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WHAT’S BEHIND HIGHER PRICES IN JOHOR
To get a clearer picture of the factors behind cost-of-living concerns in Johor Bahru, TODAY spoke to economists to understand the big picture and whether Singaporeans are the main contributors to higher prices for staple goods.
Sunway University economics professor Yeah Kim Leng said that Singaporeans, too, are facing rising costs of living in their country, which has prompted them to travel to Johor Bahru for cheaper goods.
Singaporeans have been grappling with higher prices as the core inflation of the country rose from 3.0 in September to 3.3 per cent in October. In January and February, the figures stood at 5.5 per cent, a 14-year high.
“The rising cost of living in Singapore has driven many Singaporeans to shop for their daily essentials in Johor Bahru,” said Prof Yeah.
“To cope with the excess demand, Johor Bahru needs to effectively look into capacity expansion. If they cannot expand, and demand is greater than supply, this leads to excess demand, which will then cause upward price pressures and inflation.”
In economics terms, Prof Yeah described the phenomenon as “overheating”, which occurs when an economy is unable to expand to meet the increased demand, resulting in prolonged periods of inflation.
For now, he has yet to see Johor Bahru reach this stage despite the higher price pressures faced due to some slack in the labour and housing markets.
“Businesses may boom and charge higher prices, but we also have to take into consideration that most of this demand is seasonal. You only see a big surge in demand on the weekends and public holidays.
“These are the challenges faced by businesses in Johor Bahru. They will have to factor seasonality into their plans and ensure the business is still sustainable for the rest of the week when there’s no increase in consumer demand from Singapore.”
Prof Yeah said Johor Bahru can see the influx of Singaporean consumers as an opportunity instead of a threat.
“Johor has both a combination of investor demand and traffic from Singapore. The question now is how the state can advance further to tap into opportunities presented to them in this scenario.”
Dr Carmelo Ferlito, chief executive officer of Kuala Lumpur-based think tank Centre for Market Education, said Malaysia is now “paying the consequences” for the policies introduced to alleviate the financial burdens of households during the pandemic.
An example of one such policy, according to Dr Ferlito, is the launch of economic stimulus packages, such as Prihatin, which was said to be among the largest in the world.
The RM250 billion Prihatin package can be described as the Malaysian equivalent of Singapore’s Unity and Resilience Budgets in 2020.
Dr Ferlito told TODAY: “You cannot think … (you can) ‘switch off’ the economy to implement fiscal and monetary expansions, and not have inflation.” He mentioned this in reference to the MCO, which led to an economic standstill.
“So inflation was caused by the government, not by Singaporeans.”
Asked about the reason for Malaysia’s depreciating ringgit, Dr Ferlito attributed it to two main factors – recent geopolitical tensions, such as the Russia-Ukraine war, and China’s economic slowdown.
On the first point, Dr Ferlito noted that while it may seem as if the ringgit is weakening, in actuality, it is the US dollar strengthening because it is still considered the best reserve of value.
“In moments of uncertainty, the US dollar remains the refuge. The people tend to purchase more safe-haven currencies, so in turn, this has weakened the other currencies, and as a consequence, the ringgit suffers.
“This is paired with the high-interest rate policy adopted by the Federal Reserve, attracting foreign investors towards the greenback,” he said.
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