KUALA LUMPUR: The ringgit may trend lower to RM4.60 against the US dollar over the next 12 months, cautioned Rabobank head of financial markets research for Asia Pacific Michael Every.

He said that the local currency could depreciate further moving forward, mainly driven by the predicted weakening of yuan and possible external pressures caused by global economic uncertainties.

“Our ringgit-US dollar exchange rate estimate is predicated on yuan’s forecast. Thus, if the yuan does not weaken too much over the next one year, the ringgit will not depreciate to as low as RM4.60 per US dollar.

“However, if pressure on yuan increases and Malaysia’s economic fundamentals do not improve significantly to offset the external economic pressures, the ringgit could weaken going forward.

“The ringgit-US dollar exchange rate has been improving recently largely due to the weak greenback. The condition will reverse if the US dollar strengthens against the ringgit,” Every told reporters after Rabobank’s Financial Market Outlook 2018 briefing yesterday.

He added that other regional currencies in Asia such as the baht, rupiah, Indian rupee and yuan are also expected to weaken over the next 12 months

A significant economic downturn in China could negatively affect Malaysia’s domestic economic performance, as China has continued to be the largest trading partner of Malaysia for the eighth consecutive year since 2009.

To note, in 2016, Malaysia’s bilateral trade with China increased by about 4.4% to RM240.91bil. As for the first half of this year, Malaysia-China bilateral transactions expanded by 28% to RM139.2bil, with a 41.2% surge in exports.

With regard to Malaysia’s gross domestic product (GDP) growth, Every noted that the country has performed fairly well, in comparison to other countries in the Asean region.

“While Malaysia has registered a strong economic growth beyond expectations in the first half of the year, it remains to be seen whether a similar growth trajectory can be achieved moving forward.

“The country’s good growth in the past six months has been largely due to a low-base effect and the GDP growth is likely to slow down next year, given the global economic uncertainties. This could be in line with other emerging economies’ prospects, as they are expected to suffer the most in the next one year,” he said.

Malaysia posted higher-than-expected GDP growth rates of 5.6% and 5.8% in the first and second quarters respectively.