KUALA LUMPUR (March 20): Malaysia will not be facing a balance of payment crisis, the central bank said on Wednesday, after the current-account surplus narrowed sharply to its lowest in 26 years.

Current-account surplus is expected to improve in 2024, mainly driven by growth in the tourism sector and export recovery this year, Bank Negara Malaysia (BNM) Deputy Governor Datuk Marzunisham Omar told reporters following the release of the central bank’s annual report.

"We are not and will not be facing that balance of payment crisis,” Marzunisham said. “In addition to [the] export recovery that we forecast, the tourism sector is a big foreign exchange earner for the country.”

For more than two decades, Malaysia has run a current-account surplus, which means that the country is earning more foreign exchange from goods and services exported than it is spending on imports, thanks to strong shipments of electrical and electronic products.

The current-account surplus, however, more than halved to RM22.8 billion or 1.2% of gross domestic product (GDP), its lowest since 1997, as both exports and export earnings fell amid sluggish external trade, global technology downcycle and lower commodity prices.

Marzunisham was responding to a question on whether Malaysia will face a balance of payment crisis, much like what Sri Lanka is currently facing.

Sri Lanka defaulted on its external debt in April 2022, igniting a series of economic crises that exposed its long-standing economic and financial vulnerabilities.

A balance of payment crisis, also known as a currency crisis, occurs when a nation is unable to pay for essential imports or service its external debt repayments. This is typically accompanied by a rapid currency depreciation.

BNM Governor Datuk Shaik Abdul Rasheed Abdul Ghaffour said the central bank is projecting the current-account surplus, as a proportion of GDP, to widen to 1.8%-2.8% this year, mainly driven by recovery in global trade and tech cycle, higher commodity prices that would benefit Malaysia as a net exporter, and improving travel receipts.

"The current account of the balance of payments is expected to improve and record a higher surplus in 2024,” he said. “This will be driven mainly by, first, higher goods surplus, and secondly, lower services deficit following continued improvement in inbound tourism.”