Retailers likely to face negative growth for the entire year
KUALA LUMPUR: In the event of the global Coronavirus Disease 2019 (Covid-19) outbreak and the ongoing domestic political turmoil, the retail consumption pa ern here in Malaysia will continue to falter, leading to negative growth rate for the retail industry for the entire year.
According to Kenanga Investment Bank Bhd’s research house (Kenanga Research), retailers seasonally post lower sales in the first quarter (1Q) due to a lower base compared to 4Q which is boosted by seasonal year-end promotions and preChinese New Year festivities.
This current 1Q20 is further hampered by lower footfalls from Covid-19 outbreak and onemonth movement control order (MCO).
“However, in the event of the global Covid-19 outbreak and domestic political turmoil taking more than the next few months to resolve, it would further affect the retail consumption pa ern in Malaysia drastically.
“This will lead to Malaysia retail industry suffering from negative growth rate for the entire year.
“The last time when the Malaysian retail industry recorded a negative growth rate was during the 1997 to 1998 Asian Financial Crisis,” it said, noting that in 1998, the market size of the Malaysian retail industry contracted by 20 per cent.
Nevertheless, it viewed the 2020 economic stimulus package and the recent additional stimulus package (announced periodically by Prime Minister Tan Sri Muhyiddin Yassin) announced by the government is a boon to the retail sector aim to re-invigorate local demand amidst the current crisis.
The stimulus package will have three main thrusts: mitigating impact of Covid-19, spurring people-centric economic growth, and encouraging quality investments in the country.
“In terms of the measures we think as having a significant positive impact to the market is the measure to boost consumption growth via a voluntary four per cent reduction in employees’ minimum EPF contribution from 11 per cent to seven per cent from April 1 to December 31, 2020, i-Lestari withdrawal facility from EPF account 2 (maximum amount of RM500 monthly for a period of 12 months), workers forced to take unpaid leave to receive cash assistance of RM600 a month up to six months, and temporary deferment or suspension of loan/financing repayment obligation (principal and interest) for a limited period of time (up to six months for now).
“Not only that, the Bantuan Sara Hidup (BSH) recipients’
RM200 entitlement payment will be brought forward from May to March in addition to an extra RM150 that will be paid in May of which RM50 will be in e-tunai.
“There will be other measures announced periodically by the Prime Minister after the discussion with the affected parties during this outbreak,” Kenanga Research added.
It maintained its ‘neutral’ view on the overall consumer sector.
IT also noted that the Malaysian Institute of Economic Research’s (MIER) posted 82.3 points (down 1.7ppt quarter-onquarter, down 14.5ppt year-onyear) for its 4QCY19 Consumer Sentiment Index (CSI).
“We believe the q-o-q weakness is largely owed to the increasingly cautious spending pa erns observed from the consumers, which leans more towards value-for-money purchases instead of high-value discretionary spending such as vehicles, imported goods and overseas travels.
“That said, we are expecting consumer sentiment to remain soft for the upcoming quarters, as heightening Covid-19 cases recorded within Malaysia and the imposed movement restriction are likely to dent consumers confidence, which would consequently disrupts the retail industry,” Kenanga Research said.