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What does a depreciating currency mean for actuaries?

Note: this is written from a Malaysian perspective but should be applicable for other countries with similar issues.

The depreciation of the Malaysian ringgit is not a new phenomenon, rather it has been a gradual one happening over many decades. In this write up, I will not be discussing the macroeconomic reasons and ramifications, nor will I provide my 2 cents on what the Malaysian government should do to reduce the rate of depreciation. I believe there are other professionals better placed to do that.

Rather I will look at it from the perspective of what it means for us, and what we can do. The perspective of actuaries is rather unique, for reasons I will explain below.

The unique position of actuaries

Actuaries have a unique blessing - our profession is a truly global one, with an under supply of experienced and qualified actuaries in most regions of the world.

This means that we have a much higher global mobility, being able to get jobs and business in many countries without too much trouble.

How does a depreciating currency impact our lifestyle?

Malaysia is a net importer. This means that as our currency gets weaker, it will be more expensive for us to import goods and services. This increase in cost gets passed on through the supply chain and results in an increase in living costs.

This impacts many aspects of our lives from food, household items, healthcare costs etc.

The value of our savings and investments also get impacted due to the eroding value of the ringgit, requiring higher investment returns.

Our ability to travel abroad also gets impacted.

To a certain extent, we may be able to mitigate and reduce costs, by switching to locally produced goods and services, cutting back on leisure travel and overall being more economical. However at some point it starts getting more difficult to cut down on our lifestyle.

Low and middle income earners feel the pinch faster as they may have had limited their lifestyle already and will not have much room to cut down further.

From a savings standpoint, there are options to diversify and hedge our currency risk by investing in assets denominated in foreign currencies.

So what other choices do we have?

Migrating abroad is a common choice, admittedly for good reasons, but not a perfect one. The grass may seem greener on the other side, and some patches of the grass may indeed be so, but there are some advantages of being at home too.

Most developed markets are experiencing recession and inflation simultaneously now (stagflation), perhaps not officially (yet?) but it does have the indications. Migrating actuaries can still find jobs with time and connections, but it’s a tougher market now.

What else can we do?

This brings me to the advantages I see in terms of increasing our income.

The positives of a depreciating currency

Generally exporters benefit from a depreciating currency. So those who operate an export oriented business or work for such a business stand to gain the most.

In the actuarial sphere, there are a number of export oriented businesses.

MNC Insurers, Reinsurers, Outsourcing hubs, Consultants can all be export oriented if they wish to be, and this is where I see the greatest potential.

Malaysian actuaries have a strong reputation worldwide for strong technical skills, communication skills, and good attitude. Many have become leaders across the world.

With the currency depreciation, we have become a very affordable option, and I dare say the best option for employers and businesses looking for high quality actuarial talent.

Hence I see an upcoming boom in the demand of actuarial talent in Malaysia - both in terms of jobs and business. This boom has already been happening in India for some time now.

If you are seeking for employment - I would suggest to look for employers who are export oriented, giving you worldwide exposure and the likely upside of the increasing demand of actuarial services from Malaysia.

The worldwide exposure can place you in a good position if and when you wish to migrate (the world is our oyster), and the increased demand translates into higher remunerations with time.

When life gives us lemons, let us make lemonade!


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