The Bright Side of the Falling Ringgit

Posted by Kris | Thursday, November 05, 2015 | , | 2 comments »

money
Money Money

rm50
Ringgit has fallen
This is a guest post from my friend, Michael Vincent. You can follow him on his twitter handle @mmichaels_21

With the Malaysian Ringgit (RM) plummeting to a 17-yearlow against the United States Dollar (USD) at RM4.28 to USD$1*, it is now the worst performing currency in Asia. 
*As of 4 November 2015


Several factors have contributed towards the ringgit’s slide, such as the decrease in global crudeoil prices, China’s devaluing of its currency, the drop in Bank Negara Malaysia’sforeign exchange reserves, financial scandals and growing political uncertainty in recent months.
While global investors and financial gurus are keeping an eye on how the situation develops, the truth is the sliding ringgit can have both a good and bad effect on the lives of ordinary Malaysians.
First up, let’s take a look at how the how the devalued ringgit can negatively impact our lives.

The Disadvantages of the Falling Ringgit

Less Spending Power Abroad

The lower foreign exchange rate for the ringgit against other currencies means that it has less value when converted to Singaporean Dollars, Indonesian Rupiahs, Thai Baht and other foreign currencies. Hotels, food and souvenirs abroad will be pricier and Malaysians will now have to think twice about going abroad as the cost of studying and travelling has risen up drastically.

The Rising Cost Of Inflation

As the value of the ringgit depreciates, the cost of importing goods into Malaysia will trickle down and be felt by Malaysian consumers. Many raw materials and components are imported into the country and the increased expenses of means local manufacturers will have to raise their prices. If you want to save more, consider buying commonly-used household items in bulk to reduce your spending.

Pricier Products And Services

With the price of products and services going up while the spending power of Malaysians remains unchanged, we may end up splashing out more money for the very same services we used to enjoy. One method to prevent this from greatly affecting your lifestyle is to start budgeting wisely and cutting off any unnecessary spending.

While the financial and economic challenges faced by Malaysians are all too real, there is a silver lining to the cloud hanging over the ringgit.

The Advantages of the Falling Ringgit

More Demand For Malaysian Exports
The weaker ringgit makes it affordable for foreign companies looking to purchase Malaysia’s exported goods such as palm oil, integrated circuits (e.g. semiconductors or chips) and natural gas. Local businesses who export domestic products overseas to markets like China, Europe and USA also stand to make a profit from the higher sales volume.

More Foreign Tourists In Malaysia

Unlike Malaysians who might feel the pinch of the weaker ringgit while travelling abroad, holidays in Malaysia are now even more affordable than ever before for foreign tourists. In 2014, 27.44 million tourist arrivals with RM72 billion in receipts were recorded in Malaysia. With so many tourists coming in to the country, local entrepreneurs and shops can benefit from this by offering unique products and services that can only be found in Malaysia and even offering cashbackincentives if they buy a certain amount.

More Foreign Direct Investments

Many foreign investors will be looking to diversify their foreign investments and the weaker ringgit makes it more affordable for these investors to operate in Malaysia. According to Deputy Finance Minister, Chua Tee Yong, foreigninvestments in Malaysia have reached up to RM477 billion* in June 2015.

With large multinational corporations (MNC) like Seagate in Penang and TheHershey Company  in Johor already having an established presence in Malaysia, other MNCs may follow suit and set up shop in Malaysia, opening up new local job opportunities.

**Source: “Malaysia record GDP growth of 5.3pc in first half, says Chua”, News Straits Times Business via Malaysian Investment Development Authority.                                                                                                                             
The ringgit may take some time before it fully recovers, but there are other ways to work around the depreciation of the Ringgit. Supporting local entrepreneurs and brands, taking a holiday in Malaysia and studyingin a local university are just some of the great ways to start off with! 


Digg Technorati del.icio.us Stumbleupon Reddit Blinklist Furl Spurl Yahoo Simpy

2 comments

  1. Happy walker // 11:11 AM  

    your advantage for ringgit fall is for those people who do business. employee like me wait die only, zzz

    Regards,
    (A Growing Teenager Diary Malaysia)

  2. Kris // 9:16 PM  

    Eventually need to do business..