KUALA LUMPUR (Jan 14): Consumer spending in Malaysia appears resilient and may be sustained in the near term with policy measures, economists said, shrugging off the latest data showing slower retail and wholesale trade.
With full employment in the economy, measures already announced, including higher civil servant salaries and national minimum wage, will provide support for private consumption in 2025, according to CIMB Securities, TA Securities, and Kenanga Investment Bank.
“The services sector is expected to remain robust, with tourism and consumer-related industries benefiting from the resurgence of tourist arrivals and favourable labour market conditions,” BIMB Securities said.
Data out on Monday showed wholesale and retail trade growth decelerating to 4.7% year-on-year in November. Growth of retail sales and that of the motor vehicles eased ahead of December holidays and school breaks that usually bring a surge in festive shopping and year-end promotions.
Caution, however, is rising due to potential acceleration in global inflation from escalation in trade tensions, on top of domestic cost of living pressures from planned subsidy rationalisation. Most recently, the government has announced rationalisations of various aids and assistance targeting the richest 20% of the population, cutting them off from subsidies on electricity and haj.
By the middle of 2025, the government is planning to retarget subsidies on the most widely used RON95 petrol.
“The overall impact will hinge on the timing and scale of subsidy adjustments, as well as the effectiveness of targeted financial aid programs aimed at protecting vulnerable groups,” said TA Securities.
Externally, downside risks have risen, CIMB Securities said. “The potential escalation of trade tensions may heighten global inflationary pressures, which may lead to global central banks adopting a more cautious approach to rate cuts, potentially dampening growth prospects,” it flagged.
Source: TheEdge - 15 Jan 2025
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