The currency’s swing “is no longer marginal”, which mean for foreign tourists planning a vacation here, costs would continue to rise.
PETALING JAYA: A stronger ringgit may be good for imports and help lower costs of inputs for domestic businesses, but may not necessarily work to the tourism industry’s favour, when looking at Thailand’s case, where a combination of a stronger baht and security issues have weighed on inbound visitor arrivals.
The ringgit’s strengthening momentum may even derail the government’s push for record-high tourism receipts targeted under Visit Malaysia Year 2026 (VM26).
The currency’s swing “is no longer marginal”, which mean for foreign tourists planning a vacation here, costs would continue to rise.
The government has set a goal of 47 million international visitors under VM26, with RM329bil in tourism revenue.
These figures demand not just luring in the foreign visitors but also a mix of higher spending travellers and longer stays.
Singapore, Indonesia and China were the top source markets
The ringgit surged 9% versus the US dollar last year, making it Asia’s best performer, and analysts expect the rally to continue, with projections that the currency could strengthen to below RM4. It closed the last day of trading in 2025 at RM4.06.
The ringgit appreciated against the currencies of all three countries last year, gaining 4% against the Singaporean dollar, 11.9% against the rupiah and up 5.6% against the yuan.
The ringgit’s strengthening trend may push tourists to consider other cheaper destinations in South-East Asia, or spend less in the country.
In Thailand’s case, a strong baht has been a deterring factor to higher foreign tourist arrivals, with numbers dropping by more than 7% from Jan 1 to Dec 28 last year.
Adit Chairattananont, secretary-general of the Association of Thai Travel Agents, reportedly said a stronger baht adds further pressure at a time when competition for international tourists has intensified.
An analyst told StarBiz that the Malaysian tourism industry could feel a similar heat if the ringgit’s rally continues to pick up pace.
“But, currency alone is not the deciding factor for tourists.
“More importantly is what kind of unique experiences that Malaysia can offer to its international guests.
“As for Thailand, the strong baht is not the only reason for the decline in visitor numbers. The Thailand-Cambodia border conflict has raised safety concerns.
“In a way, this is good for Malaysia. Due to our proximity, foreign travellers may consider coming to Malaysia and skip Thailand.
“But again, the question is, are we prepared to offer what the tourists actually look for?” said the analyst.
Tourism aside, the stronger ringgit has also raised concerns about Malaysia’s exports performance going forward.
The other looming issue from a stronger ringgit would be export competitiveness, with economists divided over how much of an impact this would have.
In a reply to StarBiz, OCBC foreign-exchange strategist Christopher Wong said: “A stronger ringgit may be a mild headwind at the margins, but not likely to be a major drag on exports in 2026.”
Wong noted that global demand, the electrical and electronics (E&E) cycle and commodity prices have driven Malaysia’s exports and outweigh what could be considered “moderate” currency movements.
Also, many exporters – especially in the E&E space – import a significant share of their inputs. Therefore, a firmer ringgit helps lower cost pressures, which offsets some of the competitiveness impact.
“As long as the appreciation is gradual and orderly, the impact on exports should be manageable.
“A sudden or sharp appreciation would probably start to feel less comfortable, particularly for small and medium enterprises and lower-margin exporters,” he added.
Wong expects the US dollar to weaken further against the ringgit by the end of the year, projecting the currency pair to “head lower towards RM4.00 per US dollar.”
IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan takes a similar view, but goes further in arguing that the usual “strong currency equals weaker exports” argument has become increasingly outdated for Malaysia.
“No. The traditional view misreads how Malaysia now competes in global trade,” he said, adding that the ringgit’s strength should be read “as the result of stronger macro fundamentals, sustained capital inflows and a more stable external position, rather than a loss of competitiveness.”
He said Malaysia’s export base has shifted up the value chain, where “reliability, scale and compliance matter far more than small changes in the exchange rate,” especially in sectors such as electronics and higher value manufacturing.
The ringgit’s direction can even be supportive for many exporters, he added, given the high import content of Malaysia’s supply chain.
“Most of these industries rely heavily on imported components priced in US dollars. When the ringgit strengthens, production costs fall, margins improve and balance sheets become more stable. This often offsets any loss from slightly higher export prices,” Sedek said.
He also cautioned against treating the ringgit as a single trigger point for competitiveness stress.
“There is no single number where the ringgit suddenly becomes damaging. What matters is whether the currency moves out of line with productivity, costs and investment flows,” he said.
“Given Malaysia’s current export structure and its reliance on imported inputs, the economy functions comfortably with the ringgit somewhere in the RM3.30 to RM3.70 range,” he said, adding that even a move “towards RM3.20” would not necessarily be a problem for most export sectors.
Bank Muamalat’s chief economist Mohd Afzanizam Abdul Rashid said other factors were also shaping the country’s exports outlook.
“Not entirely (referring to the impact of stronger ringgit on exports). Because there are other structural issues that are affecting the exporters,” he said.
He pointed to shifts in the technology supply chain, including China’s push to localise more of its ecosystem.
“For instance, the onshoring of China’s companies where some of them are striving for self-sufficiency in areas relating to the technology sector has affected the outsourced semiconductor assembly and testing players,” Afzanizam said, adding that the response for Malaysia would be more about upgrading capabilities rather than expect a weaker currency to boost competitiveness.
“Such dynamics require the exporters to move up the value chain by upgrading themselves in terms of their capacity and capability,” he said, adding that diversification is also crucial to reduce concentration risks.
