The anticipation is ‘killing’ many smaller economies for which currencies are not considered on an equal basis with the US Dollar. When there are uncertainties, all the ‘savvy’ investors would flock to hold US Dollar whether or not the US economy is actually doing better or worse compared to the smaller economies. Well, the current major uncertainty besides the oil price or even the political dramas is the question of when would the Federal Reserve of the US adjust their rates upwards. With the current uncertainty on the actual date, many are buying ahead in anticipation of it.
Well, this is my little wish. I wish the US economy would have everything good happening to it. I wish their unemployment rate continue to fall from current 5.5% in May 2015. (Malaysia’s unemployment rate is 3.1%). I wish their GDP growth would be faster than the latest 3.7% in Q2 2015. (Malaysia’s GDP for Q2 2015 was 4.9%). I wish that their trade deficit would be narrowed and soon become positive. As everyone knows, with trade deficits, it meant that the country is not able to build up its reserves and may have to continue to borrow. (Malaysia has been enjoying a trade surplus continuously since 1998. In June 2015, the trade surplus has even widened to RM6.9 billion).
Oh yeah, Bank Negara Malaysia (BNM) governor, Zeti commented, “A rate increase in the US reflects a positive development that the economy there is having a sustainable and stronger recovery. That is positive for us because they are the major market for our exports and therefore, it will be positive for the Malaysian economy.” I hope my wish and her positive assessment of US economy comes true. As for The World Bank Group senior financial economist, finance and markets global practice Dr Jose De Luna Martinez, he said, “Malaysia is a success story in terms of its financial system’s, its financial system development plan and carving itself to specialised in Islamic Finance.”
Fundamentally, with a lower reserves number Malaysia is definitely weakened. With uncertainty in the world, especially with China, it would be tough to maintain growth numbers of 2014 too. However, to fully attribute the ringgit’s fall to just the economic indicators is not accurate too. Recession is not going to start with Malaysia unless many other ‘stronger’ economies fall first. Happy reading about US economy and the “negative” Malaysian economy as reported by many today.
written on 30 Aug 2015
Next suggested article: 1998 vs 2015, just numbers, no rhetorics
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