KUALA LUMPUR — Malaysia's economic growth is expected to ease in 2015, slowing by up to 1.5 percentage points, the country's central bank said Wednesday.
"The external environment in 2015 will be more challenging ... While improving, downside risks to the global growth outlook remain given the continued weakness in a number of major economies." Bank Negara Malaysia's annual report said.
The bank forecast the economy would grow between 4.5% and 5.5% in 2015 on the back of growing domestic demand.
Malaysia posted 6% economic growth in 2014.
Export growth is also expected to slow amid lower commodity prices, the bank said.
Bank governor Zeti Akhtar Aziz said economic restructuring and financial sector reforms "have positioned Malaysia well to manage the external challenges."
An oil exporting country, Malaysia has been hit by the slide in the price of crude oil over the last few months, as well as the decline in prices of its main export commodities, such as palm oil and rubber.
Malaysia's central bank also said that the ringgit, which has plunged 14.4 percent against the U.S. dollar since September, was sharply undervalued but ruled out reintroducing capital controls.
The ringgit has slid to 3.70 to the dollar, making it Asia's worst performing currency so far this year. Expectations the US Federal Reserve will raise interest rates this year for the first time since the global financial crisis have strengthened the dollar against most currencies.
The governor said the ringgit's depreciation was not surprising. It was due to the double whammy of Fed ending its bond purchases last year, which foreshadowed rising US interest rates this year, and the plunge in oil prices. Malaysia is a net oil importer.
Even if the ringgit slides further, Mrs Zeti said Malaysia will not peg the ringgit to the dollar because it can cause an "extreme period of dislocation'' and "pain'' to the country.
