KUALA LUMPUR: The ringgit is expected to keep its firm momentum vis-a-vis the US dollar, trading between 3.65 and 3.70 by the year-end from a low of 4.50 early last year, a senior economist said.
Malaysian Institute of Economic Research (Mier) executive director Prof Emeritus Dr Zakariah Abdul Rashid said the ringgit had performed commendably, hovering at 3.80 to the greenback in the last three months.
He said a stable ringgit would strengthen purchasing power as domestic prices tended to move downward.
“When the ringgit is stable, domestic prices of goods and services will also decrease and therefore push the rakyat’s spending power upwards. And as the ringgit further strengthens, inflation will also decrease,” Zakariah said at a media briefing today.
Mier expects inflation rate to stabilise at three per cent this year before rising marginally to 3.2 per cent in 2019.
The headline inflation was recorded at 2.7 per cent in January and fell further to 1.4 per cent in February, the slowest rate of growth since October 2016.
Zakariah said despite the price of crude oil exceeding US$60 a barrel, the exchange rate had strengthened more than the increase in crude oil price and hence, keeping inflation moderate.
Mier, meanwhile, revised upwards its real gross domestic product growth projection for Malaysia this year to 5.5 per cent from 5.4 per cent previously, driven by domestic demand.
“The economy will continue to be domestically-driven and the private consumption will remain as the engine of growth,” Zakariah said.
“We can still rely on consumer spending to drive the economy with import and export remain promising even though we experienced absolute trade reduction in February,” he added.
Malaysia's imports and exports declined in February, partly due to the base effect, he said.
However, the country was still able to post a hefty trade surplus of RM9 billion, a 3.3 per cent year-on-year growth from 2017's.