BMI said easing inflationary pressures and a healthy reduction in unemployment would form the base for the stable consumer spending outlook.
PETALING JAYA: BMI, a Fitch Solutions company, foresees Malaysia’s household spending growing by 5% year-on-year (y-o-y) in 2023 and will continue its steady growth towards 2024 as the economic recovery feeds through into strong real consumer spending growth.
In a research report, it said easing inflationary pressures and a healthy reduction in unemployment would form the base for the 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 RM910bil based on 2010 prices.
Furthermore, it said consumer confidence levels had largely been steady, reflecting a positive consumer mindset even as inflationary pressures in certain commodities such as food and fuel weighed 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 (2H23) and into the start of 2024 will remain stable,” it said.
Other than that, it said inflationary pressures remained elevated in many markets and while the rate of price changes was slowing, it remained 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 2H23, ending 2023 at 2.5% y-o-y and averaging 2.3% over 2024,” it said. — Bernama
