You are using an older browser version. Please use a supported version for the best MSN experience.

Retail, food and beverage sectors hardest hit in 2017

Free Malaysia Today logo Free Malaysia Today 20/4/2017 Minderjeet Kaur
Winnie-Seow-Mei-1 © Provided by MToday News Sdn Bhd Winnie-Seow-Mei-1

PETALING JAYA: The retail and food and beverage sectors will continue to be the hardest hit in Malaysia this year.

Winnie Seow Mei, an economic analyst with Bower Group Asia, said salaries had not increased as much as the inflation rate, expected to be 5.3% when the March statistics are announced.

“Consumer sentiment in Malaysia has gone down. If the inflation figures remain the same, not only the poor won’t be able to spend as much but the rich will not spend as much, too.

“Everyone wants to keep cash in hand because of these issues,” she told FMT.

On Monday, a Reuters poll showed Malaysia’s annual inflation rate was expected to rise to 5.3% in March, the highest in eight years.

Bank Negara Malaysia (BNM) had recently said headline inflation would be “relatively high” in the first half of 2017 due to higher fuel prices. However, BNM expects it to dip in the second half.

Reuters reported that BNM expected headline inflation to be 3% to 4% in 2017, against 2.1% last year.

Seow Mei said the retail sector had acknowledged it would not be doing well this year as people cut down on buying clothing items.

“It is not a need, it is a want. It will be the first thing they will cut.”

The same will happen to restaurants as people cut down on eating out.

Seow Mei listed three reasons for the higher inflation.

The main factor, she said, was the vast increase in fuel prices since March last year – RON95 fuel was RM1.60 per litre in March 2016 compared with RM2.30 per litre in March this year.

The second factor was the weakening of the ringgit. In March last year, it was RM3.90 to US$1 but as of this March, the value of the ringgit had declined to RM4.40 to the US$1.

The third factor, she said, was the distribution of 1Malaysia People’s Aid (BR1M), which was given to recipients on Feb 18, 2017.

“It directly encouraged spending. As a result, we saw a spike in consumer spending, and this will contribute to inflation figures as well.”

Admitting there were no statistics to prove BR1M contributed to inflation, she said, however, that based on past habits, it did contribute a little.

She said the ringgit had weakened due to the US federal rate hike, which saw more funds flowing back to the US, and the perception about Malaysia’s economy.

“It is about how strong the Malaysian economy will be. In 2017, the perception is better than last year, hence the market is picking up.

“But if you compare with other countries, we are not one of the best. Vietnam has shown a significant amount of investment going into the country.”

She said China’s economic improvement this year, compared with 2016, would benefit the countries in the region, including Malaysia.

But she cautioned that tensions in the Korean peninsula had the potential to harm Malaysia’s economy, highlighting how Wall Street and Asian share markets dipped after Pyongyang’s recent demonstration of its heavy weaponry and a failed missile test.

More From Free Malaysia Today

Free Malaysia Today
Free Malaysia Today
image beaconimage beaconimage beacon