Malaysia's economy not weak, lower ringgit due to strong US dollar: Bank Negara governor

KUALA LUMPUR: Malaysia is not experiencing an economic crisis just because the ringgit is trading at a low level against the United States (US) dollar, said Bank Negara Malaysia governor Tan Sri Nor Shamsiah Mohd Yunus.

Nor Shamsiah said the ringgit had depreciated by 4.9 per cent against the US dollar in the third quarter (Q3) 2022, in line with regional currencies which depreciated by an average of 5.5 per cent.

She said this was driven by a strong US dollar. As such, it did not mean that the Malaysian economy was weak and in a crisis.

"This should not be taken as a simple barometer of the health of the economy. An economic crisis is usually associated with a severe contraction in gross domestic product (GDP) growth, high rates of employment and a breakdown in financial intermediation.

"We do not see these indicators," she told reporters after a briefing on Malaysia's third quarter (Q3) 2022 GDP here today. 

According to Nor Shamsiah, the country's GDP had been growing for four consecutive quarters in the third quarter of 2021.

She also noted that the unemployment rate had continued to decline for 14 consecutive months to 3.6 per cent in September from 4.8 per cent in July 2021.

"We have seen corporations and businesses' financial performance remain healthy while the public continues to spend. Indicators such as retail and car sales have exceeded pre pandemic levels.

"Furthermore, the banking system remains resilient and financing growth remains supportive of economic activity. Clearly, Malaysia is not in an economic crisis. That said, we acknowledge there are still some parts of our economy that have yet to return to pre-pandemic conditions," she said.

According to Nor Shamsiah, the impact of a weaker ringgit on Malaysia's external position remained manageable.

She said the ringgit depreciation had led to higher value of foreign currency assets, lending support to Malaysia's external position.

"Our foreign currency external assets remain sizable and are sufficient to cover up to 2.1 times of foreign currency external liabilities. The risks from foreign currency external debt are largely contained, as about 68 per cent of debt are either subject to prudential safeguards or are on flexible terms.

"Banks have to comply with liquidity management prudential standards. Additionally, their sizable foreign currency liquid assets are sufficient to cover up to 2.6 times of foreign currency external debt-at-risk that are more susceptible to withdrawal and roll over risk," she added.

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