KUALA LUMPUR, Feb 9- All regional currencies, including Malaysia’s, are expected to strengthen against the US Dollar and the Euro this year, and this is expected to lead to a slump in exports.
“There no point in keeping currency cheap to help exports if there is nowhere to export to.” said Aberdeen Asset Management business development director Donald Amstad today.
He said keeping the value of Asian currency low has been a policy for the last decade but this is expected to change as China comes under increasing pressure to revalue the Renminbi (RMB).
He said the value of the RMB is expected to appreciate this year.
Exporters are already hurting from weaker demand and foreign competition and any RMB appreciation will squeeze margins further.
“China is being pressured by the Obama administration to revalue, but I think it will want to be seen as acting in its own domestic interest.”
He described China’s traditional markets such as the United States and European Union (EU) as moribund or stagnant.
“We expect this to continue for the next three to five years.”
To counter the slump in exports, there needs to be a switch to domestic demand to lead growth.
He said governments in the region are expected to welcome the increase value of their domestic currency to encourage domestic demand.
“Stronger currency will increase the purchasing powers of consumers in their own countries.”
Despite the slump in the exports, emerging economies, led by Asia, are expected to account for half of the global Gross Domestic Product (GDP).
Amstad said Asia’s capital markets are still attractive to global investors and massively undervalued.
“Most Asian governments are solvent, most banks well run and most corporations sensibly run,” he said.
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Do you think as it is, with inflation and of daily used goods' prices rising every day, there will be increase in domestic consumption?
Some time 'expert' and government statement are talking through their noses!!