Fitch unit predicts Malaysia’s retail spending recovery to hit bumps as lockdown prolongs

Syed Jaymal Zahiid
·2-min read
A general view of the Suria KLCC shopping mall during the movement control order in Kuala Lumpur January 16, 2020. — Picture by Hari Anggara
A general view of the Suria KLCC shopping mall during the movement control order in Kuala Lumpur January 16, 2020. — Picture by Hari Anggara

KUALA LUMPUR, Jan 20 — Fitch Solutions Country Risk and Industry Research has revised its consumer spending forecast for Malaysia, citing the current round of movement restrictions that is expected to delay recovery in the retail sector despite the initial anticipation that it would rebound this year.

The Fitch Group unit slashed its real household spending growth forecast to 7.2 per cent year-on-year from the previous forecast of 11.0 per cent for the same period.

“While we still hold a positive outlook for the Malaysian consumer, several recent events have led us to revise down a number of our consumer spending forecasts for 2021,” it said in its consumer outlook released today.

“Coming out of a bleak 2020, the Malaysian consumer is again facing the prospects of a strict lockdown and movement restrictions over the first half of 2021.”

Retail sales in Malaysia dipped significantly throughout 2020 as Covid-19 related restrictions held back consumer spending and hit retailers, although monthly retail sales data is showing signs of recovery.

Retail sales posted positive growth in September 2020, the market research firm noted.

Fitch Solutions said it expects the sector to recover with all retail sub-sectors (fashion, department stores or grocery) likely to rebound as Malaysia vaccinates its population and gradually eases restrictions over 2021.

Still, continued restrictions on inter-district and inter-state travel within the Klang Valley centered on Kuala Lumpur and including its adjoining cities and towns in the state of Selangor could delay the recovery/

These states account for about 60 per cent of retail sales in the country.

All states, bar Sarawak, will be under the movement control order from January 22 as public health authorities continue to record four digit daily Covid-19 cases, with the rate of infection in the last five days hovering above the 3,000 mark.

Fitch Solutions said it expects the current lockdown to last more than the scheduled two weeks announced by the government as Putrajaya would need more time to bring down cases to a manageable level.

“While the latest lockdown measures have been announced for two weeks, new Covid-19 case numbers are increasing rapidly and the country's healthcare sector is reaching capacity,” it said.

“As such, we believe that it is very likely that lockdown measures will last longer than the initial two weeks — the previous lockdown lasted close to a quarter in Q2 20, and was implemented after a far milder outbreak than the current third wave,” the firm added.

Fitch Solutions said movement curbs on high-risk environments, like shopping malls and crowded stores, will likely be the last to be lifted, which would have a disproportionate impact on the retail sector.

Related Articles Dr Noor Hisham: 16 new Covid-19 clusters found Gloves not required, Ismail Sabri says after online video of police fining shop worker (VIDEO) Penang assemblyman calls on Putrajaya to reveal full Covid-19 vaccination programme