Malaysian consumers to spend more in 2017

Malaysian consumers are adjusting to inflated costs and employers are, perhaps, catching up with the higher cost of living and increasing salaries — at least according to BMI Research.

In the latest forecast of consumer spending in Malaysia in the next five years, Malaysians spending will increase an average of 5.3 per cent, a ripple effect from a growth in disposable income.

“The country is [also] experiencing a shift in retail formats with the government supporting development of ‘big-box boulevards’ — concentrated centres of shopping outlets on the outskirts of the cities,” writes the report.

BMI Research says that household spending will modestly expand despite a weakened currency. It also projects a growth of 5.8 per cent year on year. “We forecast a total household spending to expand at an annual growth rate of 7.5 per cent between 2-17 and 2021 and reach a total figure of RM1 trillion (up from RM774 billion, 2017), which converts into USD172 billion in 2017 and USD265 billion in 2021.”

In February, Nielsen Malaysia published a report stating that Malaysians’ consumer sentiment has dropped, reaching the lowest percentage points in its assessment.

“Malaysia now has one of the lowest consumer confidence ratings in Southeast Asia, which does not bode well for local demand in the country for 2017,” said Richard Hall, country manager, Nielsen Malaysia.

(Read also: M’sian retailers hope for stronger sales amid weak consumer demandEconomist says retail, F&B hit hardest by inflationMalls are delaying their openings in Malaysia)

“With such low confidence level, we cannot expect consumer spending levels to move positively for the next six months. As such, I believe that consumer spending will remain flat at best.”

The government’s Budget 2017 focused mainly on raising disposable income of Malaysians. Stemming from the blueprint includes more affordable housing to counter rising cost of living and allocations for education, healthcare and maintaining the country’s deficit below 3.1 per cent. Analysts have said that it is pertinent for the government to maintain its fiscal deficit at 3.1 per cent or lower.

During the latest reading of 2016 National Transformation Programme, Prime Minister Najib Razak said that it is due to unwavering political will and the 2014 implementation of the Goods and Services Tax (GST) that has helped the country dial its fiscal deficit from 6.7 per cent in 2009 to 3.1 per cent in 2016.

Malaysia is due for an election next year. With the cabinet pushing forward with its many foreign invested developments, such as Bandar Malaysia, it is uncertain whether the rakyat’s (the people) confidence in the government remains intact.

(Read also: China deepens its ties with Malaysia’s economy; Foreign retailers still think Malaysia is a ‘must’ market)

BMI Research further cites that its projection includes urbanisation and a younger generation’s increasing demand on non-essential items and luxury goods.

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