KUALA LUMPUR: Malaysia's private consumption is projected to grow 7.2 per cent this year, underpinned by improving labour market, stable inflationary pressure and fiscal incentives.
MIDF Research said this would be a rebound from 1.9 per cent in 2021 and a 4.2 per cent contraction in 2020.
"Malaysia's consumer spending is expanding strongly as reflected in retail trade sales growth of 15.8 per cent year-o-year (Y-o-Y) in the first five months of 2022.
"We believe the pent-up demand will continue until end of this year provided that no significant change in overall inflationary pressure.
"With the reopening of international borders, tourism activity will improve modestly yet still below pre-pandemic levels," it said in a note today.
MIDF Research said Malaysia's distributive trade sales expanded 19.9 per cent Y-o-Y in May 2022, the biggest gain in a year.
Most significantly, retail spending continued expanding strongly by 29.9 per cent Y-o-Y and 5.1 per cent month-on-month (M-o-M).
Sales of motor vehicles and wholesale grew by double digit rate of 20.1 per cent and 11.7 per cent Y-o-Y.
The firm said the effects of special Employees Provident Fund withdrawal and international borders reopening had provided extra boost to consumer spending starting in April 2022.
"On top of that, economic fundamentals in Malaysia strengthen as employment growth hit record high at 3.4 per cent Y-o-Y and unemployment rate stayed at pandemic-low 3.9 per cent in the same month," it said.
MIDF Research said despite of food inflation rise, overall price pressure in Malaysia remained stable thanks to the capped retail fuel prices.
"Looking ahead, we expect private consumption and services sector to contribute stronger in the second quarter (Q2) 2022 and second half 2022 gross domestic product growth amid strong and sound domestic demand.
"The three-month moving average of distributive trade sales was 15.0 per cent Y-o-Y (Q1 2022: 8.6 per cent Y-o-Y) for the Q2 2022," it added.