THE recovery in Malaysia’s consumer spending will rely on the Government’s ability to vaccinate enough of the population so as to allow for the gradual easing of movement restrictions.
However, Fitch Solutions Country Risk & Industry Research has expressed concern that the Malaysian authorities have thus far been slow to administer doses. As of April 25, Malaysia has only administered 4.0 vaccine doses per 100 people.
“While we still hold a positive outlook for the Malaysian consumer for 2021, we have revised down our consumer spending forecasts for the year as a result of surging cases and the re-implementation of stricter restrictions on movement and non-essential retail,” the research house pointed out in its latest commentary on Malaysia’s consumer outlook 2021.
“We have revised down our real household spending growth forecast for 2021 to 3.0% year-on-year (yoy) from the previous forecast of 11.0% yoy.
While still positive, Fitch Solutions rationalised that this is partly caused by base effects.
The estimated -4.3% y-o-y drop in 2020 real household creates a low yoy base for 2021 to grow from.
In nominal terms, total household spending will be worth RM922 bil (US$222 bil) in 2021, slightly lower than the RM932.9 bil (U$D225.3 bil) estimated for the pre-COVID-19 environment in 2019.
According to Fitch Solutions, retail sales in Malaysia continue to post yoy contractions as there has been no significant relaxation in restrictions, thus impacting both consumers and retailers.
“We also note that continued restrictions on inter-district and inter-state travel within the Klang Valley (centered on Kuala Lumpur and includes its adjoining cities and towns in the state of Selangor) which accounts for approximately 60% of retail sales in the country will delay this recovery,” opined the research house.
“However, these restrictions continue to speed up the development of the country’s e-commerce sector. The online retail sales index portrays e-commerce activity having surged to record 23.1% growth yoy.”
In line with its downward revision, Fitch Solutions has also adjusted downward its gross domestic product (GDP) growth forecast to 4.9% from 10.0% previously.
“The recent lockdown will result in a resurgence in unemployment which would significantly dim the prospects for a recovery in domestic demand,” projected the research house.
“Unemployment rates in 2021 will remain elevated as businesses (especially small and medium enterprises) slowly recover and increase employment.” – April 30, 2021
