(Bloomberg) -- Malaysia is on track for faster economic growth, a narrower fiscal gap and steady prices, setting the stage for sustained currency strength and increased investment, Second Finance Minister Amir Hamzah Azizan said.
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"The ringgit will find the natural level commensurate to the growth prospect of the country" and be aided by a decline in interest rate differentials with the US, Amir said in an interview in Washington on Thursday. "Malaysia will look more attractive and the ringgit should strengthen along the way."
The Malaysian currency is the best performer in emerging markets this year, even after paring gains following its best quarter in 50 years. Investors have been lured by economic growth that's surpassed estimates and the prospect that the key interest rate will stay on hold longer than many of its neighbors.
"Just because everybody has cut, doesn't mean we have to cut," Amir said on the sidelines of the IMF and World Bank annual meetings, describing current settings as "still very accommodative." The economy doesn't need any stimulus at this point, he said, commending Bank Negara Malaysia's handling of inflation.
Prime Minister Anwar Ibrahim's administration is seeking to fire up "multiple engines of growth" while delivering on its commitment to bring the budget deficit below 3% of gross domestic product by 2028, he said. Restoring fiscal health is key for Malaysia to retain Southeast Asia's highest credit score and keep investors' faith as Anwar looks to develop it into a global tech hub.
Anwar, who doubles as finance minister, unveiled his third annual budget last week with a record spending plan for 2025 that relies on higher taxes, accelerating growth and lower subsidies to help him cut the deficit to 3.8% of GDP in 2025, from 4.3% this year.
The government plans to end blanket subsidies to RON95, the country's most popular fuel, by May, said Amir, in a move that will enable it to save about 8 billion ringgit ($1.8 billion) a year. The minister is looking at an initial 5 billion ringgit windfall in 2025 from the move.
That adds to the 6 billion ringgit in estimated savings this year from removal of a diesel subsidy beginning in June, he said. Amir said the inflation impact from ending the broad support for RON95 will be contained.