KUALA LUMPUR, May 23 — Strong domestic spending that has been a bedrock of the Malaysian economy will gain a short-term boost through the zero rating of the Goods and Services Tax (GST) next month, said BMI Research today.
The increase will also be accelerated by the “tax holiday” between the effective removal of the consumption tax and the reintroduction of the previous Sales and Services Tax (SST) later in the year, said the Fitch Group unit.
“BMI already holds a positive outlook on the consumer in Malaysia, due to improving consumer sentiment and low unemployment and inflation, but with the removal of the GST, we have further revised up our real consumer spending forecasts to 8.2 per cent in 2018, up from 6.5 per cent forecast previously,” the research house said.
The main beneficiaries of this increased spending are likely to be firms in the food and non-alcoholic drink, alcoholic drink and tobacco, clothing and footwear, household goods and personal care and effects sectors.
BMI pinpointed fast-fashion retailers as those most likely to gain even further.
“Already, H&M is expanding rapidly in the market since entering in 2012, with 44 stores in FY17 (ending November 2017) and the company plans to launch an online platform in 2018. Inditex also has 20 stores across its brands in Malaysia and launched online sales in 2017.
“The removal of GST will likely boost consumer confidence, prompting consumers to spend more,” it said.
Consumer confidence is also expected to rise as a result of the GST’s removal and will be further buoyed by low prevailing unemployment and inflation.