Malaysia’s Retail Sales Forecast for 2025: Optimism Amid Rising Costs

Malaysia’s retail sales are predicted to grow in Q1 2025 after a disappointing Q4 2024 performance. Sales rose 3.5% from October to December 2024, below expectations. Retailers are hopeful for improvement due to Chinese New Year and stable unemployment, despite rising living costs and inflation concerns. Retail Group Malaysia has raised its growth forecast for 2025 to 4.3%.

On March 20, Retail Group Malaysia announced that retail sales in Malaysia are anticipated to improve in the first quarter of 2025, following a disappointing performance in the last quarter of 2024. In the October-December 2024 period, retail sales increased by 3.5%, which fell short of the 4.4% growth previously expected and the 3.8% growth noted in July-September 2024. This downturn is attributed to heightened living costs and shorter school holidays.

Despite the challenges, retailers expressed optimism about an upturn during the Chinese New Year festivities and school holidays. Retail Group Malaysia indicated that operators in department stores, supermarkets, and the fashion sector are particularly aiming for a robust recovery in the first quarter of 2025.

The unemployment rate remained stable at 3.2% towards the end of 2024, closely aligned with the 3% threshold seen as indicative of full employment. Inflation during this period was a manageable average of 1.8%. However, consumers are concerned about escalating living costs due to impending policy changes, including the rationalization of subsidies for RON95 petrol by mid-2025 and anticipated hikes in electricity tariffs.

Retail Group Malaysia cautioned that while a significant portion of Malaysian households will continue to benefit from government electricity subsidies, businesses will face increased operational costs. This situation may result in retailers transferring some of these costs onto consumers.

For the entirety of 2025, Retail Group Malaysia has adjusted its retail sales growth forecast to 4.3%, up from the previous estimate of 4.0% made in November 2024. Unlike last year, which saw retail sales growth of 3.8%, the outlook for 2025 suggests a more favorable environment.

Moreover, food-and-beverage businesses may encounter challenges with operational costs, compounded by a weaker Malaysian ringgit affecting the prices of raw materials. The firm also noted that ongoing boycotts against several international franchises due to tensions in the Middle East could lead to both temporary and permanent outlet closures across Malaysia.

In summary, Malaysia’s retail sector is expected to experience growth in early 2025 despite a challenging end to 2024. Factors such as Chinese New Year celebrations and steady employment rates may bolster sales. However, rising operational costs and the impact of inflation pose risks. Retail Group Malaysia has raised its retail sales growth forecast to 4.3% for 2025, while businesses, particularly in food and beverage, are likely to face ongoing challenges, including currency fluctuations and geopolitical issues.

Original Source: theedgemalaysia.com