The association projects a 4.5% growth rate for the nation’s retail sector in 2019, slightly lower than the 4.7% forecast in 2018

by SHAHEERA AZNAM SHAH / pic by HUSSEIN SHAHARUDDIN

Consumer and business sentiments in the local retail sector are expected to moderate this year as the country’s economy will be mostly driven by private consumption and investments amid curtailed government expenditure.

Retail Group Malaysia (RGM) MD Tan Hai Hsin said the association projects a 4.5% growth rate for the country’s retail sector this year, slightly lower than the 4.7% forecast for last year.

“The consumers’ spending pattern this year will be highly dependent on the economic performance and the impact of the cost of living.

“For 2019, the Pakatan Harapan government expects the national economy to be driven mainly by private sector consumption and investment.

“The government expenditure is likely to moderate this year in order to cope with the heavy public debt,” he told The Malaysian Reserve.

Tan said the country’s inflation rate is expected to escalate due to the implementation of a different tax system and higher projected global oil prices.

“After a small increment in the average consumer price in 2018, which was mainly due to the zero-rated Goods and Services Tax, the inflation this year is expected to rise faster as consumers are imposed with the Sales and Services Tax and the projected hike of global oil prices,” Tan said.

However, he added that the floating mechanism of the domestic fuel prices, which is expected to relieve consumers’ fuel spending, will reduce the cost of living and help in boosting retail spending.

“In Budget 2019, a new mechanism on the RON95 fuel subsidy is said to commence from the second quarter of 2019 (2Q19), in order to control the cost of living of the lower-income group as 90% of Malaysians use RON95 to power their vehicles,” he said.

Tan said the government will continue to distribute monetary incentives to Malaysians in order to alleviate the financial burden and strengthen domestic demand.

The government will launch the “Buy Malaysian Products” campaign this year with a budget of RM20 million to encourage Malaysians to support the local-made retail goods.

“This is similar to the campaign during the last Asian financial crisis and we will see the return of many exhibition events held throughout the country.

In contrast, Tan said the higher minimum wage that was implemented starting from Jan 1, 2019, may lead to higher retail prices despite alleviating the lower-income group’s financial burden.

“The increment of the minimum wage by RM100 to RM1,100 per month nationwide will also reduce the income constraints of the lower-income group, for a monthly salary below RM3,000.

“However, the higher minimum wage will result in a higher cost of goods for retailers, that eventually will be absorbed by the consumers,” he said.

In further boosting the domestic consumption, Tan said the government should be more focused on introducing new policies to stimulate broad-based economic activities in order to achieve a better economy across all sectors.

“Since the 14th General Election, the new government has been very busy fixing problems and reducing debts, and very few economic policies have been implemented that will stimulate broad-based economic activities.

“In the next six months, the government should introduce more new economic master plans and new policies that will stimulate broad-based economic activities as a higher GDP will lead to higher take-home pays and higher retail spending subsequently,” he said.

*The article has been updated.