Malaysian Finance Minister Discusses Economy and Ringgit

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00:00Let's take a look at your growth projection for the year, 4 to 4.8%.

00:04We're in October.

00:06How much clarity is there that perhaps you could get to the upper end of that range?

00:10I think we've had a good first half.

00:12The first half came in at 4.4%.

00:14And we've seen the exports as they're holding

00:17and the development expenditure that's been spending it

00:21actually helping to support it.

00:23And I think one of the pleasing elements of it is private consumption has gone up

00:27because effectively the government has been trying to lift wages in the country.

00:31So we did minimum wage lift in February this year

00:35and the civil service pay increases

00:37and they have been spending and stimulating the economy.

00:40So I think those are good support that's actually coming into the economy

00:43also on top of the normal exports and so on.

00:46So 4.8% is a possibility?

00:49Well, let's see.

00:51Don't be shy, Minister.

00:53Despite all the challenges we've all seen in terms of tariffs and so on,

00:57I think the economy has got the resilience it's managing through.

01:00And I think we will probably end up within the range that we've declared.

01:05Okay, that's not saying too much.

01:08For 2026, 4 to 4.5% projection.

01:12What's the biggest risk to that estimate?

01:15I think when you look at it, I think we all adjusted the estimates down

01:19and we anticipated the effects of the rattling of the global economy

01:23with the tariffs and realignment of how supply chains are moving,

01:27how trade is actually moving.

01:29So a lower projection was expected.

01:31But the key for us in the Malaysian economy is to understand

01:33what can we do to the Malaysian economy,

01:36what can we stimulate in the Malaysian economy to keep it up.

01:39So I think if you look at what we've done in the budget,

01:42there was a lot of spends that were actually put in

01:45in terms of supporting infrastructure growth,

01:47putting in long-term growth elements in terms of building

01:50the right type of infrastructure that the country needs in the future,

01:53and also making sure that our engines of growth,

01:57because export engines at FDI is still strong,

02:00but also making sure our SMEs are still looked at.

02:03So there were a couple of measures that we put in

02:05to actually make sure that the SMEs' engines continues to tick.

02:08So if we've managed to do that well,

02:10I think we are going to manage within that range.

02:14Tariffs are a big uncertainty.

02:17You saw how President Trump is imposing additional 100% tariffs on China,

02:22taking it to 130%.

02:23This is your largest trading partner,

02:25contributing to about 17% of overall trade.

02:29And some say 130% tariffs would mean stagflation,

02:34supply chain disruption.

02:35How might that impact the Malaysian economy?

02:38I think we've seen what's transpiring with the changing tariffs

02:41in the first half of the year.

02:44When we started the journey early on earlier,

02:46the signals were tariffs are going to come in,

02:49it's going to rattle the markets quite dramatically.

02:51Countries will have to do dramatic shifts in order to manage it.

02:55But over time, practicality started to come in

02:57because it's a very much more integrated supply chain

03:01that we're having on a global scale.

03:02So I think this recent shifts will probably also find a better landing

03:07in the not-too-distant future

03:10and we'll come back to what is probably a practical solution.

03:13And I think both sides are figuring that one out.

03:16So from a Malaysian point of view,

03:18the key is to actually understand what is the components of our trade.

03:22And our trade are E&E and semiconductors,

03:27but we also have still the commodities and so on anchoring the trade.

03:31So if we continue to do those well,

03:34semiconductors, which is a very narrow supply chain,

03:36continues to stick on a better note,

03:38I think we'll be able to ride it out.

03:39Let's talk about the Malaysian ringgit.

03:41Pretty resilient.

03:42Is that a reflection of the fundamentals of the economy?

03:45I think it is.

03:46If you look at it,

03:48we are first half year,

03:50190 billion of FDIs coming in and approved investments.

03:54We're seeing domestic investments also growing well.

03:57We've seen, if I use as a proxy,

04:00and I look back at EPF,

04:01as a proxy of formal employment,

04:06EPF's contribution rates have gone up,

04:08it's growing up at 9% compared to the previous year.

04:11So that's a sign that employment is still good.

04:14My money is still being pumped into the system.

04:16And the interventions that we're doing to lift the flow

04:19so that the citizenry has money in its hands

04:22are also helping drive private consumption.

04:26So I think those elements have actually created the resilience

04:29in the Malaysian economy.

04:30And therefore, people look at Malaysian in a slightly different form.

04:35And then with the slowing down of the growth of interest rates

04:40in other countries,

04:41particularly the US where they've been cutting,

04:43that's allowed the differential to get smaller

04:46so the ringgit is equally strengthened.

04:48Do you expect the infos to pick up speed

04:50and further boost the currency in the next 12, 24 months?

04:54I think it was important for us to make sure that 2026

04:58is a year that we have enough built-in to sustain the domestic economy.

05:04So I think that resilience will actually show value to investors going outside.

05:09The government fiscal reform is showing value to it.

05:13So we started off with a fiscal deficit to GDP of 6.4%.

05:17This year we'll end up at 3.8%.

05:19Next year we're down at 3.5%.

05:21So that is resolved.

05:23And if you see at all the reforms that we've been doing,

05:27it's about putting in fiscal disciplines coming in.

05:29And those are good signs to investors that are coming in.

05:32We've had a stable government, clarity of policy,

05:36and that's helped to attract investments.

05:38So supporting the currency,

05:39the thing is the ringgit's performance is also contingent on the dollar,

05:45which also depends on what the Fed does.

05:47Right now expectations are perhaps for two cuts,

05:51but that may not happen.

05:53How do you see that playing out into your currency?

05:56Well, even if you look at this year,

05:58there were expectations of further cuts,

06:00and further cuts didn't come in, right?

06:02But the ringgit's still still resilient,

06:04because the fundamentals are still strong,

06:06and the differentials have remained quite reasonable along that line.

06:10So I think even if the Fed slows down its process,

06:13the ringgit still has a lot of wind behind it

06:16to be able to push ahead along the way.

06:19You talk a lot about putting money into the hands of the people.

06:22You did that with this budget.

06:23In fact, some say 60% of the budget

06:26actually goes into civil southern salaries,

06:30pension funds as well.

06:32Could you be overlooking, missing the opportunity

06:35to perhaps carry out structural reforms,

06:38which could then help the economy as a whole, and growth?

06:41I think this government has actually started

06:43to do a lot of structural reform, right?

06:45And one of the key things that we've been trying to do

06:47is to dial back on subsidies.

06:49And when we give subsidies, we're making sure that the subsidies

06:52actually end up on the right end of the stake.

06:55The challenge that we've had in the past

06:56was a blanket mechanism in terms of subsidies.

06:59When we did electricity,

07:01we targeted that industries and the top end of society

07:05will have to pay more,

07:06and the bottom end gets some support along the way.

07:10And we've reached the point that subsidies and electricity

07:12have squared at this point of time,

07:14so the government is not putting any new money inside that.

07:17We've done that with diesel,

07:18from diesel last year when we rolled it out,

07:21with a lot of trepidation from a lot of people

07:23in terms of rattling the economy.

07:25But you've seen inflation under control.

07:27You've seen us also still support the core segments of society,

07:31the logistics sector,

07:32so we are able to contain inflation,

07:34yet we're able to get savings.

07:37And now recently we've done that with petrol.

07:40So again, I think reform comes in many ways.

07:43And what the key things you have to do is

07:45plan it well,

07:47anchor it well,

07:47and make sure it sustains.

07:48And that's what we've been able to do

07:50in the journey that we have.

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