In Singapore, we’ve been fortunate to witness the Singapore Dollar (SGD) strengthen considerably over time against many major currencies. This trend has underscored Singapore’s economic resilience and stability on the global stage.
In recent years, the Singapore Dollar has also gained ground against the Malaysian Ringgit (MYR), reflecting the dynamic relationship between these two closely connected neighbouring countries. As major trading partners, Singapore and Malaysia share extensive economic ties, which makes the exchange rate between the SGD and MYR particularly significant for both nations.
However, there has been a notable shift since mid-July. The Malaysian Ringgit has reversed its previous downward trend and begun to appreciate against the Singapore Dollar. This development has implications not only for individuals travelling between the two countries but also for businesses that operate across borders.
With the recent depreciation of the Singapore Dollar relative to the Malaysian Ringgit, Singaporean businesses face new challenges and opportunities. Here are three ways in which Singaporean companies might be affected by these currency fluctuations:
#1 Lower Wages For Malaysian Workers Who Commute To Singapore
Many Malaysians live just over the border in Johor Bahru but commute to Singapore daily for work. This saves them money as the cost of living – from rent to food prices – is much cheaper in Malaysia versus Singapore. Additionally, their Singapore Dollar wages are much higher in the Little Red Dot versus what they can earn in similar roles in Malaysia.
Indeed, over 300,000 Malaysians cross the Causeway daily to come and work in Singapore. With a weaker Singapore Dollar, which has declined by 6% against the Ringgit since late July, these workers will have less money to spend.
Will these workers stop working in Singapore? This is unlikely given that the wage gap between Singapore and Malaysia is still very high. But given that take-home salary is now lower (in Ringgit term), these commuting workers may want to reduce their spending given they have effectively been dealt with a 6% pay cut since July.
Read Also: Working In Singapore But Living In Malaysia. Which Country Do You Have To Pay Taxes In?
#2 Higher Spending From Malaysian Tourists
Singapore might not seem like a high-priority destination for Malaysian tourists, but the city state still appeals to them given its cultural ties and geographic proximity to Malaysia.
According to the Singapore Tourism Board (STB), as of 2019, Malaysia ranked 7th in terms of tourism spending in Singapore, totalling around S$733 million.
Even during the first ten months of 2023, when the Singapore Dollar was strengthening rapidly against the Ringgit, visitor arrivals from Malaysia recovered to around 90% of their 2019 level. Their spending had also picked up considerably in the first half of 2023.
Singapore’s robust international entertainment and leisure events calendar means it remains an attractive destination for Malaysian tourists. As a result, with a weakening Ringgit, this could accelerate the pace of arrivals and spending from Malaysian tourists as their currency will go further in Singapore. Potential businesses that could benefit include attraction sites, like Universal Studios, shopping hotspots, and dining establishments.
#3 Higher Business Cost For Singapore Companies With Operations In Malaysia
When the Singapore Dollar weakens against the Malaysian Ringgit, Singaporean business operations in Malaysia may face heightened financial pressures due to rising costs. Expenses such as salaries, rent, utilities, and other local services, paid in Ringgit, become more expensive when converted back to Singapore Dollars. This can strain budgets, as businesses now need to allocate more SGD to cover the same expenses, potentially squeezing operational budgets and impacting overall financial health.
Read Also: Singapore & Malaysia: 4 Key Statistics That Showcase Our Economic Partnership
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