2020 Budget Likely to Include Measures to Sustain Private Consumption

Malaysia’s real GDP growth rose by a better-than-expected 4.9% yoy in 2Q19, higher than 4.5% in 1Q19, led by the strength of Malaysian consumers (see Fig 1). Growth in private consumption rose strongly by 7.8% yoy in 2Q19 (7.6% in 1Q19), supported by stable income, festive spending as well as select government measures such as Bantuan Sara Hidup (BSH) and special Raya assistance. This was reflected in the wholesale, retail and motor vehicle segments during the quarter. In particular, sales of motor vehicles rose sharply by an average of 23.6% yoy in April-May (8.3% in 1Q19), albeit lower on a yoy basis in 2Q19 (see Fig 2). However, on a quarter-to quarter basis, sales of motor vehicles rose from 2.3% in 1Q19 to 6.6% in 2Q19. Besides that, loans extended by the banking system to consumption credit remained steady, rising by 2.5% yoy in 2Q19 (2.5% in 1Q19). The strong consumer spending was also reflected in higher imports of consumption goods, which rose by 8.1% yoy in 2Q19 from a low of 0.8% in the previous quarter.

Strongest Private Consumption Growth Amongst Asean Countries

Regionally, Malaysia's growth in private consumption has grown at a consistent pace, rising above 7% yoy over the past five quarters. Growth has also exceeded the Asean-5 private consumption growth level since 1Q17. In 2Q19, Malaysia’s private consumption growth rate remained the fastest amongst ASEAN countries, higher than the Philippines (5.6%), Indonesia (5.4%), Thailand (4.4%) and Singapore (3.4%).

Source: Affin Hwang Research - 22 Aug 2019