USD/MYR: Large current account surplus to underpin the ringgit – MUFG
|The Malaysian ringgit recorded marginal gains against the dollar in 2020 as the USD/MYR dropped from 4.0900 to 4.0200.
Stronger economic growth is expected in 2021 while a large current account surplus is set to continue to support the ringgit in the year ahead, according to economists at MUFG Bank.
Key quotes
“The government has secured vaccines to inoculate 20% of the population so far, with vaccination to begin in February. Funding has been set aside to procure vaccines for another 40% of the population.”
“Stronger economic recovery is expected in 2021 in part due to low base effects and spill-over effects of this year’s massive fiscal stimulus measures amounting 20% of GDP, with government projections at 6.5-7.5% from -4.5% in 2020. This lowers the need for BNM to ease in 2021, but risks of another rate cut cannot be dismissed should growth underwhelm. This is particularly in view of the difficulty in containing the third wave of infections.”
“The government expects the current account surplus to decline to MYR20.3 B in 2021 from MYR48.5 B in 2020. However, there are upside risks to this forecast as import demand may remain soft in the coming months amid restrictions enforced in Kuala Lumpur and Selangor. This is in addition to a stronger recovery in external demand amid higher oil prices, which should lift the ringgit amid dollar weakness.”
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