KUALA LUMPUR (NewsRise) – Considerable foreign exchange reserves should be built by Malaysia and keep economic principles powerful to help stabilize the ringgit in the long-term as the money stays exposed to sensed misconception about the excessive reliance on commodities of the country’s, its central bank governor said.
“What’s significant, therefore, will be to make sure the accessibility to plentiful reservations, keeping strong economic principles and handling our vulnerability to external debt,” Muhammad said.
“As we address exposures and enhance national principles, the ringgit will eventually reveal the robustness of our market,” Muhammad said.
The increases, nevertheless, come after the money dropped over 20% in 2015 following a steady drop in petroleum costs, making it the worst-performing Asian money against the U.S. dollar.
“Handling excessive volatility is especially relevant for small and open economies as explosive currency changes not only influence commerce, external debt servicing and price of investment, but also change national business and consumer opinions,” Muhammad said. “More recently, the ringgit had corrected to reflect changes in the international market such as the developments in the US market and international crude oil costs.”
Muhammad also warned against relying exclusively on monetary policy as an instrument to prop up increase as Forex Malaysia braces for what appears to be its second straight year of economic expansion that was slower.
“Specifically, reliance on monetary policy as the only device would be too narrow an approach,” he said.
While petroleum and gas accounted for 11% of Malaysia’s total exports Malaysia can also be an important producer of other commodities including rubber and palm oil. A year ago, all such commodities accounted for just 19% of goods exports in the state while electronic and electrical products made up over one third of overall exports.
Malaysia’s central bank kept the overnight policy rate constant at 3.00% at its last meeting before this month. The policy rate had surprisingly cut to help spur an economy that grew at its slowest pace in almost seven years.
Another monetary policy review is scheduled for November.
In 2013, the market will probably enlarge between 4.0% and 4.5%, according to authorities outlook, after enlarging 5.0% in 2016.