Economist sees ‘sustained price hikes’ as Malaysians struggle to stretch the ringgit

Economist Geoffrey Williams foresees ‘sustained price hikes’ throughout the year.

PETALING JAYA: A little over a decade ago, RM100 was all Sundre Sadhu Singh needed for groceries, with change to spare.

These days, though, the purple bill – Malaysia’s highest denomination banknote – is nowhere near enough to cover the cost of what she needs.

“Five years ago, prawns cost around RM15 per kg. Today, it is RM40 per kg, while kangkung prices have increased from RM1 to RM5 per bunch,” she told FMT.

Sundre, who works as a lecturer, is one of many struggling to stretch their purchasing power against a backdrop of a weakening ringgit and increasing prices.

The national currency closed at RM4.65 against the US dollar on Jan 16. On Wednesday, it ended lower against the greenback for the third consecutive day after the US Federal Reserve said it was in no hurry to cut rates.

“As the ringgit weakens, imported goods get more expensive, including items used to manufacture products,” Bait Al Amanah analyst Yugendran T Kannu Sivakumaran told FMT.

“Since most countries trade in US dollars, we will be receiving less (value of imports) per ringgit than we received before.”

He added that issues like India’s ban on rice imports had led to a reduced supply, pushing up the price of imported rice.

Last September, Padiberas Nasional Bhd raised the price of imported white rice from RM2,350 per metric tonne to RM3,200 per metric tonne.

More recently, it was reported that Pakistan might impose similar restrictions on its exports of onions, even as food business owners in the Klang Valley complained about increasing onion prices.

Geoffrey Williams of the Malaysia University of Science and Technology predicted “sustained price hikes” and a reduced supply of goods throughout the year.

“Businesses will not reduce their prices now that the market has become accustomed to them. They will also blame high costs (of raw materials) which may have come down. This is not new and will continue,” he told FMT.

The rising food prices also come amid plans for a hike in taxes such as the sales and service tax from 6% to 8%, an average surge of 22 sen per cubic metre for water tariffs come Feb 1, and the introduction of a 10% sales tax on imported low-value goods.

Universiti Teknologi Mara senior lecturer Firdausi Suffian said the government could expand initiatives to alleviate the burden of lower income groups.

He said initiatives like Menu Rahmah, People’s Income and Agro Entrepreneur programmes, the RM1,500 minimum wage, and the progressive wage model could help lower the cost of living and enhance the people’s purchasing power.

“With adequate income (for the people), facilitated by these government initiatives, significant changes could be observed within two to three years, enabling people to better cope with the challenges of the escalating cost of living,” he told FMT.

The government has so far pledged to increase its Rahmah cash aid for 2024, raising the maximum rate from RM3,100 to RM3,700.

The cash aid is set to benefit nine million people or 60% of the country’s adult population.