Flash Malaysia 2Q current account surplus narrows to RM2.6b, from RM8.7b in 1Q

Flash Malaysia 2Q current account surplus narrows to RM2.6b, from RM8.7b in 1Q
Business & Markets 2013
Written by theedgemalaysia.com
Wednesday, 21 August 2013 18:05

Flash: Malaysia 2Q current account surplus narrows to RM2.6b, from RM8.7b in 1Q

Update Zeti says Malaysia current account unlikely to sink into deficit
Business & Markets 2013
Written by Shalini Kumar of theedgemalaysia.com
Wednesday, 21 August 2013 18:41

KUALA LUMPUR (Aug 21): Malaysia's current account surplus had narrowed to RM2.6 billion in the second quarter, from RM8.7 billion in the first quarter, due to a lower goods surplus as well as sustained services deficit and outflows in the income accounts.

However, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said she does not foresee the current account heading towards deficit territory.

"Yes, the surplus has narrowed but it is still a surplus and the recovery in external demand will improve this. During periods of high investment activity we also have high imports and this is a factor that contributes to a narrowing of the current account surplus," she said.

"We can take measures such as sequencing large investments that have high import content, increasing our competitiveness and diversifying our export markets to improve our external position," she added.

Zeti also said Malaysia had a steady inflow of foreign direct investment, which showed that there was still confidence in the Malaysian economy.

The export perfomance and GDP are expected to show improvements in the second half of the year, she added.

Commenting on the recent depreciation of the ringgit against the US dollar, Zeti said that the fluctuations experienced by the local currency were the result of levels determined by the market.

"We see volatility even in the larger economies and this is what happening in uncertain times. That is the reason all the flexibility of the foreign exchange administration has been removed so that businesses can now manage their foreign exchange exposures in a more effective manner," she said.

Between July 1 and Aug 20, the ringgit further depreciated against the greenback by 3.7%. Against regional currencies, the ringgit strengthened against the Indonesian rupiah by 1.9%, but slid against other currencies by between 2.1% and 5.5%

In answering a question on the central bank's intervention in the forex market, Zeti said the bank's mandate was only to maintain orderly transactions within the money and forex markets.

She said BNM did not aim to defend any exchange level, which is left to be determined by the market.

But she said the exchange rate of ringgit versus the US dollar is expected to moderate in the medium term.

On inflation, Bank Negara said in a statement headline inflation rate increased to 1.8% in the second quarter, due mainly to the price increases for food and non-alcoholic beverages, housing, water, electricity, gas and other fuels.