US watchlist a recognition of Malaysia’s economic strength

The ‘hit list’ assesses countries with a total trade above RM167b a year


Finance Minister Lim Guan Eng views Malaysia’s inclusion in the US currency manipulator watchlist as an acknowledgement of the country’s economic strength and its role in the global economy.

US President Donald Trump’s administration on Wednesday included Malaysia — along with Singapore and Vietnam — on its watchlist for currency manipulation. Major trading economies such as Germany, South Korea and Japan are already under scrutiny.

Currently, there are 21 nations on the “hit list” which assesses countries with total trade above US$40 billion (RM167.74 billion) a year.

Lim said Malaysia is on the list as it met two of the three conditions set by the US Treasury.

“Firstly, Malaysia has a trade balance with the US of more the US$20 billion a year. Secondly, Malaysia has a healthy current account surplus of more than 2%
of its GDP.

“Both factors demonstrate the competitiveness of the Malaysian economy, instead of currency manipulation,” he said in a statement yesterday.

Lim said Malaysia would be a currency manipulator only if it meets all three criteria.

“But as noted by the US Treasury, Malaysia does not intervene in the foreign-exchange (forex) market to suppress the value of the ringgit, and therefore does not meet the third requirement.

“Additionally, Bank Negara Malaysia (BNM) has stressed that Malaysia runs on a floating exchange-rate regime and any interventions carried out are only to avoid excessive volatility in the ringgit,” he said.

As a result, Lim said the inclusion of Malaysia into the US Treasury’s Monitoring List of Potential Currency Manipulator has no impact on the economy, with no penalties or sanctions being imposed on Malaysia.

“Malaysia will continue to build its economic competitiveness fairly by adopting new technology, investing in its infrastructure, enhancing transparency, and
simplifying government as well as business processes, while promoting free trade regionally and globally,” he added.

Malaysia has been on the list for having bilateral trade and current account surpluses.

On Wednesday, the US Treasury said Malaysia has maintained a significant bilateral goods trade surplus with the US since 2015, registering US$27 billion last year.

However, Malaysia’s current account surplus has tapered substantially over the past decade on higher consumption and investment, falling to 2.1% of GDP in 2018.

As acknowledged by the Report on Macroeconomic and Foreign-Exchange Policies of Major Trading Partners of the US, BNM’s intervention over the last few years has been in both directions of the forex market.

“Treasury estimates that in 2018, the central bank made net sales of forex of 3.1% of GDP to resist depreciation of the ringgit.

“Malaysia’s external re-balancing in recent years is welcome, and the authorities should pursue appropriate policies to support a continuation of this trend, including by encouraging high-quality and transparent investment and ensuring sufficient social spending, which can help minimise precautionary saving,” the US authorities said.