KUALA LUMPUR – BMI, a Fitch Solutions company, foresees Malaysia’s household spending growing by 5% year-on-year (y-o-y) in 2023 and continuing its steady growth towards 2024 as economic recovery feeds through into strong real consumer spending growth.
In a research report today, it said easing inflationary pressures and a healthy reduction in unemployment would form the base for a stable consumer spending outlook.
“Risks to this outlook would be higher-than-anticipated inflation and more aggressive economic weakness which will weigh heavier on household purchasing power,” it said.
It said real household spending over 2024 will grow 5% y-o-y to a total of RM910 billion based on 2010 prices.
Furthermore, it said consumer confidence levels have 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.
On the ringgit, BMI expects it to appreciate against the US dollar, strengthening from 4.50 in 2023 to 4.40 in 2024.
“Malaysia remains heavily reliant on imports to meet local demand and this appreciation will provide a further tailwind to consumer spending growth as imports become cheaper.
“We believe this backdrop will significantly mean that consumer spending over the second half of 2023 (H2 2023) and into the start of 2024 will remain stable,” it said.
Other than that, it said inflationary pressures remain elevated in many markets and while the rate of price changes is slowing, it remains higher than central banks’ targets.
“Compared to other markets, inflation in Malaysia has been relatively tame, peaking at 4.7% y-o-y in August 2022 and the latest data for May 2023 puts inflation at 2.8% y-o-y, the lowest inflation reading since May 2022 although we note that this is higher than what Malaysian households are used to.
“Our country risk team forecasts inflation will trend downwards in H2 2023, ending 2023 at 2.5% y-o-y and averaging 2.3% over 2024,” it said. – Bernama, July 12, 2023
