KUALA LUMPUR: Despite the ringgit’s decline to its lowest level against the strong US dollar since the Asian Financial Crisis (AFC) in 1997, Malaysia is far from being in crisis – as the country has a resilient economy, robust banking system and strong external sector, Bank Negara Malaysia (BNM) governor Datuk Abdul Rasheed Ghaffour said.
“Although we have touched the AFC level, we are not in a crisis. It’s different from our past experience during the AFC. We look at the economy’s growth formulation. Recently, DoSM released the advanced estimate for the third quarter. We’re growing by 3.3% for the third quarter this year, which is better than the 2.9% growth in the second quarter,“ he told reporters after delivering his welcome remarks at the JC3 Journey to Zero Conference 2023 today.
Abdul Rasheed said Malaysia has a robust banking system supported by a high level of capitalisation and healthy assets, and they are ready to fund the economy to support economic growth in Malaysia.
“Our capital, our external sector is also very strong with a surplus … capital account surplus,” he added.
He noted several factors that have contributed to the ringgit’s decline in value, citing the tight monetary conditions in the US and the strong economic numbers coming from the country.
“Global developments, including the geopolitical developments that we’re seeing, are also affecting the financial markets’ development. When you talk about the ringgit, the depreciation in the ringgit is not unique to Malaysia alone. In fact, almost all currencies in the world have depreciated against the US dollar, especially emerging markets, including Malaysia,” said Abdul Rasheed.
A weaker currency is not unique to Malaysia, he said, and the central bank stands ready to maintain stability and support businesses through orderly adjustments, utilising various market measures.
“We are in the market to ensure that the ringgit continues to adjust in an orderly manner, allowing businesses to facilitate business as well. We will do what is necessary, and we have a number of market measures that we can deploy,” he added.
Going forward, the central bank aims to have at least 50% of new bank financing aligned with climate-supporting or transitioning activities by 2026, as outlined in the Financial Sector Blueprint.
“By 2026, we expect to see at least half of new financing by banks to be aligned with climate supporting or transitioning activities … BNM will continue to provide a facilitative policy environment,” said Abdul Rasheed.
He said BNM has begun undertaking a comprehensive review of regulations to integrate climate risk and ensure climate resilience.
“This is to ensure that industry remains climate resilient, while being able to effectively support the economy’s transition,” he said.
To manage the challenges associated with transitioning to climate-focused initiatives, BNM is developing guidance on transition plans.
“BNM recognises the challenges that financial institutions may face in balancing these outcomes. Concentration risks could for example, increase from green and transition funding, and financial institutions need to properly understand and manage such risks,” he said.
He added that BNM is also committed to improving climate data reporting by working with relevant ministries, agencies, and committees to enhance the availability and accessibility of climate-related data at the national level.