Zero-rat­ing of GST likely to boost con­sumer spend­ing growth in the June to Au­gust pe­riod, says May­bank IB

New Straits Times - - BUSINESS -

RETAIL trade growth is ex­pected to pick up in June-Au­gust pe­riod this year fol­low­ing the zero-rat­ing of the Goods and Ser­vices Tax (GST), ef­fec­tive early this month.

May­bank In­vest­ment Bank Bhd (May­bank IB) said the new­ly­elected gov­ern­ment had de­liv­ered its elec­tion pledge by re­mov­ing the broad-based GST be­fore bring­ing back the pre­vi­ous nar­row-based Sales and Ser­vices Tax (SST) from Septem­ber 1 this year.

“Ad­di­tional boost to con­sumer sen­ti­ment and spend­ing will come from fuel price sta­bil­i­sa­tion and sub­sidy as RON95 and diesel prices have re­mained un­changed at RM2.20 and RM2.18 a litre, re­spec­tively, since March 22 this year and will re­main at the lev­els un­til year-end,” said the re­search firm in a re­port.

This is on top of the con­tin­u­a­tion of the tar­geted cash hand­outs to low-in­come house­holds, in­tro­duced by the pre­vi­ous gov­ern­ment, re­named from Ban­tuan Rakyat 1Malaysia to Ban­tuan Sara Hidup (Cost of Liv­ing As­sis­tance) and the spe­cial Aidil­fitri cash pay­ment of RM400 to civil ser­vants (Grade 41 and be­low) and RM200 for re­tired civil ser­vants.

Car sales are ex­pected to pick up with mo­tor ve­hi­cle trade in­dex re­bound­ing 5.8 per cent year-onyear (y-o-y) in April this year com­pared with 3.7 per cent y-o-y in March.

This is in tan­dem with a turn­around in mo­tor ve­hi­cle sales, where a 10.2 per cent y-o-y jump was posted in April this year com­pared with a 6.9 per cent y-o-y in March.

“An in­dus­try an­a­lyst ex­pects the tax hol­i­day pe­riod fol­low­ing GST be­ing zero-rated to sup­port car sales as distrib­u­tors re­duced prices by about six per cent, while the re­in­state­ment of SST will re­sult in car prices go­ing up,” said May­bank IB.

“We ex­pect pri­vate con­sump­tion growth to in­crease to 7.3 per cent this year, com­pared with 7.0 per cent last year, to sup­port do­mes­tic de­mand and eco­nomic growth amid ra­tio­nal­i­sa­tion in gov­ern­ment spend­ing and a re­view of ma­jor in­fra­struc­ture projects,” said the re­search firm.

May­bank IB ex­pects real gross do­mes­tic prod­uct growth to slow to 5.3 per cent this year from 5.9 per cent last year.

May­bank In­vest­ment Bank Bhd says con­sumer sen­ti­ment and spend­ing will get an ad­di­tional boost from the sta­bil­i­sa­tion of fuel prices and sub­si­dies.

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