Retailers expect better 2018 on sustained economic growth

The retail sector sees sales falling by 1.1% YoY for 3Q17, but RGM projects a 6% growth rate in 2018


Malaysia’s retail sector expects a stronger 2018 on improved consumer confidence, disposable income and tourist numbers.

The sector has since 2016 been experiencing slower growth due to weaker consumer spending, low consumer confidence level and rising cost of operation for the participants.

Retail Group Malaysia (RGM) MD Tan Hai Hsin said the currency depreciation since early 2016 has been impacting retailers’ profit margins due to higher import costs of raw materials, unfinished goods and retail goods.

The currency depreciation in the last two years has also resulted in higher cost of living for consumers.

“To improve retail sales, the government needs to improve the economic conditions of our country.

“When economic growth is broad-based, more Malaysians will have higher take-home pay — which means higher purchasing power,” Tan told The Malaysian Reserve in an email.

He believes the upcoming 14th General Election (GE14) will stimulate economic activity and boost consumers’ confidence level.

“The ringgit value against the US dollar is also expected to return to the level in 2014 before the end of next year.

“Strong and sustainable economic data in China and the US next year are also expected to boost retail sales,” Tan added. RGM recently reported that retail sales declined by 1.1% year-on-year for the third quarter of 2017 (3Q17).

Hence, RGM has revised its annual growth forecast down- wards from 3.7% to 2.2% for the retail industry in 2017 — the third revision since the end of last year.

Based on this latest revision, the total sales turnover for Malaysia retail industry in 2017 is estimated at RM100 billion. RGM also projects a 6% growth rate in retail sale for 2018, although the recovery of the Malaysian retail market next year will highly depend on GE14, external economic demand and the ringgit’s performance.

Malaysian Retail Chain Association VP Datuk Liew Bin said most of the retail players, especially the major retailers, recorded declining numbers in their businesses this year.

Liew, who is also Bagman Corp Sdn Bhd group CEO, said retailers expect brighter days in 2018 as the world economy is projected to sustain its growth path.

“Malaysia’s economy is expected to improve next year, with the World Bank projecting higher gross domestic product for the country this year, as well as other positive sentiments, including stronger oil price.

“Retail sector is also highly dependent on the tourism sector, and we expect to get four million visitors next year, which will definitely boost the retail industry,” Liew concluded.