Public to pay more for goods as ringgit tumbles

PETALING JAYA: Malaysians should brace themselves to pay more for goods and services with foreign content and relook at their spending habits as the ringgit continues to fall at an alarming rate.

As the man on the street grapples with rising costs since the introduction of the Goods and Services Tax in April, the situation will be compounded by inflation due to an increase in the prices of imports.

Economist Yeah Kim Leng said as the price of imports increases, prices of domestic goods using imports as raw materials will also increase, causing an increase in the general prices of all goods and services.

The ringgit hit a fresh pre-peg 17-year trough yesterday, falling as much as 1.79% to 4.2430 per US dollar.

Malaysia pegged the currency at 3.8000 against the dollar in September 1998 and maintained it until 2005.

“The public will have to cope with the changes in the import of goods and services. Sacrifices will need to be made. Household spending will need to be relooked at,” Yeah told theSun.

Among the hardest hit will be those studying abroad as parents will need to fork out more to pay for tuition fees.

At the same time, with the value of the ringgit rapidly falling, overseas travels whether for business or leisure will be more costly.

“Malaysians will have to think twice if they plan to buy assets overseas as well,” said Yeah.

He said the rapid decline of the ringgit will see importers pass-through import prices to the consumer to mitigate the foreign exchange losses.

“As the local currency loses more value, importers’ margins are being squeezed significantly. They would have no choice but to pass the cost to consumers,” he explained.

Yeah said the ringgit depreciation will see a major impact on sectors that are “import-intensive.”

Among the sectors are the automotive industry that has high import content, highend retail stores with imported branded goods as well as the iron and steel industries.