KUALA LUMPUR, March 6 — The low ringgit rate is not a reflection of the economy, said Investment, Trade and Industry Minister Datuk Seri Tengku Zafrul Abdul Aziz.
In an interview with CNBC, Zafrul said that the all-time low of the ringgit in 26 years was a result of several factors, but the primary one being the interest rate differential between Malaysia and the United States and other countries.
“Malaysian interest rates are around 3 per cent, but when you look at the fundamental economy, the numbers, the economy, when you look at our unemployment rate... We look at our inflation rate at 2.5 per cent, growth last year around 3.7 per cent, unemployment is around 3.3 per cent. And this year growth is projected to be four to 5 per cent.
“I think it's justified where our rates are and that's obviously decided by the central bank, but that interest rate differential has resulted in prejudice or honouring it,” he said.
Zafrul said that although that is what the Bank Negara Malaysia has decided, he admitted that the ringgit was undervalued based on the country’s economic performance.
“I believe that what was said by the central bank and our by minister of finance, second finance minister, our ringgit, it is currently undervalued, look at even our stock market as it performs relatively well around 5 per cent year to date,” he said.
He had been asked how concerned he was with the depreciation of the ringgit, what he thought were the driving factors behind it and whether the worst was over.
The ringgit hit a 26-year low on February 20, falling to RM4.7965 against the US dollar, its weakest level since the 1998 Asian financial crisis when it hit RM4.8850. Some analysts have reportedly said they believe that the worst was over.
