Economists warn of weaker ringgit as Malaysians spend RM130mil abroad

 

Malaysian tourists flocked to markets and attractions in Southern Thailand over a long weekend last month, boosting the Thai economy. (Bernama pic)

PETALING JAYA: 

Economists are warning that an outflow of funds could weaken the ringgit, after Malaysians spent a whopping RM130 million in Southern Thailand over a long weekend last month.

Universiti Malaya’s Goh Lim Thye said that while such spending indicates an increase in the purchasing power of Malaysians, the fact that it is taking place overseas may impact the local economy.

“As more Malaysians exchange ringgit for foreign currencies, such as the Thai baht, the supply of Malaysian 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 told FMT.

Goh’s views were shared by Ahmed Razman Abdul Latif of Putra Business School, who suggested that the outflow could be countered by 

attracting more foreign tourists to Malaysia and encouraging them to spend more than Malaysians do abroad

.

It was previously reported that nearly 100,000 Malaysian tourists took advantage of the long Malaysia Day weekend to vacation in Southern Thailand – contributing more than 1 billion baht (about RM130 million) to the Thai economy.

Both Goh and Razman said redirecting spending towards the local economy would bring a positive impact on business growth and productivity.

Increased spending stimulates higher demand, which prompts businesses to ramp up production or increase their service capacity. This will contribute to the growth of business and productivity, so long as the growth in demand is sustainable.

Goh said Malaysia’s retail sector saw a 26.5% increase in sales in Q1 2023, driven primarily by strong post-pandemic consumer spending.

Higher household spending translates into greater demand for products and services,

 he said.

This surge in demand encourages businesses to scale up their operations, invest in infrastructure, and create more job opportunities to meet consumer needs. - FMT