Malaysia to record ‘healthy’ spending growth in 2022: Fitch

It posted a three-year high 29.9% growth in retail sales in May.

Consumer spending in Malaysia is expected to log a “healthy” growth of 4.4% year-on-year in 2022, higher than the estimated 1.2% growth last year which saw the demand weighed down by the pandemic.

In a report, Fitch Solutions said this will follow the wider headline economic growth which is expected to reach 5.2% in 2022.

“The stable headline macroeconomic environment will provide a solid footing which is facilitated by a healthy vaccination drive and improvements in key economic verticals such as freight, logistics, and tourism,” Fitch said.

With this, Fitch expects household spending to grow “modestly” to 5% in 2023 as the pandemic-related restrictions ease further, unlocking the significant pent-up demand.

The expected slowing of inflation to 2.1% in 2023 from 4% in 2022 will also support real income growth and discretionary spending trends.

It added that the retail sales have returned to growth with an average of 15.8% from January to May. Retail sales in May reached a three-year high at 29.9%.

“Consumer confidence has largely been steady, reflecting a positive consumer mindset even as inflationary pressures in certain commodities such as food and fuel weigh on low- and mid-income households,” Fitch said.

Consumer confidence in the first quarter of 2022 averaged around 107%, which suggests that the reopening of borders, relaxing of restrictions, and the growing economic activity boost consumer spending despite the inflationary pressures.