Inflation, ringgit problems due to other countries, says Tengku Zafrul

 

Finance minister Tengku Zafrul Aziz says Malaysia’s economic growth next year is expected to be lower than this year’s rate.

PETALING JAYA: The exchange value of each country’s currency is not a benchmark to determine if they are facing an economic crisis, finance minister Tengku Zafrul Aziz said today.

Inflation rates in most countries had risen to levels not seen in decades because of factors beyond their control which had triggered a surge in prices of commodities and basic goods.

Among the factors were the tensions between the US and China, the war in Ukraine, floods and droughts that have affected food supply, and China’s zero-Covid policy that has disrupted global supply chains.

“All these factors will also have an impact on Malaysia’s gross domestic product (GDP) for 2023, which is projected to be lower than in 2022,” he said, Bernama reported.

He said the US Federal Reserve had aggressively raised the US interest rate to 3.25%, much higher than Malaysia’s rate of 2.5%.

“While this has led to the ringgit depreciating 10.5%, other currencies have also fallen, at an even higher rate, which proves that this is a global phenomenon,” he said.

The rise in the US interest rate had affected many countries but this did not mean that these countries should be considered failures, Tengku Zafrul said in a statement reported by Bernama.

What is an economic crisis

“Every country has its own challenges and monetary policies and the currency exchange value of each country is not a benchmark to determine if they are facing a crisis or not.

“The real definition of an economic crisis is when the GDP declines sharply, unemployment and bankruptcy increase significantly, and the overall standard of living is affected while the definition of a financial crisis is when there is a sudden depreciation in the value of some of the financial assets within a short period.

“This includes the sudden fall in the stock market and currency value within a short period, as well as the failure of the government to repay debts,” he said.

The situation in Malaysia today is different from the years 1998-1999, 2009 or 2020. What the country is currently experiencing started from global inflationary pressures that led to uncertainty in the global capital market.

He said the world’s major powers must take responsibility for their policy decisions, especially those affecting the global economy. - FMT