Weakening ringgit, politics affecting retail sector; prices may rise

Weak ringgit is affecting cost of goods due to higher import cost, says Retail Group Malaysia MD Tan Hai Hsin (pic). Graphics shows the declining foreign reserves.

PETALING JAYA: The weakening ringgit and unabating political issues in the country are affecting consumer sentiment and negatively impacting the local retail sector.

The weak ringgit is affecting the cost of goods due to higher import cost, according to Retail Group Malaysia (RGM) managing director Tan Hai Hsin.

“This will lead to higher retail prices.

“Higher import costs are affecting all retail sectors, from grocery stores, restaurants, fashion stores, furniture stores, electrical and electronics stores.

“Higher retail prices will be more apparent by the third quarter of this year. By then, Malaysian consumers’ purchasing power will decline further,” he told StarBiz.

He added that the current political developments in the country were affecting retail sales indirectly.

“The current political situation is affecting the consumer sentiment level or buying mood of Malaysian consumers. They are frustrated, confused and are uncertain of their future in this country. As a result, they are less willing to buy more.

“We hope these current trends (currency and politics) are temporary and that they will fully recover by the last quarter of this year.”

Tan said the goods and services tax (GST) has affected all retail sub-sectors (from retailers selling groceries, fashion accessories, electrical and electronics products, food and beverages and overseas travel) since April 1.

“Businesses of many retailers dropped from 20% to 50%. For the first two months after GST, consumers had been holding back on their purchases to observe the price movements of the retail goods and services. They were also waiting for more promotions by retailers.

“In addition, the confusion (such as service charges for food and beverage, Telco top-up cards, last minute announcement of products to be tax exempted, sudden increase in taxi fares) caused by the Government was one of the main causes for this drop in retail sales.”

Tan said consumers were frustrated by the conflicting messages by different Government departments and chose to delay their purchases.

“Shopping traffic had dropped in shopping centres for the first three months after GST.

“Nevertheless, they are still crowded during peak hours and on weekends. At the same time, trendy cafes cater to the young are still popular, especially on weekends.

“For the first two weeks of Ramadhan, sales were slow. However, retail sales picked up since. (But) it was not as good as last year.”

Last month, the Malaysia Retailers Association lowered the projected retail sales growth rate in 2015 for the third time from 4.9% to 4% as consumers hold back their spending due to the higher cost of living, a weak ringgit and the rising cost of doing business. It said consumers had been holding back on spending since the end of 2014 ahead of GST.