Will the retail sector keep up the momentum for economic growth?

Retailers in Malaysia are gearing up for a busy first half of 2025, with Lunar New Year and Hari Raya Aidilfitri falling just two months apart. The festive period, combined with the school holiday break from late January to mid-February, is expected to drive strong retail sales momentum.

Retail sector woes?

However, concerns remain about whether spending will decline in the second half of the year due to economic headwinds. The expected rationalisation of petrol subsidies and a potential electricity tariff hike in mid-2025 could raise living costs, leading to cautious consumer spending.

Purchasing power

Despite these challenges, analysts point to factors that could support purchasing power, such as the recent increase in civil servant salaries, the adjustment of the minimum wage to RM1,700, and withdrawals from EPF Account 3. Some believe these measures will help sustain spending across both essential and discretionary goods.

While higher costs may impact certain income groups, historical data suggests minimal spillover into overall inflation. The retail sector’s outlook remains mixed, with strong first-half performance likely but uncertainty about whether spending will hold steady in the latter half of 2025.

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