RETAIL TRADE SET TO PICK ON ZERO-RATED GST
Zero-rating of GST likely to boost consumer spending growth in the June to August period, says Maybank IB
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.