TA Research said the growth in the DTI suggests that personal spending will continue to be a key driver of overall gross domestic product growth in the first quarter.
PETALING JAYA: Private consumption is expected to remain the primary driver of economic growth, with a projected expansion of 5.5% in 2025.
TA Research said this outlook is supported by a resilient labour market, steady income growth and contained inflation.
“Consumer spending is also likely to receive an additional boost from higher civil servant salaries, a minimum wage increase and rising tourist arrivals, particularly benefiting the retail, food and beverage, and leisure sectors,” the research house told clients in a report.
It said Malaysia’s Asean Chairmanship this year could serve as an additional catalyst, attracting more business activities, international events and increased spending, particularly in urban centres and hospitality-related industries.
“However, the rationalisation of the RON95 fuel subsidy remains a key downside risk. Higher fuel costs could erode disposable income, particularly for lower- and middle-income households, potentially weighing on discretionary spending.”
TA Research said the overall impact will depend on the timing and magnitude of subsidy adjustments, as well as the effectiveness of targeted financial aid programmes designed to cushion the impact on vulnerable groups.
Despite these risks, strong consumer confidence, policy measures aimed at supporting household spending and ongoing structural improvements in the labour market are expected to sustain private consumption growth in the coming years, it added.
In the report, TA Research also noted Malaysia’s distributive trade index (DTI) grew by 3.8% on a year-on-year basis in January, reaching 158.1 points. This marked a slowdown from the 4.4% growth recorded in the preceding month. “On a month-on-month basis, the DTI contracted by 1.8%, reversing the 1.5% month-on-month gain in December 2024.
“Similarly, distributive trade sales registered a modest 4.6% growth to RM148.9bil, easing from the 5.7% increase recorded in the prior month.”
TA Research said the growth in the DTI suggests that personal spending will continue to be a key driver of overall gross domestic product growth in the first quarter.
“While the pace of growth moderated slightly in January, we anticipate a stronger spending pattern in February and March, driven by the festive seasons of Chinese New Year and Ramadan.”
These celebrations typically lead to higher household consumption.
