Malaysians cut back on imported goods as ringgit weakens

The falling ringgit has translated into higher prices for imported goods, which has hurt demand from consumers.

Zunaira Saieed

Zunaira Saieed

The Straits Times


In the year to date, the ringgit has weakened against the US dollar by 5.5 per cent, trading at RM4.6450 at Thursday’s close. PHOTO: BT FILE

June 23, 2023

SINGAPORE– Malaysians are cutting back on imported consumer goods and switching to cheaper, locally made alternatives due to the weaker ringgit.

In the year to date, the ringgit has weakened against the US dollar by 5.5 per cent, trading at RM4.6450 at Thursday’s close.

In the past 12 months, the ringgit has fluctuated between RM4.7479 to the greenback in November 2022 and RM4.2435 in January 2023.

The falling ringgit has translated into higher prices for imported goods, which has hurt demand from consumers.

Ms Engku Kay said comparing prices has become the norm for her.

“I am now buying cheaper products compared to before, as long as the quality of the product is not compromised.

“For instance, I used to buy international clothing brands like Zara, but after the rising prices, I have switched to purchasing local brands such as Kree that are 80 per cent cheaper,” said the 41-year-old business owner.

Malaysia’s import growth of consumption goods has already slowed in the first five months of this year, growing an average of 1.1 per cent year on year, compared with a 20.1 per cent year-on-year increase for the same period in 2022, Maybank Investment Bank chief economist Suhaimi Ilias said.

After a volatile trend in the first five months of 2023, he expects imports of consumer goods to be weak for the rest of the year due to the higher inflation and interest rate environment, as well as weak ringgit, reflecting cautious consumer sentiment and thus spending.

He said about 45 per cent of Malaysia’s imported consumer goods are food and beverage products. Others include clothing, cars, footwear, furniture and furnishings.

Businesses are also curtailing their imports in order to avoid building up unsold inventory, Mr Suhaimi said.

But not all sectors can afford to do so.

Mr Anand M, who owns an Indian garment shop in Kuala Lumpur, said it is important for his business to replenish inventory and display new items to attract shoppers.

The weaker ringgit has meant higher freight charges for his garments, which are imported from India, and he has had to absorb these costs, which impacts his bottom line.

“Malaysia is a very price-conscious market, and it is tough for us to pass the higher cost to customers. In the fashion business, it is important to also replenish our inventory as we cannot just showcase old stock,” he said.

The weaker ringgit is expected to cause consumer spending growth in 2023 to fall below the annual average of 7 per cent, said Bank Muamalat Malaysia chief economist Mohd Afzanizam Abdul Rashid.

Some businesses have taken the opportunity to offer cheaper local products as substitutes for pricier imported ones.

In April, agricultural firm Quantum Springs started a new venture selling napier grass to cattle and goat farmers in Johor as a substitute for imported animal feed. The imported animal feed costs three times more than napier grass.

The company has planted 20.2ha of napier grass and plans to increase this to 40.5ha in Johor. Revenue has grown by 15 per cent each month.

“We saw an opportunity to make money from import substitution when the ringgit weakened and inflation overseas made prices go up,” said Quantum Springs managing director Nazrin Navin Kumar.

Meanwhile, internal data from Malaysia’s Road Transport Department seen by The Straits Times showed that people in Malaysia bought more national cars for the first five months of 2023 compared with a year ago, while sales of the most popular imported cars fell.

Perodua sold 15 per cent more cars from January to May than in the same period a year ago, while Proton saw car sales boosted by 43.7 per cent.

In contrast, year-on-year sales of foreign marques for the same five-month period fell, with BMW taking the biggest hit at 56.6 per cent. Honda sold 10.2 per cent fewer cars; Mitsubishi, 5 per cent; Nissan, 37.4 per cent; and Volkswagen, 27.6 per cent.

With consumer sentiment generally more dismal, car buyers are plausibly turning to more affordable local makes.

Ms Julia Kamaruddin, a sales adviser of dealer Perodua Texajaya, said she has encountered buyers who had intended to get a Honda, but decided on a Perodua instead, as the Malaysia-made car is more affordable, and has lower maintenance costs and high resale value.

“There are buyers who bought Perodua as a second car for their children, as it’s cheaper than imported cars,” she said.

Mr Balan Jeya, 45, an editor who switched from a BMW to Proton in January, said: “National cars like Proton are better value for money than continental cars.”

The ringgit is expected to stay weak until the US Federal Reserve indicates that it will pause its interest rate hikes, China’s economy shows signs of picking up, and crude oil prices rise, said Maybank chief foreign exchange strategist Saktiandi Supaat.

“The weakness in the ringgit is mostly externally driven in the short term due to external cyclical factors. We foresee the ringgit to hover between the 4.4 and 4.6 range against the greenback from now until September,” he said.

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