KUALA LUMPUR (Dec 18): PublicInvest Research said in a note today the ringgit is expected to average between RM4 and RM4.05 per US dollar in 2021, underpinned by both external and internal factors.
These factors, according to the research house, include a turnaround in oil prices, policy normalisation in Malaysia and around the region, renewed investor sentiment towards emerging markets and a favourable second US-China trade deal.
“The prospect of a strong economic turnaround post Covid-19 and the possibility of a general election being called in 2021 will also boost the ringgit,” it said.
It opined that volatility in the ringgit will in turn be soothed by advanced economies' policy status quo, which may remain until 2022.
Malaysian economic growth seen at 6.2% in 2021
Meanwhile, the research house anticipates Malaysia’s economy to grow at 6.2% in 2021.
It said the private sector will remain as the main growth driver with private consumption set to grow above its historical average, driven by massive pro-consumption initiatives rolled out in 2020 and 2021.
It added that growth in 2021 will also be aided, among others, by a further rebound in the ringgit and ample capacity that will underpin growth.
“We are optimistic about 2021 amid the removal of the single largest drag on global growth — the Covid-19 pandemic,
“Coupled with massive economic stimulus packages worth RM305 billion, Malaysia’s growth trajectory is anticipated to rebound sharply, lifting output to pre-Covid-19 levels, putting the country on course to be one of the fastest economic turnarounds in the region,” it said.
On the policy outlook, it expects the overnight policy rate (OPR) to be accommodative in 2021 given the lag impact of policy interventions in 2020.
“Policy normalisation may only begin in 2H21 (the second half of 2021) and even then, the intervention may very well be in small doses of 25 basis points (bps) each despite a sharp rebound in growth momentum,” it said.