KENANGA Investment Bank Bhd (Kenanga IB) has reaffirmed its distributive trade growth forecast for Malaysia, projecting a 6.5% increase in 2025, up from 5.5% in 2024.
The bank’s optimism is driven by expectations of stronger income growth and a boost from the tourism sector.
In its latest report, Kenanga IB highlighted that Malaysia’s distributive trade—which includes wholesale, retail, and vehicle sales—grew by 5.7% year-on-year (y-o-y) in recent months, marking a five-month high. However, the growth rate for the full year of 2024 is expected to reach 5.5%, a slowdown from the 7.7% recorded in 2023. This is below the bank's earlier forecast of 6.0%.
Despite the softer-than-expected performance in 2024, Kenanga IB remains positive about sales growth for 2025.
The bank anticipates that the rise in household incomes, spurred by increases in minimum wages and government salary adjustments, will boost private consumption.
Furthermore, an uptick in tourist arrivals and sustained government spending are expected to provide additional momentum to the country’s retail and wholesale sectors.
However, Kenanga IB also cautioned that downside risks to Malaysia's distributive trade persist. The potential impacts of subsidy rationalisation in the second half of 2025 (2H 2025) could pose a challenge to consumer spending and shift consumer behavior.
Nevertheless, the bank believes that the negative effects will likely be mitigated, as the government is expected to continue providing support to vulnerable groups, though details on such measures remain unclear.
In a separate analysis, CIMB Securities Sdn Bhd has projected that Malaysia’s gross domestic product (GDP) growth for the fourth quarter of 2024 (4Q 2024) will be 5.0% y-o-y, slightly lower than the 5.3% growth seen in the third quarter of the same year. Full-year GDP growth for 2024 is now expected to reach 5.1%.
Looking ahead to 2025, CIMB Securities anticipates that Malaysia's GDP will continue to expand at a rate of 5.0%, driven by a recovery in external demand, particularly from the global technology sector, alongside strong investment inflows and resilient consumer spending.
This growth forecast aligns with the government’s target of between 4.5% and 5.5% for the year.
However, CIMB Securities also highlighted several downside risks that could dampen Malaysia’s economic prospects.
These include the potential escalation of a global trade war, which could exacerbate inflationary pressures worldwide and prompt central banks to adopt more cautious stances on interest rate cuts, potentially slowing down global and domestic growth.
Both reports suggest that while Malaysia’s economic outlook for 2025 remains positive, uncertainty on the global stage and domestic policy changes could still pose challenges that need to be carefully navigated. – February 13, 2025
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