BMI Country Risk & Industry Research is cautiously positive of Malaysia’s consumer spending outlook over 2024 as economic recovery feeds through to strong real consumer spending growth over the full year.
Household spending growth is expected to be more positive relatively to 2023 as economic growth persists and consumption levels normalise.
“We forecast household spending to grow by 5.0% year-on-year (yoy) over 2024 in real terms to a value of RM904.6 bil (at 2010 prices),” the research house pointed out in a consumer outlook commentary for Malaysia.
“Household spending over 2024 will mark the return to pre-COVID levels of growth (household spending grew at a real average rate of 5.2% yoy during the 2015-2019 period).”
Over 2025, BMI expects household spending to hold steady, growing 4.8% yoy in real terms to a value of RM948.0 bil (at 2010 prices) with spending to be constrained by an environment of high debt levels and its servicing costs.
“However, easing inflation and a tight labour market will support spending as real wage growth returns to positive territory to support purchasing power over the year,” projected the research house.
Delving further, BMI stated that its forecast for yoy growth in Malaysia’s consumer spending over 2024 is in line with its country risk team’s forecast that the economy will grow by a real rate of 4.4% yoy over the year.
In this regard, real private final consumption as a percentage of GDP (gross domestic product) has been rising from 57.9% of total GDP in 2021 to 58.6% of total GDP in 2024.
“The fading of base effects and pent-up demand, tighter credit conditions and a weakening global growth outlook will pose significant growth headwinds, driving this slowdown in growth,” cautioned the research house.
“However, compared to other markets, Malaysia will still post solid growth. The recovery of the tourism sector, especially as Mainland China re-opens for travel, should provide some offset.”
Over 2024, BMI expects the ringgit to remain stable against the greenback at RM4.60/US$ from 2023 to 2024.
“Malaysia remains heavily reliant on imports to meet local demand and the stability of the exchange rate will mean that while it will not benefit from cheaper imports, consumer spending growth will not be hindered by a weakening exchange rate,” opined the research house.
“We believe that this backdrop will result in consumer spending over 2024 remaining stable.” – July 16, 2024
Main image credit: Atap.co
