RAM Ratings revises outlook on retail sector to ‘stable’

KUALA LUMPUR: RAM Ratings expects the retail sector to be one of the prime beneficiaries of the country’s upbeat consumer sentiment and measures proposed by the government to alleviate the rising cost of living.

The credit rating agency has revised the “negative” outlook on the retail sector (in place since October 2016) to “stable”, citing that the consumer sentiment has improved markedly following the 14th General Election in May.

“We expect the zero-rated Goods and Services Tax (GST) to translate into stronger consumer spending and sales for retailers, especially during the threemonth tax holiday until the Sales and Services Tax (SST) is reinstated on September 1,” said RAM head of consumer and industrial ratings Kevin Lim.

He said consumer spending and retail sales were envisaged to normalise somewhat after the reinstatement of the SST.

“However, the overall tax burden on consumers will be considerably lighter, with the government’s tax collection estimated to come in at RM21 billion per annum, less than half of the amount collected through the GST,” said Lim.

Ram Ratings said the government had pledged wide-ranging initiatives aimed at increasing the purchasing power of consumers, particularly lower income households (bottom 40).

These measures include the reintroduction of a targeted fuel subsidy as well as a medical subsidy, reduced excise duty on firstcar purchases, the gradual abolition of expressway tolls and a higher minimum wage.

RAM Ratings said while details were scant and execution would take time, these moves were deemed positive for the retail sector.