Oil, growth, inflation and the Ringgit: Things looking up for Malaysia

KUALA LUMPUR – Natixis believes there is still room for the ringgit to strengthen over the balance of 2017, with oil prices having likely bottomed with a rise tipped towards year-end. “Coupled with this, global trade volume is picking up, bolstering the external environment. These factors should support the current account, and thus the MYR.”

Natixis says the economy also bottomed in 2016 and is expected to rebound this year as investment picks up on better industrial production. Additionally, credit growth is on the mend.

“The restriction on NDF and forcing of exporters to sell 75% of foreign exchange to the central bank puts the floor to the ringgit, limiting further depreciation,” Natixis says.

“The currency is still cheap, which will support export volume rebound. And this will pass through imported inflation, causing the BNM to raise rates. This will also support the ringgit.

“We expect the USD/MYR to strengthen to 4.15 by end 2017. Admittedly, the expected recovery of the currency is still shy of the depreciation that has taken place. Still, the trajectory is clearly positive as its relationship with oil and global trade takes an upturn.”  www.natixis.com (ATI).