Malaysians to shop more with significant income growth, says Fitch Solutions

 

Fitch Solutions says clothing and footwear spending will grow at an annual average of 8.5%, with expenditures for this category set to reach RM39.1 billion in 2026.

PETALING JAYA: Malaysian households will see significant growth in their disposable income for the rest of the year and up until 2026, says Fitch Solutions.

Fitch Solutions Country Risk and Industry Research said household disposable income had grown beyond pre-pandemic levels of RM98,300 per household in 2019.

For the medium-term from 2022 to 2026, it predicted that the average disposable income of Malaysian households will grow at an average of 5.3% a year to reach RM127,000 by 2026.

While inflation is expected to increase this year at an average of 3.3%, it said, this will be significantly below the rate of disposable income growth of 7.2%. Disposable income growth in 2023 will slow but still remain above the inflation rate.

“This will remain the case in 2024, with the trend of household disposable income outpacing inflation maintained throughout our forecast period to 2026. This means consumers in Malaysia will see their disposable incomes increasing in real terms,” it said in a statement.

Fitch said Malaysian households will be moving away from focusing on essentials, as they did in the past two years, to non-essential spending.

It said recreational and cultural spending was the fastest growing category currently, followed by restaurant and hotel.

“These growth outlooks indicate that while Malaysian consumers are spending more on discretionary spending than they did during or before the pandemic, they are focusing that spending on experiences rather than tangible products.

“We believe the continuous strong growth of the spending category in the long term is aided by a growing middle class and high-income households in Malaysia, as well as positive demographic shifts that will drive demand for recreation and cultural experiences,” it said.

It said the clothing and footwear category could be the biggest benefactor from this growth in recreational spending, pointing out that retail sales had strongly recovered over the past six months.

Clothing and footwear spending will grow at an annual average of 8.5%, with expenditures for this category set to reach RM39.1 billion in 2026, compared to RM28.4 billion this year.

Regional and international brands are looking to capitalise on this, said Fitch, pointing out that Adidas had opened its largest brand centre in Southeast Asia when it set up its store in Sunway Pyramid last year.

The opening of Japan-based Mitsui Fudosan’s Lalaport mall and Tropicana Corp’s Tropicana Gardens Mall this year further proved the retail sector’s strong recovery.

“Fashion retailers can benefit by having their stores near recreation or tourist spots in order to capitalise on the strong surge in recreation and culture spending over the medium term.

“As discretionary spending levels rise in Malaysia, retailers can ride the momentum by ensuring their brands are seen at high foot-traffic tourist spots, particularly as domestic social restriction orders ease and international tourism reopens,” it said. - FMT