The vote also raises uncertainty in regards to the fate of the federal government’s $80 billion budget announced earlier this month, which goals to chop taxes while reducing the fiscal deficit through more targeted grants. The government has said the budget might be postponed again after the election.
“The election announcement has essentially put the already announced 2023 budget on hold,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore.
Political and monetary uncertainty could weigh on the ringgit, which is already under pressure from Bank Negara Malaysia’s decision to adopt a less aggressive monetary stance than its U.S. counterpart. It not only raised rates of interest by a smaller amount but in addition signaled dovishly at its September meeting that future tightening was uncertain.
Investors will probably be taking a look at local inflation data due on Oct. 21 to evaluate whether Bank Negara can proceed to develop into more hawkish when it reviews borrowing costs next month. If it fails to achieve this, the trail of least resistance could see the ringgit weaken further.
True, the ringgit will trade at a rate of between 4.53 and 4.70 per U.S. dollar within the fourth quarter, in accordance with 14 analysts surveyed by Bloomberg, indicating that some are predicting it would strengthen, not weaken.
