KUALA LUMPUR: Malaysia's removal from the United States Treasury's (Treasury) monitoring list indicated that the country's economic and foreign exchange policies are now viewed as balanced and transparent, said an economist.

The list comprises major US trading partners whose currency practices and macroeconomic policies merit close attention.

UOB Kay Hian Wealth Advisors head of investment research Mohd Sedek Jantan said that this shift underscored that Malaysia no longer meets the US Treasury's criteria for close monitoring, reaffirming the country's commitment to sound policy management aligned with international norms.

"While inclusion on the monitoring list is not inherently negative, it does entail heightened scrutiny, reputational risk, and diplomatic pressures, which can deter foreign investment and impact trade relations.

"Consequently, Malaysia's removal bolsters its standing as a credible, stable economy, likely enhancing investor confidence and strengthening economic ties with the US and other major economies," he told Bernama.

The three criteria for a nation to be placed on the monitoring list are a bilateral trade surplus with the US of at least US$15 billion (US$1 = RM4.48), a material current account surplus of at least 3.0 per cent of gross domestic product (GDP) and persistent, one-sided intervention in the foreign currency market for at least eight months during a year and with net purchases totalling at least 2.0 per cent of an economy's GDP over 12 months.

Mohd Sedek said that the removal from the US watchlist offers Malaysia a unique opportunity to reinforce its image as a transparent and cooperative trade partner.

"By promoting the recent alignment with US standards, Malaysia can reduce concerns of unfair trade practices, thereby facilitating constructive trade dialogues," he said.

To optimise this opportunity, Mohd Sedek suggested Malaysia maintain sustainable economic policies while aiming to sustain trade and current account balances.

"We can uphold transparency in foreign exchange operations. While transparency is important and can enhance Malaysia's image, it also opens the country to potential overreach by foreign powers, emphasising the need for a balanced approach.

"Malaysia also needs to restrict currency interventions. Constraining intervention to instances of genuine market disorder is advisable, though Malaysia should retain enough flexibility to respond decisively in times of economic volatility," he said.

The economist said Malaysia's exit from the currency watchlist largely reflects its current account and trade balances aligning with the US Treasury's benchmarks, illustrating a measured and stable approach to economic policy.

"However, it is crucial to recognise that maintaining this status is an ongoing process; minor economic shifts could quickly place our country back under scrutiny.

"The fact that countries on the watchlist face significant reputational and policy risks underscores the need for Malaysia to navigate its fiscal and monetary strategies with precision," he said.

Mohd Sedek said that Malaysia's policy autonomy could be compromised if it adopts overly cautious practices to avoid re-inclusion to the monitoring list.

"Hence, the government needs balanced economic growth. While stability is critical, Malaysia should avoid overly conservative policies that might dampen its competitive edge.

"Proactive diplomacy is needed. Malaysia's diplomatic efforts with the US and other key economies should focus on shaping trade agreements that secure mutual growth while insulating against excessive US influence. Malaysia's involvement in international economic dialogue is significantly important," he added.

-- BERNAMA