Should Singaporeans be happy when the Malaysian ringgit slumps?

The Malaysian Ringgit (MYR) has slumped to an all time low at RM3.12 to the Singapore dollar (SGD). This sounds like an excellent chance to head to Johor Bahru (JB) and make all the purchases while it lasts. The already cheap food and groceries just got cheaper and fuel is about a third of Singapore's price.

But like the saying goes, what goes around comes around.

We might be rejoicing now that the MYR has spiraled downwards, but in the mid to longer term, the ones that would be suffering the most may be Singaporeans.

Why so gloomy?

While many Singaporeans may joke about the weak currency and other matters across the border, such as 1MDB scandal and depreciating MYR, we fail to realise that Malaysia is the third largest economy (after Indonesia and Thailand) in South East Asia, with more than 5.5 times the population of Singapore.

Further, Malaysia is within the top three largest export destinations for Singapore's goods and services. This means it has a big influence on the Singapore dollar as well as our the health of our economy.

Impact of the falling ringgit on Singapore

  • The Malaysian Ringgit (MYR) slumped to an all time low at RM3.12 to the Singapore dollar (SGD) on Nov 28.
  • This sounds like an excellent chance to head to Johor Bahru (JB) and make all the purchases while it lasts. The already cheap food and groceries just got cheaper and fuel is about a third of Singapore's price.
  • But while we might be rejoicing now that the MYR has spiraled downwards, but in the mid to longer term, the ones that would be suffering the most may be Singaporeans.
  • Many often forget that Malaysia is the third largest economy in South East Asia, and within the top three largest export destinations for Singapore's goods and services.
  • If Singapore's currency becomes too strong, there will be a reduction in Malaysian demand for Singapore's exports which will ultimately reduce Singapore's earning power.
  • The short term benefits may be apparent but in the long term, any weaknesses in the economies of our major trading partners will not be good news for Singapore.
  • But there are ways to take advantage of the weaker ringgit. As individuals, we can head to the moneychangers and buy up some MYR.
  • Singaporeans should definitely consider visiting JB for their delicious food and other goods. There are also many things that are simply cheaper in Malaysia.
  • A combo adult ticket, which allows you entry to the theme park and the water park, costs RM175 while the child and senior option costs RM140.
  • An entry ticket to the park featuring the world famous cat (which caused confusion earlier this year before creator Sanrio confirmed it really is a cat) costs RM75 for both adults and children.
  • The rib-smacking restaurant opened an outlet at the Komtar JBCC, a stone's throw from the Woodlands Checkpoint. They currently have a promotion called the Tony's Fiesta Platter, which costs RM148.
  • In light of the recent painful developments - it still hurts thinking of the Lions' exit from #AFFSuzukiCup - here's how much you will fork out for the Malaysian national team jersey.
  • If you have a couple of hours to while away, laser tag is a fun option for the young and young-at-heart.
  • Singaporeans can also consider investing in Malaysia. If we were to invest in the KLCI Index at Dec 31, 2006, we would have made a handsome return on about 48.6 per cent.

With Singapore being a small and open economy driven mainly by trade and world economics, the amount of wealth we earn is largely derived from overseas purchases. If our currency becomes too strong, Malaysia, and our other trading partners, would have a reduction in demand, which will ultimately reduce Singapore's earning power.

The short term benefits may be apparent but in the long term, any weaknesses in the economies of our major trading partners will not be good news for Singapore.

Of course, we can draw out the entire flow chart of what may happen. Lower GDP growth, weaker economy, lower wage growth and bonus payout, less consumption, even weaker growth outlook, job loss. The end point is really up to our imagination.

What can we do to take advantage of this?

As individuals, there are generally just two things we can do about this:

1. Enjoy while it lasts. As individuals, we can head to the moneychangers, buy up some MYR, travel to JB and splurge because we can - with historically high valuations of SGD (relative to MYR), we should definitely consider visiting JB for their delicious food and other goods.

2. Being Dollars And Sense, we take this opportunity encourage everyone to consider investing in Malaysia. If we were to invest in the KLCI Index at 31-Dec-2006, we would have made a handsome return on about 48.6 per cent. This amount does not even take into account of all the dividends that would have been paid during the 10-year period. Although there might have been exchange rate risks to consider, the return thus far would have outweighed the exchange rate risk.

Do note that we should always do our due diligence before investing. Not because currency or other factors are in our favour for the short-term, then we blindly dump money in.

6 items S'poreans who want to save money shouldn't buy in S'pore

  • Many people think it's too "leceh" to drive across the Causeway to buy groceries. But it's probably because they don't know exactly how much money you can save by buying your food and toiletries in Johor Bahru.
  • A few years ago, you could save about 30 per cent on your groceries by buying in JB.
  • Now that the Malaysian Ringgit is lower than ever vis a vis the Singapore dollar, you can save much more, in many cases up to 50 per cent.
  • Unless you're talking about those awful assessment books for kids at Popular Bookstore, most books in Singapore have to be imported.
  • And they're not cheap-you can usually expect to pay about $15 to $20 for a paperback novel.
  • If you are ordering a fairly large shipment and don't mind second hand items, consider buying your books from Amazon's second hand section and then shipping them back using a service like Borderlinx or vPost.
  • For some reason, vitamins and dietary supplements are super expensive in Singapore. If you've ever walked into GNC, the prices are enough to give you a stroke.
  • If you're happy go buy all your furniture from Ikea, more power to you. But if you're the house-proud type who's willing to spend thousands of dollars on a sofa, consider buying your furniture and homeware in Bali or Thailand.
  • It's not just owning a car that's expensive in Singapore. It's also darned difficult to get your car serviced without being ripped off-many mechanics here are more concerned about getting you to replace parts than actually fixing your vehicle's problems.
  • If you know where to go, car and bike servicing in Malaysia can cost almost half the price. Although there are hundreds of popular recommendations, it's best to go with a friend who's familiar with a workshop in JB to be safe.
  • If you work in the sort of place where you actually have to show up looking decent, adding a few crisp tailored shirts or a slick suit to your wardrobe can make you look a bit more presentable.
  • But tailors in Singapore are expensive-you can usually expect to pay at least $1,000 for decent tailored suit.
  • Some people prefer Hoi An in Vietnam or even Shanghai, but Bangkok is the cheapest and easiest place to fly to and the destination Singaporeans are the most familiar with.


DollarsAndSense.sg is a website that provides bite-sized and relevant articles to help Singaporeans make better financial decisions.