Malaysia’s consumer spending outlook remains constrained by high household debt, even as the broader economy shows signs of resilience. In its latest report, research firm BMI, a unit of Fitch Solutions, noted that household debt reached 69.5% of GDP in the fourth quarter of 2024. This was slightly higher than the 69.3% recorded in the previous quarter, based on data from Bank Negara Malaysia.

BMI stated that elevated household debt continues to limit future borrowing capacity and reduce disposable income. Although Bank Negara has begun easing monetary policy, high debt servicing costs are still weighing on spending power.

Consumer Sentiment And Retail Activity Soften

Consumer confidence weakened notably in early 2024. According to the Malaysian Institute of Economic Research, the consumer sentiment index averaged 87.1 in the first quarter, down from 89.4 in the fourth quarter of 2023. This was one of the lowest readings since mid-2022 and remained well below the long-term average of 96.5 between 2005 and 2023.

Retail sales growth also showed signs of moderation. Year-on-year retail sales rose 4.9% in May 2025, slightly above April’s 4.7% but slower than rates recorded earlier in the year. This suggests household spending momentum is beginning to cool.

Inflation And External Risks Add Pressure

Inflationary pressures, particularly in essential items like food and fuel, remain a concern. Food price inflation eased to 2.1% in June 2025, down from an average of 2.5% in the fourth quarter of 2024. However, BMI highlighted that price pressures continue to affect low- and middle-income households. Should inflation accelerate again, the central bank may be required to tighten policy, increasing debt servicing costs further.

Malaysian consumers are also exposed to a range of external risks. These include global supply chain disruptions, geopolitical tensions, and trade barriers that could increase prices and affect product availability. Longer shipping routes, rising logistics costs, and potential retaliatory trade measures are expected to keep supply chains under strain. BMI also warned that a deep recession in the United States could dampen global demand and impact Malaysia’s consumer sector.

Spending Expected To Grow, But Risks Remain

Despite these headwinds, BMI maintained its consumer spending growth forecast of 3.8% for 2025, rising to 5.0% in 2026. These projections are supported by expected wage gains and continued monetary easing. However, the outlook remains sensitive to inflation developments and global economic conditions.

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• TAGS:
• BMI
• Consumer Spending
• Fitch Solutions
• High Household Debt
• Household Debt