Malaysia’s Retail Sales Expected to Rebound in Early 2025

Retail Group Malaysia anticipates a recovery in retail sales during Q1 2025, following a 3.5% growth in Q4 2024, which fell short of expectations. Despite economic pressures like rising operational costs and inflation, festive seasons offer potential boosts. The retail growth forecast for 2025 is now 4.3%, above previous estimates.

According to Retail Group Malaysia (RGM), Malaysia’s retail sales are expected to rebound in the first quarter of 2025 following disappointing growth in the last quarter of 2024. Retail sales grew by 3.5% from October to December 2024 compared to a forecasted 4.4% and a 3.8% increase in the previous quarter, largely attributable to the rising cost of living and reduced school holidays.

Retailers are optimistic about increased sales driven by the Chinese New Year celebrations and upcoming school holidays. RGM indicates that department stores, supermarkets, and the fashion sector are particularly aiming for a significant recovery during the first quarter.

The unemployment rate has remained stable at 3.2%, close to the economists’ full employment level of around 3%. Inflation was manageable at an average of 1.8% for the quarter. However, consumers are preparing for a rise in living costs due to fiscal policies, including adjustments to fuel subsidies and electricity tariffs scheduled for mid-2025.

RGM cautions that while 85% of Malaysian households will still receive government electricity subsidies, increased operational costs for businesses may result in higher prices for consumers. Consequently, the retail sales growth forecast for all of 2025 has been adjusted upwards from 4.0% to 4.3%, following a 3.8% increase in 2024.

Furthermore, food and beverage operators in Malaysia anticipate challenges from rising operational expenses and a weakened ringgit, which inflates the cost of raw materials. The ongoing boycotts against certain international franchises amid the regional conflicts are likely to lead to additional temporary or permanent store closures in the near future.

The retail sector in Malaysia is poised for growth in early 2025 despite a lag in the previous quarter, with hopes pinned on festive seasons. Nonetheless, rising operational costs and external economic factors pose challenges for businesses and consumers alike. With adjustments to retail forecasts reflecting cautious optimism, stakeholders must navigate a complex landscape shaped by economic policies and consumer sentiment.

Original Source: theedgemalaysia.com