KUALA LUMPUR (Dec 7): Prominent economist Professor Dr Jomo Kwame Sundaram said the weakness in the ringgit cannot be blamed solely on the slump in oil prices, as the loss of confidence in the Malaysian government is also among key factors contributing to the steady decline in the local currency.

Jomo said the concerning trend — seen over the past one and a half years — cannot be attributed simply to the collapse in oil prices.

“There are many other factors going on, including the loss of confidence in the government, as more and more revelations came out about 1MDB (1Malaysia Development Bhd).

“This crisis of public confidence is very serious, and it has huge implications,” he told the press on the sidelines of the National Economic Outlook Conference 2017-2018 at Putra World Trade Centre (PWTC) here today.

Jomo said that one way of restoring confidence is to think outside the box, pointing to examples in South Korea and Italy.

“The South Korean president has offered to resign, the prime minister of Italy has just resigned. These are extraordinary times,” he added, referring to South Korean and Italian premiers Park Geun-hye and Matteo Renzi.

However, the economist highlighted that a well-managed and inclusive transition is important.

“What she [Park] has done was very responsible. She asked the ruling party and the opposition party to work together to manage a transition process, whereas when Renzi resigned, there is a lot of uncertainty.

“[The transition] should be in the interests of the Malaysian people. It should not be something just in the interests of the parties, whether it is the Barisan Nasional or the opposition parties,” he said.

The ringgit decline started in mid-2014, as global crude oil prices took a plunge, amid oversupply concerns. The currency further depreciated in mid-2015, following revelation of scandals surrounding troubled state investment fund 1MDB.

The currency was further impacted by Donald Trump’s unexpected win in the U.S. presidential elections, amid worries surrounding the expected hike in the U.S. interest rate in 2016.

At the time of writing, the ringgit strengthened 0.03% to 4.4340 against the U.S. dollar.