likes of China, India and Indonesia.

6. But first and foremost, more often than not, Prime Minister Anwar should understand that as our RM becomes stronger, we need to strengthen our relationship with China, India and Indonesia to ensure our export sector remains strong.

7. Second, RM is not gaining at too quick a speed, as some of the money that returns to Malaysia is due to the repatriation of the Malaysian GLICS and GLCS’ foreign investment back to a booming economy in Malaysia. Anwar has explained to his Members of Parliament that he did not force the GLICs and GLCs to re-invest in Malaysia based on their foreign profits abroad other than what they themselves have deemed appropriate.

8. Growing at a clip of 6 percent by the end of 2024, which is only 2.2 percent lower than India, Malaysia is returning to the status of an emerging economy. If one must, an Asian Tiger.

9. Thirdly, RM is gaining because within the last 18 months, Malaysia has put in a place a Renewable Energy Plan. Although Malaysia is responsible for 0.8 percent of the Global Green House Emissions, as compared to 34 percent by China and 28 percent by the US, Prime Minister Anwar Ibrahim has decided to help Malaysia achieve a net zero emission by 2050.

10. At 0.8 percent of global green house emission, as long as Malaysia can ensure that the cost of the utilities to generate the Green Energy Renewal Plan, known officially as National Transition in Energy Renewal (NETR) is not affected by any bottlenecks such as the above, Malàysia is well poised to achieve its Renewable Energy plan.

11. Third, with a debt to GDP ratio of 44 percent, with the intention to pare down at leart RM 1.5 Trillion Debt further, there is nothing wrong to want a stronger RM. A stronger RM reduces the cost outlay to repay the national debt. Ideally to bring it down to less than 40 percent within the next two years. In contrast, Indonesia’s debt to GDP ratio is well above 66 percent.

12. Although Indonesian Rupiah is also doing well, not unlike the Thai Baht, a stronger RM helps Malaysia to pare down the national debt especially those denominated in a basket of US and EURO currencies.

13. Fourth, the Federal Reserve Bank in the US, not unlike the one in Canada, has reached an inflation rate of 2.5.percent and 2.1.percent respectively, the Feds especially is set to lower the interest rate, in turn the mortgage rate in the US.

14. As and when the two rates falls they have a positive spill over effect on Malaysia too. Currency traders all across the world will be less interested in the yields from being in the FOREX of the US or the US dollar per se. The US dollar should stabilize at USD 1 to RM 3.8 in particular by early 2025.

15. One must take note of the fact that the Malaysian Budget has not been announced yet. As it is announced in October 2024, the RM will strengthen again; notwithstanding the occasional retreat, as occurred on October 2 2024, when the war in Lebanon, increased the geopolitical uncertainty in the world.

16. Meanwhile, data from Bloomberg shows the RM has appreciated 14.35% against the US dollar over the last three months, beating gold, which rose by 14.2%, into second place.

17. The data covered the period between June 27 and Sept 27. The fact is when RM is strong that’s when PM Anwar’s popularity standing will increase regionally and globally.

18. Meanwhile, the inauguration of President Prabowo Subianto, on October 15 2024, one of the closest allies of PM Anwar will further consolidate the performance and status of both leaders to create a win win effect across both sides of the Malacca Straits.

19. All of the factors above have been taken in by the necessary markets or financial centers around the world. The fact that Malaysia knows how to avoid a shouting match with China, while also positioning itself to join BRICS together with Thailand has also put us in good light, as one of the leading countries—–no longer a Banana Republic of the Global South during the heydays of 1MDB—-in the developing world 640 times the size of Singapore that is worthy to its stature.

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