KUALA LUMPUR: The ringgit, which fell to a six-year low yesterday, is expected to remain bearish against the US dollar, given the slower macro backdrop of the Malaysian economy, said analysts. Adding to the gloom, the International Monetary Fund lowered its projection for global economic growth this year.

According to Reuters, the ringgit weakened 0.9% to a low of 3.6030 per US dollar yesterday — its weakest level since April 2009.

Prime Minister Datuk Seri Najib Razak yesterday announced a revision of Budget 2015, which sees the fiscal deficit target for 2015 revised from 3% of gross domestic product (GDP) to 3.2%, and the economic growth forecast lowered to 4.5% to 5.5% for 2015 from 5% to 6% as forecast earlier.

The current account surplus this year is expected to narrow to 2% to 3% of gross national income from an estimated 5.1% in 2014.

BNP Paribas Investment Partners Malaysian Sdn Bhd head of Asean equities, Patrick Chang, said the weakness in the ringgit is likely to remain given the slower macro backdrop of the Malaysian economy. “Currency investors may need to see actual evidence of fiscal discipline before committing to a more bullish view on the ringgit,” Chang told The Edge Financial Daily yesterday.

UOB Global Economics and Markets Research economist Ho Woei Chen said yesterday the market appears to be sceptical about the new fiscal deficit target of 3.2% of GDP, which is much better than earlier expected. “The ringgit has surged above 3.61 against the US dollar after the announcement of the revised budget, pushing the pair to a fresh high since the 2008/09 global financial crisis (high was RM3.7390 in 2009).

“Lower forecasts for growth and current account surplus this year will also be negative for the ringgit,” said Ho, adding that near-term uncertainties domestically and in the global market could continue to drive the pair higher.

UOB is retaining its forecast for the ringgit at 3.65 against the greenback at end-March 2015 and 3.68 at end-June 2015.

Kenanga Research economist Wan Suhaimie Saidie said while the ringgit had weakened against the greenback, it had performed relatively better among currencies of emerging markets and the euro. “This is due to a stronger US dollar as market sentiment is positive towards a recovery of the US economy,” he said.

Analysts believe that the weakening ringgit will benefit exporters such as IT, rubber glove makers and palm oil producers.

Yesterday, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said despite the ringgit’s fall, Malaysia’s current account surplus remains healthy while foreign direct investments continue to flow into the economy.  She added that the central bank’s policy interest rate of 3.25% is still “highly accommodative” for growth and that there is no need to further lower interest rates.

This article first appeared in The Edge Financial Daily, on January 21, 2015.