CARI Captures Issue 640: Malaysian ringgit vulnerable to drop towards 2023 low due to political risks

Given recent developments in the region, Captures will widen its scope to include news related to members of the Regional Comprehensive Economic Partnership (RCEP) agreement which was signed towards the end of 2020. The other weekly newsletters under CARI, China-ASEAN Monitor and Mekong Monitor will also be consolidated into the Captures newsletter. We hope this new version of Captures will serve you better and look forward to providing a curation of stories relevant to ASEAN and its trading partners.

Malaysian ringgit vulnerable to drop towards 2023 low due to political risks
(15 January 2024) The Malaysian ringgit is vulnerable to dropping towards 2023’s low due to concerns over the current government’s stability. The ringgit is also facing headwinds from a recent slide in oil prices and falling exports. The ringgit is currently about 3% away from the 25-year low reached in October 2023. Last year, the ringgit was labelled as emerging Asia’s worst performer. RBC Capital Markets has projected the ringgit to drop about 2% from 12 January’s close to 4.75 versus the US Dollar in the first half of 2023. In October, the ringgit slumped to nearly 4.8, the weakest since January 1998, the height of the Asian financial crisis. The ringgit has slid more than 1% in January, adding to losses from the previous three years.

Sovereign wealth fund Khazanah Nasional invest US$42 million in Indian fast food chain
(16 January 2024) Malaysia’s sovereign wealth fund Khazanah Nasional invested US$42 million into Indian fast food chain Wow! Momo. Khazanah Nasional acquired a 15% stake in the chain. The fast food chain also raised another US$7.2 million from Indian investment firm, OAKS Asset Management. Wow! Mamo plans to use its newly acquired funds for expansion as well as to provide an exit route to early-stage investors. Wow! Mamo is based in Kolkata in West Bengal state, and was founded in 2008. The company operates about 630 outlets and kiosks in 35 cities under different brands.

Southeast Asian leaders appealing to Tesla to invest in their country
(16 January 2024) Southeast Asian leaders are appealing to electric vehicle (EV) maker Tesla to invest in their countries to curb its dependence on the Chinese market. In May 2022, Indonesian President Joko Widodo visited Tesla CEO Elon Musk in Texas, where he urged Musk to build an EV plant in Indonesia to leverage upon the country’s rich nickel minerals. In July 2023, Malaysian Prime Minister Anwar Ibrahim discussed potential investments and other topics with Musk. Thai Prime Minister Srettha Thavisin met with Musk on the sidelines of the United Nations General Assembly in September 2023. Strettha later stated that he expected at least US$5 billion in total investments from Tesla and other U.S. corporations.

Thailand set to delay launch of US$14.3 billion digital wallet scheme until after May 2024
(17 January 2024) Thailand is set to delay the launch of its US$14.3 billion digital wallet handout scheme until after May 2024. Thailand’s Deputy Finance Minister stated that it is ‘unlikely’ the scheme will be launched in May, and that there is no back-up plan if the scheme could not be implemented. The programme was originally slated for February, before being delayed to May. The scheme would see US$285 transferred to 50 million Thais each via a mobile app to spend in their local communities. The digital wallet was a key election campaign policy of the ruling Pheu Thai party. It is among a raft of stimulus measures that Thailand’s government has promised, alongside debt suspension for farmers and a minimum wage hike.

Central bank keeps policy rates unchanged on 17 January, 2024
(17 January 2024) Indonesia’s central bank, Bank Indonesia (BI), kept its policy rates unchanged on 17 January, 2024. BI claimed this was consistent with efforts to stabilise the rupiah exchange rate and ensure inflation remains within target in 2024. BI left its benchmark 7-day reverse repurchase rate at 6.00%, where it has been since October 2023. Its two other policy rates were also unchanged. BI has targeted inflation between 1.5% to 3.5% for 2024, lower than 2023’s target of 2% to 4%. The central bank forecasts growth of between 4.7% and 5.5% for 2024, compared with 2023’s forecast of 4.5% to 5.3%.

Indonesia’s trade surplus shrinks to US$36.93 billion in 2023
(15 January 2024) Indonesia’s trade surplus shrank by almost a third to US$36.93 billion in 2023, down from the record US$54.46 billion recorded in 2022. This shrinkage was attributed to a drop in exports and imports along with commodity prices and weakening global trade. Prices of Indonesia’s main commodities, including coal, palm oil and nickel, fell sharply in 2023. Some economists predict a further drop in 2024 albeit at a slower rate. In 2023, exports dropped to US$258.82 billion from US$291.9 billion in 2022. Meanwhile, imports reached US$221.89 billion last year, down from US$237.45 billion the year before.

Government to spend US$1.7 billion to boost rice production
(16 January 2024) The Filipino government plans to spend US$1.7 billion to build more storage and other facilities to boost food production and cut prices, including that of rice. The government plans to build facilities that will minimize post-harvest losses and lessen dependence on imports. According to the Philippines’ Agriculture Secretary, the country seeks to modernize farm and fisheries production and develop its logistics system. Around 30% of the Philippines’ farm production is lost due to poor logistics, and authorities claim eliminating such losses will lower the cost of high-value crops and vegetables by as much as 15%. The country incurs 494,000 metric tons a year in post-harvest losses on the staple grain and corn.

RCEP Monitor

China’s population falls for second consecutive year in 2023 at 0.15% year-on-year
(17 January 2024) China’s population fell for the second consecutive year in 2023 due to a record-low birth rate and a wave of COVID-19 deaths following the end of lockdown measures. According to China’s National Bureau of Statistics, the total number of people in China declined by 2.08 million, or 0.15%, to 1.409 billion in 2023. In comparison, the population declined by 850,000 in 2022. Due to authorities lifting strict nationwide COVID-19-related measures at the end of 2022, total deaths rose 6.6% to 11.1 million in 2023, the highest level since 1974. Meanwhile, new births fell by 5.7% to 9.02 million. The birth rate reached a record low of 6.39 births per 1,000 people, down from a rate of 6.77 births in 2022. China’s 2023 rate of 7.87 deaths per 1,000 people was higher than the rate of 7.37 deaths in 2022.

China’s economy grows by 5.2% year-on-year in 2023, beating official forecast
(17 January 2024) According to China’s National Bureau of Statistics, China’s economy grew by 5.2% year-on-year in 2023, beating an official forecast of roughly 5.0%. The growth rate for the fourth quarter of 2023 was also 5.2% year-on-year, up from 4.9% for the previous period, as government spending helped spur a recovery from the COVID-19 pandemic. Quarterly, GDP in the fourth quarter expanded by 1%, lower than the 1.3% recorded in the previous quarter. Authorities also resumed reporting of the youth unemployment rate, which had been suspended after it hit a record high of 21.3% in June. The rate at the end of December 2023 was measured at 14.9%, which does not include fresh graduates looking for work.

China’s coal output reached record high of 4.66 metric tonnes in 2023
(17 January 2024) According to China’s National Bureau of Statistics, China’s coal output reached a record high of 4.66 metric tonnes in 2023. This is an increase of 2.9% year-on-year. In December, coal output reached 414.31 million tonnes, nearly flat with November’s 414 million tonnes and up 1.9% year-on-year. Daily output over the month was 13.36 million tons, slipping from November’s record-high daily average of 13.8 million tons. China’s overall power generation, which is dominated by coal-fired plants, rose 8% year-on-year in December. Analysts are predicting another modest coal production increase in 2024.

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