BY SHERIDAN MAHAVERA
Published: 23 June 2015 8:28 PM
Datuk Seri Abdul Wahid Omar says households who consume more local produce will not be highly affected by the low ringgit value. – The Malaysian Insider pic by Seth Akmal, June 23, 2015.
The ringgit's plunge in value will have a "manageable impact" on Malaysian households said Datuk Seri Abdul Wahid Omar, since most of the food they consume is produced locally.
The Minister in the Prime Minister's Department, said the impact of the low ringgit differs according to whether someone is an exporter of goods or consumer of imports.
"If someone relies on imported goods then the impact is high. In terms of the average household most of the produce (that is consumed) is produced locally, so overall the impact will still be manageable," Wahid told reporters after attending a dialogue session, #tanyagomen on the 11th Malaysia Plan in Kuala Lumpur today.
Wahid was responding to concerns that the fall of the ringgit to a nine-year low of about RM3.70 against the US dollar, was hurting consumers since they would have to pay more for imported goods.
On June 22, The Malaysian Insider report quoted economists and a consumer group warning that the ringgit’s plunge would raise prices of goods in the coming weeks.
Wahid was confident that Malaysia would be able to weather the impact of a weak ringgit due to the country’s strong financial systems, and a healthy trade and current account surplus.
“The good news is that our current account surplus is still sizeable and we will be able to maintain the surplus in 2015 even with low oil prices. This is very positive.”
According to financial website Investopedia, a nation’s current account is the difference between its savings and its investment.
It is defined as the sum of the balance of trade (goods and services exports minus imports), nett income from abroad and nett current transfers.
The current account is an important indicator of an economy's health, according to Investopedia.
The trade balance is generally the biggest determinant of the current account surplus or deficit.
He also said many of Malaysia’s companies had borrowings, which are denominated in ringgit, lessening the impact of foreign currency fluctuations.
“So the impact to corporate is not that big as we are in better financial shape than we were before (in the late 1990s).
“Our financial system is strong and liquid and the ample foreign reserves point to a stable economy.” – June 23, 2015.
~ The Malaysian Insider