KUCHING: The ringgit’s rally to around 4.04 against the US dollar — its strongest level in nearly five years — has caught the attention of external observers, but what matters most now is whether Malaysia can sustain that strength, said Dr Carmelo Ferlito.
The chief executive officer of the Centre for Market Education (CME) and a faculty member at Universitas Prasetiya Mulya said the ringgit can continue to rise, but investors will ultimately judge Malaysia on stability rather than headline levels.
“It is an important point for external observers, but what will matter more in the future is how Malaysia will be able to keep this level in the future.
“Because for investors and observers, what is most important is not the value per se, but the stability of that value,” he said.
Ferlito attributed much of the ringgit’s volatility in 2024 — and into 2025 — to external factors rather than domestic fundamentals.
“Because what we have observed both in 2024 and in 2025 was an alternance of ups and downs for the ringgit.
“Often in particular in 2024 due more to external factors and external speculation rather than the behaviour of internal fundamentals,” he said.
With the currency now strengthening and outperforming some regional peers, he said the focus has shifted to confidence and consistency.
“Now that the ringgit in fact has strengthened and I would say really developed its position when compared also to the regional peers, it is important for Malaysia to reassure and to keep this confidence in the next months to be able to fight to keep this level constant,” he said.
While acknowledging the role of external conditions, Ferlito said domestic policy outcomes have been crucial in reducing uncertainty.
“Softening of the dollar is an important element. I mean, the uncertainty of American policy has played a role.
“But if we look at the situation domestically, what in my opinion has mattered the most is that some policies that were somehow in the air, like the rationalisation of subsidies, have finally found an outcome,” he said.
He said the shift from prolonged debate to actual implementation has helped anchor expectations.
“Maybe it can be more or less than expected, but something has happened. So there is no more discussion about this.
“But this thing has been done and now we know what we are dealing with.”
Ferlito cited e-invoicing as a clear example of policy materialisation.
“So I think that the materialisation of certain announcements has created, has contributed to stabilise also the behaviour of the currency.
“And our policy has been, for example, the invoicing. We may like it or not, but it happened.”
He said clarity matters more than perfection.
“It’s there and now we don’t have to think what is going to happen in that direction because the policy has finally been announced and implemented and we all know what we are dealing with, like it or not.”
Looking ahead, he said the next credibility test lies in government spending discipline, even as he acknowledged progress so far.
“The fact that these policies were indeed implemented and therefore there is no more discussion and uncertainty on the shape, on the actual way in which these policies are going to happen, is the most important factor.
“And somehow the government is heading in the right direction. But I believe that more can be done in particular on the rationalisation of spending.”
He said revenue measures have advanced, but spending reforms will define future confidence.
“Something has been done on the revenue side, but where probably the battlefield in which the government will build its future credibility, I think, is on the rationalisation of spending.”
Ferlito added that political signals and stronger-than-expected data have also supported sentiment.
“I think that somehow also the recent government reshuffled with some adjustments, has played a role in building confidence.
“And I think that the latest data on investment, exports, the economy per se, even GDP, has somehow caught the analysts by surprise, and been better than expected.”
While investors continue to watch sovereign ratings, he said policymakers should not become overly constrained by them.
“So people, investors, the business community look at these ratings with expectations and the fact that they are positive creates and boosts the confidence.
“Although I think sometimes we have to be even a bit more brave and also dare to do policies when the rating agencies are not supportive of them.”
Looking into 2026, he said Malaysia’s room for manoeuvre lies primarily at home.
“I think that there is one level, which is the international level, on which obviously Malaysia in itself cannot do much.
“So try to recalibrate that and build a bigger space for the private sector.”
