KUALA LUMPUR (Sept 3): Malaysian retail sales fell 11.9% in the second quarter (2Q), from a year earlier, as the combined impact of the goods and services tax (GST) and weaker ringgit hit sentiment, Retail Group Malaysia (RGM) said.

In a statement today, RGM said it downgraded its 2015 full-year retail sales growth forecast to 3.1%, from 4% previously, following the 2Q data.

"This latest quarterly result was the worst quarterly retail growth rate since the Asian financial and economic crisis in 1998. The negative impact of GST on Malaysia's retail industry is worse than anticipated.

"The weak ringgit is affecting costs of goods, due to higher import costs. Higher import costs are affecting all retail sectors, from grocery stores, restaurants, fashion stores, furniture stores, electrical & electronics stores, etc. Higher retail prices will be more apparent by the fourth quarter of this year. By then, Malaysian consumers' purchasing power will decline further," RGM said.

Today, the ringgit weakened to 4.2335 against the US dollar, following China's yuan devaluation and in anticipation of US interest rate hikes this year. The ringgit also closely tracks prices of crude oil, which forms a crucial portion of the Malaysian economy.

RGM obtained its industry data from Malaysia Retailers Association (MRA) members who have been contending with the GST since its implementation in April this year.

Today, RGM said the 11.9% drop in 2Q retail sales as compared with MRA's, estimated a 3% contraction forecast.

"This quarterly performance is highly disappointing and way below the average growth rate of -3.0% forecasted by members of MRA in June 2015. All retail sub-sectors suffered declines in their retail businesses during the second quarter of 2015, due to the implementation of GST," RGM said.