KUALA LUMPUR: Standard Chartered (Stanchart) forecasts the ringgit to reach 4.40 against the US dollar by the end of 2025, maintaining a positive outlook due to favourable positioning for domestic financial assets.
ASEAN and South Asia chief economist Edward Lee said the ringgit has underperformed since 2012 due to cautious sentiment.
However, he added, “I feel that sentiment today is more balanced, and from a positioning perspective, I believe the outlook for the ringgit is positive.”
He made these comments during the bank’s Global & Malaysia Outlook for the First Half (1H) 2025 media briefing here today.
Still, Lee said the ringgit had outperformed strongly year-to-date Dec 5, 2024, and the nominal effective exchange rate (NEER) has risen 10 per cent since February 2024, standing slightly above its 10-year average.
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Nevertheless, he said as Malaysia is trade-reliant and exposed to China’s growth, any negative US-led trade policies may pose a risk to the local currency in 2025.
Domestic confidence in the ringgit has improved in 2024, with the local currency being one of the rare few currencies which gained against the greenback in 2024.
“Domestic fundamentals remain positive. Positioning is favourable with high onshore foreign currency deposits while the domestic fund management industry’s allocation to foreign assets is already high.
“Ongoing foreign income repatriation by local institutions and strong inbound tourism activity could also benefit the ringgit,” he said.
Meanwhile, Stanchart expects Malaysia’s growth in 2025 to remain steady at 5.0 per cent, supported by domestic demand and improving business sentiment.
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It has revised its growth forecast for 2024 to 5.2 per cent from 4.8 per cent due to strong growth momentum in the first three quarters of the year, and a favourable base effect.
Lee said private consumption is likely to be buoyed by a healthy labour market, civil service pay hikes and the new flexible pension fund account, while private investment is expected to be supported by strong manufacturing interest in Malaysia and non-restrictive interest rates.
However, the cautious global outlook and the threat of negative US trade policies may weaken investment sentiment.
Despite continued subsidy rationalisation in 2025, he said the team expect inflation to remain manageable at 2.2 per cent this year versus 1.9 per cent in 2024 given lower-than-expected inflation year-to-date Dec 5, 2024.
“As such, the team maintains its view that Bank Negara Malaysia will keep the policy rate unchanged at 3.0 per cent and any hiking decision by the central bank will be reactive rather than pre-emptive,” he added.
