BMI, a company under Fitch Solutions, has predicted that Malaysia’s consumer spending will grow by 5% year-on-year (y-o-y) in 2023. This growth is also expected to continue into 2024, with the ongoing economic recovery driving strong growth in real consumer spending.

According to its research report, BMI said that this positive development can be attributed to two key factors: an easing inflation and a lower unemployment rate. “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, adding that real household spending over 2024 is forecasted to come up to a total of RM910 billion, based on 2010 prices.

In comparison, the real household spending for 2023 is currently recorded at RM866.6 billion (at 2010 prices), which is itself an improvement over the RM755.1 billion real household spending noted during pre-pandemic times in 2019.

BMI also highlighted that consumer confidence levels have been quite steady and positive, even though low and middle-income households may be somewhat affected by inflationary pressures in certain commodities – like food and fuel.

As for the local currency, BMI believes that the ringgit will strengthen against the US dollar in 2024, from the current 4.50 to 4.40 next year. “Malaysia remains heavily reliant on imports to meet local demands, and this appreciation will provide ta 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 further said.

BMI also stressed that although inflation in Malaysia remains somewhat elevated, Malaysia’s situation is still relatively tame in comparison to other markets. “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 commented.

(Sources: The Star, The Edge Markets)

• TAGS:
• BMI
• Fitch Solutions
• Household Spending