Kuala Lumpur (VNA) - Malaysia's resilient domestic demand and investment activity are expected to anchor the economic outlook, although escalating conflict in the Middle East could test the ringgit's momentum through higher global energy prices.
Kenanga Research said a prolonged disruption in the Strait of Hormuz could revive global inflation pressures and tighten external financial conditions. The firm also said inflation in Malaysia remains contained, but the intensifying conflict introduces renewed "cost-push" risks through the energy channel.
The firm said the central bank of Malaysia (Bank Negara) expects to keep inflation at a moderate level and maintain the overnight policy rate (OPR) at 2.75% through 2026.
It noted that the ringgit has undergone a structural "de-commoditisation", meaning it no longer benefits as strongly from higher oil prices.
According to Kenanga Research, If Brent crude oil sustains above 100 USD per barrel, the ringgit could face a depreciation pressure of 6 to 9% from the oil channel alone, compounded by safe-haven demand for the US dollar.
Although remaining optimistic about the ringgit’s medium-to-long-term outlook, the firm said the duration of the Middle East conflict becomes a key determinant of ringgit performance
As of February 27, Bank Negara's international reserves rose 1.4 billion USD or 1.1% month-on-month, to 128.3 billion USD - the highest level since August 2014. Despite the increase, import cover eased to 4.7 months from 4.8 months in January, while the reserves-to-short-term external debt ratio remained unchanged at 0.9 time./.
Malaysia boosts exports to CPTPP member countries
Through the CPTPP, exporters can access non-traditional markets such as Canada, Mexico and Peru and, for the first time, gain preferential access to the UK market, which had previously been subject to regular tariffs, said a Malaysian official.
