As Malaysia approaches 2025, the outlook for the Malaysian Ringgit (MYR) against the US Dollar (USD) is shaped by a mix of domestic economic policies and global market dynamics. The recent announcement of Malaysia's largest-ever budget, totaling RM421 billion, aims to enhance economic competitiveness while addressing social welfare concerns.

Prime Minister Anwar Ibrahim emphasized that "the savings will be used for the well-being of the masses," highlighting a commitment to equitable growth through targeted fiscal measures.

The MYR's performance in 2025 will be influenced by several key economic indicators. Firstly, the projected fiscal discipline, with expectations to maintain the fiscal deficit below 4% of GDP, is crucial for bolstering investor confidence. This stability is expected to attract foreign direct investment (FDI), which has already seen an uptick in recent quarters, particularly within the services sector.

Analysts predict that if the MYR can stabilize around RM4.20 against the USD, Malaysia could achieve high-income nation status by 2027, underscoring the importance of currency stability for national economic goals.

Moreover, the anticipated easing of US monetary policy may further strengthen the MYR. MIDF Research forecasts that the USD/MYR exchange rate could dip below RM4.00 in 2025 as funds flow into emerging markets like Malaysia due to favourable interest rate differentials and a more accommodating global economic environment.

This potential appreciation of the MYR would not only reflect improved investor sentiment but also signify a more resilient Malaysian economy capable of weathering external shocks.

A recent McKinsey report emphasizes the role of institutional reforms and digital infrastructure in fostering long-term economic growth. Malaysia’s investments in digitization and innovation are projected to contribute an additional 1.5% annual GDP growth by 2030.

Similarly, insights from the Harvard Business Review highlight the importance of strengthening regional partnerships to counter supply chain disruptions. Malaysia’s deepening engagement with ASEAN presents opportunities to enhance trade stability and cushion its economy from global uncertainties, further supporting the MYR’s trajectory.

In addition to fiscal measures, social initiatives outlined in Budget 2025 aim to address rising living costs and wage disparities. The government plans to implement targeted subsidies and raise minimum wages, which are expected to support domestic consumption and enhance overall economic activity.

These measures are likely to create a more robust economic foundation, further supporting the MYR's value against the USD.

As we look ahead, it is essential to consider external factors that may impact currency predictions. Global economic conditions, including China's recovery from its recent downturn and ongoing geopolitical tensions, could create volatility in currency markets. However, Malaysia's proactive approach in enhancing its economic framework positions it favourably for sustained growth.

In conclusion, the MYR’s journey against the USD in 2025 reflects Malaysia’s dedication to sound fiscal management, equitable growth, and strategic investments. With robust policies and an emphasis on resilience, the MYR is poised to strengthen, aligning with both domestic priorities and favorable global trends.

AUTHOR: SUNTHEREN YOGANATHAN, Lecturer at Politeknik Seberang Perai, and Dr. Rozita Abdul Jalil, Lecturer at the Faculty of Computer Science and Information Technology, Universiti Tun Hussein Onn Malaysia.

This is the author's personal view and does not necessarily represent the views or official position of RTM.