KUALA LUMPUR (Jan 24): Malaysia is expected to see continued growth in consumer spending throughout 2025, with real household spending forecasted to increase by 5.2% year-on-year, driven by a favourable macroeconomic environment, according to BMI, a Fitch Solutions unit.

In a note on Friday, it said this projected growth would bring household spending to RM954.5 billion, up from RM907.2 billion in 2024, marking a return to pre-Covid levels.

The research house highlighted that the positive outlook for consumer spending is largely underpinned by low inflation and a stable labour market.  

These factors, coupled with strong growth in household incomes, provide a solid foundation for sustained real terms growth in household expenditures.

However, BMI anticipates a slight deceleration in the growth rate, in line with a broader slowdown in Malaysia’s economic performance.

For 2025, the country risk team has forecasted Malaysia’s economy to grow by 4.7% in real terms, a moderation from the rapid recovery seen post-pandemic. 

This slowdown is expected to be driven by several factors, including the diminishing impact of base effects, the waning of pent-up consumer demand, tighter credit conditions and a global economic environment that remains subdued. 

Despite this, Malaysia’s consumer spending growth is projected to outperform many other markets, with analysts pointing to the country’s resilience amid global challenges.

That said, BMI also highlighted potential risks to its consumer spending outlook. 

As major economies around the world stabilise, labour markets are expected to loosen, driven by a reduction in government support and fiscal spending, resulting in a rise in unemployment, presenting a key risk to the consumer outlook for 2025. 

Although inflation is projected to remain low, with wage growth improving purchasing power, the potential for job losses could offset these benefits.

Additionally, high levels of household debt remain a significant risk — many Malaysian households are still burdened by debt, which limits future borrowing capacity and constrains disposable income. 

The challenge is compounded by rising debt servicing costs, which have been exacerbated by interest rate hikes during the 2022-2023 inflationary period. 

While central banks in many countries, including Malaysia, are expected to cut interest rates over 2025, easing monetary policy may not fully reverse the pressures that higher rates have placed on household finances, BMI noted.