In recent weeks, the Malaysian Ringgit has seen an unprecedented surge in its value, making it the best performing currency in the world against the US Dollar.
However, this rosy picture may not last for long as economists are raising the alarm over the Ringgit potentially losing its value due to Malaysians taking their money to spend overseas instead of locally.
Ringgit at risk of weakening due to overseas spending
Speaking to FMT, Goh Lim Thye, an economist from Universiti Malaya (UM), warned that should an outflow of funds continue, it will pose a threat to the Ringgit’s strong performance.
This comes after it was reported that 100.000 Malaysians spent a total of RM130 million in southern Thailand during the long Malaysia Day weekend last month.
“As more Malaysians exchange Ringgit for foreign currencies, such as the Thai baht, the supply of the Ringgit in the market increases, potentially leading to its depreciation.
“A weaker Ringgit, in turn, increases the cost of imported goods, adding inflationary pressures on the economy,” he said as quoted by the news portal.
Goh’s view was echoed by Putra Business School’s Ahmed Razman Abdul Latif, who urged the government to ramp up efforts in wooing foreign tourists to Malaysia and encourage them to spend more that Malaysians do overseas.
Both economists also concurred on the view that rerouting spending towards the local economy will positively impact business growth and productivity.
“Increased spending triggers higher demand, which prompts businesses to ramp up production or increase their service capacity. This will add on to the growth of business and productivity, as long as the growth in demand is sustainable.
“Conversely, higher household spending translates into greater demand for products and services. This, in turn, will spur businesses to ramp up operations, make investments in infrastructure, and create more job opportunities to meet consumer needs,” explained Goh.
Do you agree with the economists’ view? Share with us in the comments!
READ ALSO:
