KUALA LUMPUR: The ringgit has fallen 15 per cent from January 2021 to June 2023 against the US dollar, dampened by the United States monetary policy tightening.
The local note declined 37 per cent from July 2014 to January 2016.
The World Bank lead economist Apurva Sanghi said the US monetary policy tightening had been the driver of ringgit depreciation from 2021-2023.
"There are short-term factors that keep fluctuating the ringgit. Up until June this year, it had reached RM4.6, and the ringgit appreciated for awhile and again declined against the US dollar.
"The important thing to keep in mind is that the Malaysian ringgit is uniquely sensitive due to exposure to oil shocks and sudden or sizeable outflows," he told reporters at the World Bank East Asia and Pacific economic update and Malaysia economic monitor here today.
Sanghi said the local note's depreciation was also sapped by oil prices, interest rate differentials and change in international investment position.
The local note slipped to 4.6990/7045 against the greenback on Monday, from last Friday's close at 4.6930/6970.
On foreign direct investment (FDI), the World Bank said it had been declining with Malaysia lagging behind Vietnam and Thailand.
He said the decline raises concerns about political stability surpassing policy stability.
The quality of infrastructure, digital infrastructure, and addressing the talent gap are critical factors influencing Malaysia's position in attracting FDI.
Sanghi also noted that Malaysia's investment to gross domestic product ratio had been consistently coming down since the Asian financial crisis from a high of over 40 per cent GDP to below of 20 per cent today.
He also pointed out that New Industrial Master Plan (NIMP 2030) had given renewed impetus for both FDI and DDI but need to liberalise services, which will help the NIMP 2030 to achieve its objectives.
Meanwhile, Malaysia's semiconductor sector was one of the bright spots for the economy.
The sector constituted over half of the total electrical and electronics industry exports and 22 per cent of the country's total exports.
"What we found is that the US-China trade tensions have increased semiconductor exports to both China and the US," he added.
The tensions have also caused an increase in Malaysia's semiconductor imports from China.
However, this could become a problem in the future if US sanctions disrupt China's supply chain, affecting Malaysia's ability to produce further downstream semiconductor products," he explained.
