KUALA LUMPUR (Sept 12): In the second quarter of 2024 (2Q2024), Malaysia's retail sales growth decelerated to 0.6%, falling short of market expectations, according to Retail Group Malaysia (RGM).

In June, members of the Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) projected a growth rate of 1.7%, making the actual result 65% below the estimate.

Despite an attractive ringgit and visa-free entry for tourists from China and India, which boosted foreign tourist numbers, festive sales during Hari Raya Aidilfitri, celebrated from April 10, did not meet expectations. 

"Retail prices continued to rise during 2Q2024. Malaysian consumers needed to manage their monthly expenses carefully in order to maintain their lifestyles. 

"The never-ending Israel-Palestine conflict had affected businesses of certain international retail brands," said RGM in its most recent report.

Overall, the Malaysian retail industry grew by 4.6% in the first six months of 2024, compared to the same period in 2023.

Looking ahead, the majority of members of the MRA and MRCA are optimistic about the next three months. They estimate an average growth rate of 3.6% in retail sales for 3Q2024.

Department store operators predict a recovery with a growth rate of 7.3%, followed by supermarket operators with 5.8%.

Supermarket and hypermarket operators expect a moderate growth of 1.9%, while mini-markets, convenience stores and cooperatives foresee a 2.3% increase. 

The fashion and fashion accessories sector is expected to remain vibrant with a growth rate of 7.4%. Retailers selling children's and baby products anticipate a 2.7% growth, whereas pharmacy operators expect a slowdown with a 1.2% increase.

Retailers in the personal care sub-sector are particularly optimistic, forecasting a 23.5% growth rate. However, operators of furniture, home improvement and electrical and electronics sectors are pessimistic, predicting a 1.9% contraction, marking the third consecutive quarter of decline.

Retailers in other specialty stores, including photo shops and online shopping platforms, expect a 2.6% improvement. 

RGM maintained its 3.6% growth forecast for 2024, considering the softer market in 2Q2024, and higher estimates for 3Q2024.

The retail sector is anticipated to grow by 3.6% in 3Q2024, and 3.2% in 4Q2024.

Challenges such as rising living costs, increased service tax rates and floating diesel prices have reportedly impacted retail spending. 

Meanwhile, the introduction of a new flexible account by the Employee Provident Fund and cash handouts under the Sumbangan Tunai Rahmah programme are said to have provided some relief. 

The government's efforts to attract tourists have also reportedly benefited retail businesses, with significant increases in tourist arrivals from China and India.

Additionally, the Malaysian government will increase civil servant remuneration from Dec 1, which is expected to stimulate retail sales during the year-end holiday season. 

The government targets 27.3 million tourists and RM102.7 billion in tourist receipts for 2024, further boosting the retail sector.