, Malaysia
Photo by Thilipen Rave Kumar (Pexels).

Retail recovery unlikely for Malaysia in 2021

The country’s consumer spending is tipped to exceed pre-pandemic levels by 2022.

Malaysia is unlikely to see a retail recovery before the end of 2021 despite accelerating vaccination campaigns, after the industry suffered weak retail sales over the year due to prolonged lockdowns, according to a report from Fitch Solutions.

Most of the country’s retail growth in 2021 mainly came from a low base, with the weaknesses in the industry stemming from the prolonged lockdown restrictions impacting both consumers and retailers, which has been severe in the populated regions of the country like the Klang Valley.

Klang Valley, centred on Kuala Lumpur and including its adjoining cities and towns in the state of Selangor, accounts for around 60% of retail sales in Malaysia, and lockdowns in the area have delayed the recovery in retail sales as a result.

“Although vaccinations are accelerating, they are unlikely to see the country achieve herd immunity before the end of 2021, making a surge in retail sales towards the end of the year improbable,” the report stated.

The country has been under a state of constant restrictions for the whole of 2021, the report noted. The government classifies this lockdown into four phases, with phase one being the strictest. All of Malaysia's localities are in either phase two to phase four.

Meanwhile, the disproportionately important Klang Valley is currently in phase 3, where food establishments can open from 6 AM to midnight and offer dine-in services for fully vaccinated persons with health protocols in place. Up to three unvaccinated individuals from each household can leave their residence to purchase essential items.

Not helping Malaysia’s retail situation is the high level of political risk resulting after its prime minister was replaced in August, and an ongoing concern that the COVID-19 outbreak could worsen over the coming months. These could further affect both retail sales and consumer confidence, Fitch said.

Consumer spending in Malaysia is expected to begin recovering to $218b (MYR915b) in 2022, exceeding pre-pandemic levels of $218b (MYR905b) in 2019 with household spending projected to grow by a real rate of 5.1%.

This is a notable improvement from the 5.4% YoY contraction estimated to $206b (MYR855b) for 2021, as pandemic curbs continued to weigh on domestic demand.

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