KUALA LUMPUR (March 19): The Retail Group Malaysia (RGM) maintained its outlook for 2026, but flagged potential negative impacts from the ongoing Middle East crisis.

The association target a 4.0% annual growth for 2026 rate after a “disappointing” finish last year.

“This projection has yet to take into account the negative impact on the costs of living of Malaysians in the near future due to the ongoing Middle East war,” it noted in its latest retail industry report on Thursday.

For 1QFY2026, the industry is expected to enjoy a promising growth of 4.4%, bolstered by the Chinese New Year and Hari Raya Aidilfitri festivals, it added.

This optimism is supported by the government’s RM15 billion allocations for cash aid programmes (Sumbangan Tunai Rahmah or STR, and Sumbangan Asas Rahmah or Sara) and the launch of Visit Malaysia Year, which targets 47 million foreign tourist arrivals.

However, RGM cautioned that the US-Israel strikes on Iran that began on Feb 28 have introduced significant uncertainty, and contributed to rising energy prices and “severe” supply-chain disruption.

“The current Middle East war may affect the subsidised [fuel] rate in the near term,” RGM stated, noting that the government might be forced to raise RON95 prices due to increased subsidy costs.

According to RGM’s latest report, the industry recorded lower-than-expected growth of 2.4% in the full year of 2025, falling short of the 3.6% estimate set in November. 

This comes as the last quarter of 2025 (4QFY2025) saw growth of just 2.5%, which was 50% below market expectations.

“The year-end festive celebration, the longer school holidays and higher tourist arrival failed to bring cheer to many Malaysian retailers,” it said.

While consumers continued to shop, they remained “careful in their spending,” prioritising goods that offered “good values at a reasonable price point,” added RGM.

The mini-market, convenience store & cooperative segment emerged as the standout performer, expanding by 13.2% in FY2025. In contrast, the furniture and furnishing, home improvement, as well as electrical & electronics sub-sectors were the worst performing, contracting by 9.6% over the same period.

Other key sub-sector performances for FY2025 included the fashion & fashion accessories, pharmaceutical, supermarket & hypermarkets, and the department stores.

Members of the Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA) were interviewed on their retail sales performances for the entire year of 2025 and the first quarter of 2026. 

This is the 29th anniversary of Malaysia Retail Industry Report. It is the longest running retail industry survey in Malaysia.