Malaysia’s retail sales are projected to improve in Q1 2025 after a disappointing Q4 2024, with growth driven by Chinese New Year and school holidays. RGM has raised its 2025 retail sales forecast, while highlighting challenges from rising costs and economic policies.
Malaysia’s retail sales are anticipated to accelerate in the first quarter of 2025, following a weaker-than-expected performance in the last quarter of 2024. According to Retail Group Malaysia (RGM), retail sales experienced a growth of 3.5% from October to December 2024, which was lower than the projected 4.4% and the 3.8% growth reported in the previous quarter. This slowdown is attributed to the rising cost of living and shorter school holidays.
Despite this, retailers are optimistic about an upturn driven by the celebrations of the Chinese New Year and upcoming school holidays. The consulting firm noted that department stores, supermarkets, and the fashion sector are particularly focused on a strong rebound in the first quarter. Furthermore, the unemployment rate has remained stable at 3.2%, close to the full employment mark of 3%, while inflation during the last quarter averaged a manageable 1.8%.
Consumers are preparing for an increase in living costs due to policy changes, including a planned rationalisation of subsidies for RON95 petrol by mid-2025 and higher electricity tariffs. RGM cautioned that while a significant majority of Malaysian households will continue receiving government electricity subsidies, businesses are likely to face increased operational costs, which might be transferred to consumers.
For the entirety of 2025, RGM has updated its retail sales growth forecast to 4.3%, up from the previously projected 4.0%. In 2024, retail sales had already shown a growth of 3.8%. Additionally, food-and-beverage operators are expected to face challenges from rising operational costs and a weak ringgit, which inflates the prices of raw materials. Ongoing boycotts against certain international franchises, stemming from the Middle East conflict, may also result in further temporary or permanent outlet closures across Malaysia.
In summary, Malaysia’s retail sector is expected to rebound in early 2025, despite a disappointing finish in 2024. Factors such as festive celebrations and school holidays contribute positively to retail forecasts. However, rising costs of living and operational expenses present significant challenges to consumers and businesses alike, prompting heightened vigilance regarding expenses in the retail landscape. Overall, while there are positive outlooks, the industry remains cautious due to potential economic pressures.
Original Source: theedgemalaysia.com
