Food prices might go up again, economist says after ringgit slump

An economist has warned of a possible increase in import costs after the ringgit fell to its lowest level of RM4.71 against the US dollar last week. 

Barjoyai Bardai said the development would affect food prices, citing the value of food imports which hit RM70 billion this year. 

"The cost of imported goods will effectively become more expensive as importers raise their prices," he said. 

"This is because they need to pay for imports in US dollars." 

In July, the ringgit was the worst performing currency of the year in Southeast Asia. 

It has continued its downward trend, due to several factors including an increase in US interest rates and weak trade with China, Malaysia's largest trading partner. 

Its previous low was recorded on Sept 19, when it slipped to 4.6890/6940 against the US dollar. 

Speaking to MalaysiaNow, Barjoyai said the price of goods in developed countries in general had also increased as a result of inflation. 

"The lack of supply is due to psychological factors," he said, citing the conflict in Ukraine as well as the trade war between China and the US. 

"All of this will contribute to more uncertainty in the global market, so we need to be prepared for the possibility of import costs going up." 

Prime Minister Anwar Ibrahim previously said that the government was making efforts to reduce its dependence on food imports. 

Earlier this year, meanwhile, Economy Minister Rafizi Ramli made waves after saying that the ringgit slump was good for the country.

He said Malaysia's income, especially in the oil sector, could increase due to sales in US dollars.

In June, he said the government would not immediately intervene in the capital market and ringgit decline as the cost of doing so would be high, and the funds should instead be channelled to economic development. 

The opposition, for its part, has been quick to jump on the issue, with its leader Hamzah Zainudin accusing the government of doing nothing. 

He said the successive declines in the ringgit value last week indicated the government's failure to take immediate intervention measures.

Economist Adilah Zafirah however said that the ringgit slump was unlikely to affect food imports as the US is not a major exporter to Malaysia. 

"At the moment, we are reducing our use of the US dollar for trade with other countries," Adilah, of Iris Institute, said. 

"Malaysia's exports to other countries will also become cheaper if purchased in US dollars." 

And while Malaysia might face pressure to raise its interest rates in tandem with the US, Adilah said, a variety of factors would need to be taken into account before the rates are determined.