Malaysians see lower profits, cut travelling, amid weaker ringgit

The ringgit has been hovering at 25-year lows in recent weeks, hitting almost 4.8 to the US dollar last month, the lowest since the 1998 Asian financial crisis.

Hazlin Hassan

Hazlin Hassan

The Straits Times


The ringgit has been hovering at 25-year lows in recent weeks, hitting almost 4.8 to the US dollar in October. PHOTO: LIANHE ZAOBAO

November 13, 2023

KUALA LUMPUR – A sharp downturn in the fortunes of the ringgit, which hit a near-record low against the US dollar and reached an all-time low against the Singapore dollar in October, has sent jitters through Malaysian households and businesses alike.

The ringgit has been hovering at 25-year lows in recent weeks, hitting almost 4.8 to the US dollar last month, the lowest since the 1998 Asian financial crisis when it hit a historic low of 4.885 to the greenback.

The Singapore dollar surged to 3.5086 against the ringgit on Oct 24. It first breached the 3.5 mark on Oct 23, according to Bloomberg data.

The latest slump has sparked concern among Malaysians, many of whom curtailed overseas travel plans and now have to spend more when buying imported goods.

The ringgit has since recovered to 4.72 per US dollar.

Housewife Melissa Lim, 45, from Kuala Lumpur said her family had planned to holiday in Singapore, but scrapped the idea due to the unfavourable currency exchange rate for the ringgit.

“It’s very expensive. One night’s stay will cost us at least RM1,000 (S$288) for four people,” Madam Lim told The Straits Times.

Apart from travel, Malaysians also have to fork out more on items such as food due to the ringgit’s slide. Food prices in Malaysia climbed by 3.9 per cent year-on-year in September.

Adding to inflationary pressures, owners of small food businesses have had to raise prices due to the soaring cost of ingredients in a country which is a net importer of food, purchasing some RM79 billion worth of foreign food items in 2021.

Ms Nicole Nadia, 38, who sells ready-to-eat food products from home such as spicy sambal squid, said that the prices of imported raw materials for her products have increased drastically.

“We have no choice but to increase the price according to the current pricing of raw materials. This is the first time we have (had) to do this since we started our business in 2021,” she told ST.

The price of dried squid from Vietnam has gone up from RM36 per kg to RM50, while the price of chilli paste made from dried chillies imported from India and Thailand has increased from RM5 to RM7 per kg, she said.

“It may look like just a few ringgit, but when we add the other ingredients we purchased, the difference is really noticeable.”

Her sambal squid used to cost RM16 for 250g, but she has had to raise the price to RM20.

Some companies that import goods are making losses because of the rising dollar and constantly fluctuating exchange rates.

“The cost of bringing in hardware for businesses has escalated and the rising US dollar means that quotes we received earlier are not valid any more,” said Ms Sue T., who works for an information technology company that imports IT hardware such as microphones.

She declined to give her full name, as she was not authorised by the company to speak to the media.

“When the bid for a tender takes a longer time, by the time the bid or tender is won, the US dollar has risen again. The buffer given can’t even cover the cost,” she said.

She explained that when bidding for bigger projects, even a marginal difference in the currency exchange could cause a loss.

“Let’s say when you put in an order for RM4.4 for US$1 and you put in a buffer (of up to) RM4.5, meaning that you agree to absorb the difference if it fluctuates that much. But now the US dollar is RM4.7, so it eats up our profit.”

The exchange rate has also impacted her personal spending power, as she discovered during a recent trip to Thailand.

“The value of the ringgit has depreciated so much. Even travelling to neighbouring countries like Thailand burned a huge hole in my pocket with the weakening ringgit,” she said.

Other business owners as well as hoteliers are also experiencing a downturn due to the lower ringgit, as profits are eaten up and people become more cautious with their spending.

Mr Sri Ganesh Michiel, president of the Malaysia Budget and Business Hotel Association and deputy secretary-general of the Federation of Malaysian Business Associations, said that most goods used in business operations are imported from other countries and therefore have become more expensive.

“When the ringgit weakens, our operational costs go up. Investors also slow down, they get worried. We need to ensure that our currency is always strong. It affects the mindset of investors,” he told ST.

Hotels are seeing a slowdown also because people are wary of spending on non-essentials.

“When people make less profit and the economy is down, they tend to cut down on travel,” he said, adding that the government should provide incentives for tourists to travel domestically.

Despite the economic woes as a result of a weaker ringgit, the government has no plans to peg it to the US dollar, as it did during the 1998 crisis, said Deputy Finance Minister II Steven Sim on Nov 1.

The trajectory of the ringgit will be closely watched in the months ahead, but an economist said the worst may be over.

Dr Yeah Kim Leng, professor of economics and director of the Economic Studies Programme at the Jeffrey Cheah Institute on South-east Asia at Sunway University, said the strength of the greenback may have peaked.

“The ringgit, along with most other currencies, is reversing its slide against the dollar. That respite appears to be holding as the US economy is showing signs of the deleterious effects of high interest rates,” he told ST.

He pointed out that the weakening of the US economy points to a reversal of the dollar’s strength.

“We see brighter days ahead for the ringgit, as well as for the currencies of other emerging economies.”

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