Tuesday, October 3, 2023
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Good news, bad news for Malaysia’s economy

ANN/THE STAR – After persevering for two years against the pandemic, Malaysia’s economy looks to be making progress, especially the tourism and export sectors that could capitalise on the weakening ringgit to bounce back.

Federation of Malaysian Manufacturers (Penang) Chairman Datuk Lee Teong Li said exporters of electronic goods, machinery and equipment benefitted from a weaker ringgit. “Compared to about three months ago when the ringgit was MYR4.39 to USD1, export-oriented manufacturers, especially those with low import content, have gained about five per cent, given the exchange rate of MYR4.50 to USD1 today.

“Earnings in US currency helped offset the higher cost of imported raw materials and logistics,” he said.

Importers, however, would lose out, as their earnings in ringgit would not offset the higher logistic charges for air and sea freight and importation costs, Lee said.

“The higher interest rates worsen the situation. Currently, the bank interest rate is about 4.5 per cent compared to three per cent a year ago. They are, therefore, hurt by a weaker ringgit and high interest rates,” he added.

A money changer in Penang gesturing with banknotes. PHOTO: THE STAR

FMM has over 4,000 members, of which about 500 are in Penang. Some 40 per cent of its members are exporters.

Malaysian Institute of Economic Research head of research Shankaran Nambiar said that while a weaker ringgit made Malaysian exports attractive and benefitted exporters, it was also equally valid that countries whose currency had depreciated against the US currency would eventually import less.

“The Japanese and Chinese currencies have depreciated recently, affecting their purchasing power in buying from Malaysia, a situation that wouldn’t spare local exporters, as Japan and China are Malaysia’s key trading partners,” he said.

Small and Medium Enterprises of Malaysia (Samenta) honorary secretary SH Yeoh said the downside of a weaker ringgit was, of course, the price of imported raw materials shooting up.

“Margins for those selling only to the domestic market will be squeezed. The higher import cost will have to be passed on to consumers, affecting demand eventually,” he said. Yeoh added that a weaker ringgit also meant that overseas holidays would be expensive.

On the brighter side, a weakening ringgit would attract more tourists to the country.

“Since the opening up of the country’s borders, leisure and medical tourists have been coming in.

“There’s no doubt that a weaker ringgit played a pivotal role in enhancing Malaysia’s competitive edge as an attractive leisure and medical tourist destination.”

Industries Unite MCO 2.0 Coordinator Datuk Irwin Cheong said with the stronger US dollar, businesses had to pay higher fees for their advertisements on social media.

“Most of us get our items from China and other countries. However, for advertisements on social media, we still have to pay in US dollars,” he said.

Industries Unite is a coalition of 120 trade associations and chambers of commerce, as well as associations from the retail and hospitality sectors.

In Petaling Jaya, trade associations also warned that while the stronger US dollar might make Malaysian exports competitive, the weaker ringgit might lead to higher production costs and would not bode well for importers.

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