Rising recreational spending in Malaysia presents opportunities for fashion retailers, says Fitch Solutions

KUALA LUMPUR (July 25): Fitch Solutions Country Risk and Industry Research says economic growth and real incomes will surpass pre-pandemic levels in 2022 as Malaysia continues to shred in the pain of the pandemic. Ta.

The company said in a report last Friday (July 22) that this allows consumers to redirect spending away from essential items, giving them more room to indulge in discretionary non-essential spending. .

The report said spending on recreation and culture led the way as the fastest growing non-essential spending category, indicating Malaysian consumers’ tendency to spend on experiences rather than tangible products. Ta.

“However, we note that spending on clothing and footwear is the fastest growing essentials category and the strong recovery in broader retail in Malaysia.

“We believe this provides a window for fashion retailers to make the most of the recreational spending momentum in Malaysia and cater to consumers who are willing and able to increase their fashion spending,” the company said. Stated.

Fitch Solutions said Malaysian households will see strong increases in disposable income through 2022, with further growth in personal consumption across all household spending categories.

According to the report, average household disposable income will reach 104,900 ringgit in 2022, an increase of 7.2% from the previous year.

Malaysia’s household income growth also recorded a strong performance of 7.5% year-on-year in 2021, although it noted that the growth in 2021 benefited from the lower base effect of 2020.

Fitch Solutions said its forecast of 7.2% year-on-year growth in Malaysian consumer spending in 2022 is in line with the country risk team’s forecast for 2022 economic growth of 5.2% year-on-year in real terms. Stated.

The company said this is a revised forecast from its previous forecast of 5.6% due to the weaker outlook for net exports, but the team believes that Malaysian consumers in particular are protected from the impact of inflation due to higher commodity prices. said it expects strong domestic demand to drive growth. Meanwhile, the ongoing chip shortage will support investment in Malaysia.

“As such, our country risk team forecasts that GDP will grow at an average annual rate of 4.1% in real terms until 2026.

“Given the favorable economic climate that Malaysian consumers find themselves in over the medium term, households will gradually move away from focusing on essential items and increase their propensity to spend on non-essential items in 2020-21.

“As the impact of the pandemic subsides, we see Malaysian consumers starting to return to discretionary spending that they had cut back on during the pandemic,” the report said.

Fitch Solutions said that in 2022, essential spending in Malaysia is expected to grow by 7.6% year-on-year, while non-essential spending is expected to grow significantly by 8.6% year-on-year.

In the medium term, growth in non-essential spending will also outpace essential spending, at an average annual growth rate of 8.1%, outpacing essential spending growth of 7.3% annually, he said.

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