Malaysia ringgit gains ahead of GDP data

[MALAYSIA] The Malaysian ringgit has shown notable appreciation in recent weeks, buoyed by positive economic indicators and investor confidence ahead of the country's first-quarter GDP announcement.

Ringgit's Recent Performance

As of mid-May, the ringgit has strengthened against major currencies, reflecting improved investor sentiment. Analysts attribute this uptick to Malaysia's resilient economic fundamentals, including robust domestic demand and a rebound in exports. The currency's performance is also supported by Bank Negara Malaysia's (BNM) monetary policies aimed at ensuring financial stability amid global volatility.

In addition to local factors, global market dynamics have played a crucial role in supporting the ringgit. The recent pause in U.S. Federal Reserve rate hikes has eased pressure on emerging market currencies, making the ringgit more attractive to investors seeking higher yields. Furthermore, a modest recovery in China's economy — Malaysia’s largest trading partner — has positively influenced regional trade sentiment, boosting demand for the ringgit.

Foreign direct investment (FDI) has also provided a tailwind for the currency. According to the Malaysian Investment Development Authority (MIDA), the country secured RM37.4 billion in approved investments during Q1 2025, a 15% increase compared to the same period last year. These inflows, especially in sectors like renewable energy and semiconductors, have reinforced the ringgit’s position amid broader regional currency volatility.

1Q GDP Growth Exceeds Expectations

Malaysia's economy expanded by 4.2% year-on-year in the first quarter of 2025, surpassing the median forecast of 3.9% in a Bloomberg survey. This growth was driven by increased household spending, stronger investment activities, and a rebound in tourist arrivals. On a quarter-on-quarter seasonally adjusted basis, GDP rose 1.4%.

The services sector remained the primary driver of economic growth, registering a 5.2% increase, while the manufacturing sector grew by 4.2%. The construction sector continued its positive trajectory with a 14.5% growth, marking its fifth consecutive quarter of double-digit expansion.

Tourism, in particular, saw a strong resurgence, with international arrivals rising nearly 30% year-on-year, according to Tourism Malaysia. The influx of visitors, mainly from Southeast Asia and the Middle East, contributed significantly to retail, hospitality, and transportation revenues, reinforcing the broader services sector recovery.

Outlook for the Ringgit

Economists maintain a cautiously optimistic outlook for the ringgit, projecting it to remain stable within the range of 4.5 to 4.6 against the US dollar in 2025. Factors influencing this forecast include global economic conditions, trade policies, and domestic economic performance.

Bank Negara Malaysia continues to monitor the currency's movements and has encouraged corporations and government-linked companies to repatriate realised investment income to support the ringgit's value.

While sentiment remains positive, analysts caution that external risks such as geopolitical tensions, persistent inflationary pressures in advanced economies, and supply chain disruptions could still impact the ringgit’s trajectory. Policymakers are closely watching global oil prices as well, given Malaysia’s status as a net energy exporter, where fluctuations in Brent crude could directly affect fiscal revenues and investor outlook.

As Malaysia approaches the release of its first-quarter GDP data, the strengthening ringgit reflects growing investor confidence in the country's economic resilience and growth prospects.