MIDF Projects Resilient Domestic Demand With Stronger Retail Sales

KUALA LUMPUR, May 13 (Bernama) -- MIDF Amanah Investment Bank Bhd’s research arm, MIDF Research, is projecting sustained expansion in domestic spending following stronger retail sales recorded in March 2025.

The investment bank said in a note today that this outlook is underpinned by several key factors, including a resilient labour market characterised by steady employment and wage growth, particularly in domestic-oriented sectors, which will continue to support household spending.

“Manageable inflation, alongside an accommodative monetary policy stance and targeted fiscal measures, is expected to further reinforce consumer purchasing power and overall spending confidence.

“Robust domestic demand will likely remain the key pillar of Malaysia’s economic growth, helping to cushion the impact of ongoing external headwinds, including softening global trade and elevated geopolitical risks,” it said.

Additionally, it noted that the tourism sector is poised to play a more prominent role in supporting growth, with stronger tourist arrivals and higher spending contributing positively to the services and retail sectors.

However, MIDF Research remains cautious about potential downside risks. Heightened global trade tensions could weigh on both consumer and business sentiment, potentially leading to more restrained spending behaviour.

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It noted that while the United States (US) and China have temporarily eased tariffs, uncertainty lingers over the prospects of a mutually acceptable deal — including its scope, timeline and durability.

Similarly, the outcome of Malaysia’s ongoing trade negotiations with US President Donald Trump’s administration remains unclear.

“Although the 90-day tariff pause may offer temporary relief, underlying uncertainty continues to pose a risk to the resilience of retail sales and the broader economic outlook,” it said.

MIDF Research also said that recent policy adjustments, including higher diesel prices and increased utility tariffs, continue to have a contained effect on overall price levels.

Furthermore, the government’s decision to delay the planned expansion of the sales and service tax, aimed at supporting manufacturers and exporters amid a more challenging business environment due to higher US tariffs, is expected to help keep price pressures manageable.

“However, if tariff shocks pose significant risks to Malaysia’s outlook, further subsidy rationalisation and planned hikes in tax and utility rates may be reconsidered and deferred to support domestic consumption and overall growth,” it added.

-- BERNAMA