Why the Malaysian Ringgit Continues to Outperform Asia

The Malaysian ringgit, Asia's top-performing currency over the past year, may have more room to strengthen, according to Second Finance Minister Amir Hamzah Azizan. Citing the country's robust economic performance, he signaled that growth forecasts could be revised upward.

In a Feb. 4 interview with Bloomberg TV, Amir stated that the ringgit was undervalued in 2025 and the market is now adjusting to that reality. He noted that inflows into Malaysia's equity and bond markets in January helped strengthen the currency, a trend he expects will continue.

"I think the ringgit still has potential because growth is still intact in this country and it's still growing well," he commented. This follows a prediction he made four months earlier, correctly forecasting the currency would strengthen past the four-per-dollar mark against the US dollar.

Malaysia's Economy Defies Global Headwinds

For now, Malaysia’s economy has proven resilient in the face of US tariffs, a factor that prompted the central bank to hold its benchmark interest rate steady since July. The nation's economic momentum is outpacing much of Southeast Asia, supported by resilient domestic demand.

Key drivers include strong investment flows into several high-growth sectors:

• Electronics

• Data centers

• Energy transition projects

These investments are helping to cushion the economy from turbulence in global trade.

Strong GDP Growth Fuels Currency Rally

Malaysia's economic expansion hit 4.9% in 2025, exceeding the government's own forecast of 4% to 4.8%. While the official forecast for 2026 is a more moderate 4% to 4.5%, Amir expressed optimism that Bank Negara Malaysia might revise this estimate upward in the coming months. He also added that he sees no catalyst for inflation to rise this year.

This strong economic foundation is translating directly into currency performance. The ringgit has gained 3% in 2026, building on a 10% surge in 2025. This rally is attributed to structural factors like investment flows and growth momentum, not just the broad weakness of the US dollar.

Fiscal Consolidation Bolsters Investor Confidence

The government is also focused on improving its fiscal health to attract investors. Malaysia aims to narrow its budget deficit to 3.5% of gross domestic product in 2026, down from a target of 3.8% in 2025. Amir noted that the 3.8% target for 2025 was "within reach," with final numbers expected by the end of February.

To achieve this, Prime Minister Anwar Ibrahim's administration is counting on better tax collection and reduced subsidy spending, even as it contends with lower petroleum-related revenue and a relative slowdown in growth.

Amir emphasized that the government is deliberately reducing its reliance on oil and gas revenues. He stated that the current oil price range was already factored into the budget.

"The key for Malaysia was the diversification," he explained. "The more we push for economic diversification, the more we improve our fiscal space and tax collections, the resilience of the fiscal space of the government is much better."