The ringgit’s recent appreciation has been attributed to sound government policies, but the strengthening may be transitory in nature, says an ISEAS - Yusof Ishak Institute academic.
by close to 11 per cent against the US dollar between mid-June and end-September this year. Political leaders from the country’s ruling coalition were quick to attribute this reversal of the ringgit’s fortunes to “sound government policies”.
Another much-cited driver of the ringgit’s appreciation is the robust growth in exports. Exports grew by 12 per cent year-on-year in July and August this year, driven by the palm oil industry and key manufacturing industries such as machinery and equipment as well as electrical and electronics. This implies that Malaysia’s exports have become cheaper over the years while its imports have become more expensive. The recent appreciation of the ringgit has reversed this long-run trend only slightly.
Though the size of trade in services has gradually risen over the years, its size relative to the GDP has declined since the late 1990s. Trade in services is still dwarfed by merchandise trade, which is five to six times larger. Thus, the services sector is expected to remain mainly non-tradable in the future.One consequence of the rise of the non-tradable sector in the economy is the relative decline in the role of trade.
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