The Falling Ringgit and What You Can Do About It

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The Malaysian ringgit has been losing its strength in recent months, hitting its lowest point in over two years. This decline can be linked to various factors, such as the uncertain global economy, the robustness of the US dollar, and Malaysia’s current account deficit.

This weakening ringgit has had several effects on Malaysia’s economy. It’s caused imported items to become pricier, contributing to rising inflation. Furthermore, it’s made it harder for local businesses to compete with foreign competitors.

The government in Malaysia is quite concerned about this situation. They’ve taken steps to try to bolster the ringgit, like getting involved in the foreign exchange market. However, they’ve also acknowledged that the ringgit’s decline is part of a global trend, and their ability to control its value is limited.

Impacts of a Weaker Malaysian Currency:

1. Higher Interest Rates: When the ringgit loses value, the central bank might raise interest rates to stabilize the currency. This can make it more expensive for consumers to handle their loans.
2. Increased Borrowing Costs: As the ringgit weakens, borrowing in foreign currencies becomes costlier. This might make it tougher for consumers to obtain loans for things like education abroad or property purchases.
3. Higher Prices for Imported Goods: As the ringgit loses strength, the prices of imported goods go up. Importers have to spend more ringgit for each unit of foreign currency needed to purchase imports.
4. Increased Inflation: The overall inflation rate is likely to rise as the cost of imported goods goes up. This can reduce the purchasing power of consumers.
5. Reduced Disposable Income: As the cost of goods and services rises, consumers will have less money left over for savings or other expenses.
6. Lower Living Standards: The general living standards for Malaysian consumers are likely to decrease as the ringgit weakens.

Dealing with a Weaker Ringgit:

The weakening ringgit presents a challenge, but there are steps that both the government and consumers can take to lessen its impact.

1. Reduce Debt: If you have debt in a foreign currency like the US dollar, you’ll be more vulnerable to the effects of a weak ringgit. If possible, work on reducing your foreign currency debt.
2. Invest in other Foreign Currencies: Consider investing or savings in other foreign currencies in money market funds through US based stock brokers. This can help safeguard your savings from the impact of a weak ringgit.
3. Support Local Products and Services: When you purchase local goods and services, you’re contributing to the Malaysian economy, which can help strengthen the ringgit.
4. Be Aware of Exchange Rates: When you make purchases in foreign currencies, stay informed about the current exchange rate. This will help you avoid overpaying for goods and services.
5. Use Credit Cards without Foreign Transaction Fees: If you plan to travel abroad, think about using a credit card that doesn’t charge foreign transaction fees. This will save you from incurring additional charges on your purchases.

Forecasts for other Southeast Asian currencies raising in values against the Malaysian ringgit for the next 5 years

• Indonesian rupiah (IDR): The Indonesian rupiah is expected to appreciate against the Malaysian ringgit over the next 5 years. This is due to Indonesia’s strong economic fundamentals, such as a large and growing middle class, a young and productive workforce, and a rich natural resource endowment.
• Thai baht (THB): The Thai baht s also expected to appreciate against the Malaysian ringgit over the next 5 years. This is due to Thailand’s strong tourism sector, which is expected to continue to grow in the coming years.
• Philippine peso (PHP): The Philippine peso is expected to be relatively stable against the Malaysian ringgit over the next 5 years. This is due to the Philippines’ strong economic growth prospects and its relatively low level of debt.