Malaysians will have a harder time at the cash register as they head into the third quarter of 2015, following the sharp drop in the Malaysian Ringgit’s value, warned a consumer group.
Retail Group Malaysia (RGM) managing director Tan Hai Hsi warned that the falling RM, coupled with political uncertainty in the country, is adversely affecting consumer sentiment and as a consequence the local retail sector.
“Higher import costs are affecting all retail sectors, from grocery stores, restaurants, fashion stores, furniture stores, electrical and electronics stores,” Tan told The Star Online.
“Higher retail prices will be more apparent by the third quarter of this year. By then, Malaysian consumers’ purchasing power will decline further.”
The ringgit has been in freefall as of late, with the local currency now trading at 3.99 to the US dollar, the lowest it has been since the Asian financial crisis of 1998.
In 1998, the Federal Government moved to peg the ringgit at 3.80 to the dollar, and only removed the currency control in 2005.
Investor sentiment towards the Malaysian economy has soured following political turmoil in the country, evidenced most clearly by Prime Minister Najib Razak’s struggle to contain the scandals surrounding sovereign development fund 1Malaysia Development Berhad (1MDB).
Consumers were already discouraged from spending as they usually did with the implementation of the Goods and Services Tax (GST) on April 1, leading many business to take a temporary hit in sales.
“Businesses of many retailers dropped from 20 per cent to 50 per cent. For the first two months after GST, consumers had been holding back on their purchases to observe the price movements of the retail goods and services. They were also waiting for more promotions by retailers,” Tan said.
“In addition, the confusion (such as service charges for food and beverage, Telco top-up cards, last minute announcement of products to be tax exempted, sudden increase in taxi fares) caused by the Government was one of the main causes for this drop in retail sales.”
