Stronger Ringgit Seen By Year-End

Move by US to print money will increase supply and weaken the greenback

KUALA LUMPUR: The ringgit is expected to strengthen to 3.50 against the US dollar by year-end from between 3.60 and 3.65 currently.

According to Maybank Investment Bank Bhd chief economist Suhaimi Ilias, the US dollar is expected to weaken as the US government would have to find means to finance its huge fiscal deficit this year.

“It is highly likely they would have to print money, which is what they have started to do.

“The increase in supply would weaken the US dollar,” he said on the sidelines of the Financial Planning Seminar organised by Permodalan Nasional Bhd yesterday.

Meanwhile, the local banking sector is expected to weather the crisis without incidence, as stress tests conducted recently showed that it is fundamentally sound, according to Suhaimi.

“Our banks registered healthy profits and are well capitalised,” he added.

However, he expects non-performing loan (NPL) ratio to increase to 7% to 8% this year from 4% last year.

“This forecast figures are not bad, given the current situation, compared with over 20% NPL ratio registered during the 1997 economic crisis,” he said.

On a positive note, Suhaimi noted that electrical and electronic manufacturing companies in Penang had indicated that the plunge in orders since October last year appeared to have levelled off last month.

He also said Malaysia’s economy would likely recover from technical recession by the fourth quarter of this year, backed by the speedy implementation of the fiscal stimulus package introduced by the Government recently.

“I would expect the decline in the economy to be the worst in the first quarter of this year. In the second and third quarters, even if the economy were to contract, it would be at a smaller pace,” he said.

He also expected the overnight policy rate (OPR) to fall by another 50 basis points by April 30. The OPR is currently 2%.

Source: TheStar