Najib: Economic fundamentals sound, no need for Ringgit peg, capital controls

PUTRAJAYA - Despite the depreciating value of the Ringgit, Malaysia will not impose capital controls or peg the currency to the US Dollar, said Prime Minister Datuk Seri Najib Tun Razak.

Najib, who is also Finance Minister, said this was because Malaysian economic fundamentals remained sound and that the currency devaluation was largely due to the "overwhelming strengthening" of the US Dollar.

He said the decision was made following extensive discussions with Bank Negara, economists, analysts and financial institutions.

"Although the Malaysian Government views the current levels of the Ringgit do not reflect its fundamentals, the Government is cognisant of the integration of the Malaysian and global economies.

"We remain committed to market-friendly policies. As such, the Government remains steadfast in maintaining the integrity and openness of its markets and will not impose capital controls, nor implement a peg for the Ringgit to the US Dollar," he said at a press conference at Perdana Putra here.

Najib said the Gross Domestic Product (GDP) growth of 4.9 per cent in the second quarter of 2015 showed that the fundamentals of the economy remained sound.

"Malaysia's economy is now driven by the services and manufacturing sectors which constitute 76.6 per cent of GDP, whilst reliance on mining, including oil and gas, and agriculture sectors have been reduced to 17.9 per cent of GDP.

"The diversification of our economy has allowed for continued reduction in relying on oil and gas for government revenue.

"In this regard, we will continue with our economic transformation programme to further structurally strengthen and diversify the economy," he said.

Najib added that Malaysia achieved trade surplus of RM41.7bil (S$14.25 bil) while its current account realised a surplus of RM17.6bil.

"The country's labour market condition remains stable, with unemployment rate at 3.1 per cent as of May 2015. The inflation rate remains low," he said.