PETALING JAYA: Malaysian consumer spending is expected to remain strong in 2025 underpinned by a low inflationary environment and a stable labour market, says a Fitch Solutions unit.
In a report, BMI Country Risk & Industry Research (BMI) said a strong Malaysian labour market and easing inflation are raising wages in real terms, which has filtered into the disposable incomes of Malaysian households.
BMI said Malaysians’ earnings would grow by an average of 3.3% year-on-year, and the average Malaysian household would have a purchasing power about 8% higher than the 2019 level, with a continuously improving trajectory over the medium term to 2029.
“Overall, we forecast household spending to grow by 5.2% y-o-y over 2025, in real terms, to a value of RM943.7 billion, up from RM896.9 billion in 2024,” it said.
“As a result, household spending has returned to pre-Covid levels of growth, where it grew at a real average rate of 5.2% y-o-y during the 2015-2019 period.”
BMI also noted that inflation is forecast to average 2.4% in 2025, which remains low enough to support household purchasing power.
It also pointed out that the unemployment rate in Malaysia remained stable at a multi-year low of 3.1% in February, underpinning consumer confidence.
BMI forecast unemployment to average 3.1% for the year, supported by foreign investment and tourism.
However, BMI said consumer spending would continue to be restrained by Malaysian consumers’ high levels of indebtedness and the correspondingly high debt servicing costs.
It said high debt levels leave Malaysian households vulnerable to elevated interest rates, requiring consumers to allocate more of their budgets to debt repayments for longer and constraining their ability to spend on other goods and services.
It also forecast the ringgit to strengthen slightly against the US dollar from RM4.6 per US dollar last year to RM4.5 per US dollar this year.
Noting that the country remains heavily reliant on imports to meet local demand, it said that the strengthening of the exchange rate means that Malaysian consumers will benefit from cheaper imports.
