BMI, an offshoot of Fitch Solutions, projects a promising 5.0% year-on-year (y-o-y) surge in Malaysia’s household spending in 2023. This steady growth trend is anticipated to continue into 2024, bolstered by the country’s economic recovery which is set to foster robust real consumer spending growth.
According to a research report released today, the company suggests that diminishing inflationary pressures coupled with a significant drop in unemployment form the cornerstone of this stable consumer spending forecast. However, the report warns of potential risks such as an unexpected rise in inflation or a sudden economic downturn, both of which could drastically impact household purchasing power.
Based on 2010 prices, BMI estimates that real household spending in 2024 will increase by 5.0% y-o-y, amounting to a whopping RM910 billion. Consumer confidence levels, despite some inflationary pressures on certain commodities like food and fuel, have largely remained consistent, implying a positive consumer mindset across low and mid-income households.
As far as the local currency is concerned, BMI predicts that the Ringgit will strengthen against the US dollar, moving from 4.50 in 2023 to 4.40 in 2024. This shift is crucial, as Malaysia heavily depends on imports to fulfill local demand. The projected currency appreciation will drive further consumer spending growth by making imports cheaper.
BMI also notes that while inflationary pressures remain high in many markets, the rate of price changes is slowing. However, the situation in Malaysia has been somewhat milder, with inflation peaking at 4.7% y-o-y in August 2022 and latest data for May 2023 recording inflation at 2.8% y-o-y. The company’s country risk team forecasts inflation to trend downwards in the latter half of 2023, ending the year at 2.5% y-o-y and averaging 2.3% over 2024.”
This news is based on an article from malaymail.com.
