Kuala Lumpur: Standard Chartered (Stanchart) forecasts the ringgit to reach 4.40 against the US dollar by the end of 2025, maintaining a positive outlook due to favourable positioning for domestic financial assets.
According to BERNAMA News Agency, ASEAN and South Asia chief economist Edward Lee stated that the ringgit has underperformed since 2012 due to cautious sentiment. He mentioned that current sentiment is more balanced and indicated a positive outlook for the ringgit from a positioning perspective. These comments were made during the bank’s Global and Malaysia Outlook for the First Half (1H) 2025 media briefing.
Lee noted that the ringgit had outperformed strongly year-to-date December 5, 2024, with the nominal effective exchange rate (NEER) increasing by 10 percent since February 2024, now slightly above its 10-year average. However, he cautioned that Malaysia’s trade reliance and exposure to China’s growth could pose risks if negative US-led trade policies emerge in 2025.
Domestic confidence in the ringgit improved in 2024, with the local currency among the few that gained against the US dollar. Lee highlighted positive domestic fundamentals and favourable positioning with high onshore foreign currency deposits and substantial allocation to foreign assets by the domestic fund management industry. He also mentioned that ongoing foreign income repatriation by local institutions and strong inbound tourism could benefit the ringgit.
Stanchart expects Malaysia’s growth in 2025 to remain steady at 5.0 percent, supported by domestic demand and improving business sentiment. The bank revised its 2024 growth forecast to 5.2 percent from 4.8 percent, citing strong growth momentum and a favourable base effect.
Lee indicated that private consumption is likely to be supported by a healthy labour market, civil service pay hikes, and the new flexible pension fund account. Private investment is expected to benefit from manufacturing interest in Malaysia and non-restrictive interest rates, though a cautious global outlook and potential negative US trade policies could affect investment sentiment.
Despite continued subsidy rationalisation in 2025, Lee expects inflation to remain manageable at 2.2 percent, compared to 1.9 percent in 2024, due to lower-than-expected inflation year-to-date December 5, 2024. He added that Bank Negara Malaysia is likely to keep the policy rate unchanged at 3.0 percent, with any rate hikes being reactive rather than pre-emptive.