KUALA LUMPUR: The impact of the impending implementation of the goods and services tax (GST) continues to be at the forefront of retailers’ minds this year, with an expected boost in retail sales in the first quarter of 2015 (1Q15) followed by post-GST blues over the next six months.

“For the first quarter of this year, consumers will be more willing to spend due to the Chinese New Year celebration and employees receiving bonuses,” Retail Group Malaysia (RGM) Sdn Bhd managing director Tan Hai Hsin (pic) told The Edge Financial Daily in an email reply.

“In the last two years, this is also the period when the government distributed Bantuan Rakyat 1Malaysia and other incentives,” he said.

He noted that the rise in retail spending will be “even more obvious” for high-value consumer goods and big-ticket items such as luxury fashion items, cars, electrical and electronic goods as well as furniture and fittings as consumers began their purchases from the end of last year until the GST implementation in April.

“For the six-month period after April 2015, retail sales will likely slow down as consumers have made all the major purchases in advance and choose [to adopt] a wait-and-see attitude on the prices of goods and services,” he said.

Nevertheless, Tan does not expect a slowdown in the retail sector, with RGM projecting it to grow by 6% this year, which is similar to 2014’s, and inflation expected to rise by about 4%.

“Malaysian consumers will get used to the GST by the last quarter of 2015, and retail spending will normalise again,” he pointed out.

Malaysia Shopping Malls Association president Tan Sri Eddy Chen, however, reckoned that the retail industry will face a general downtrend this year, albeit a temporary hike in retail sales in 1Q15.

“Yes, a general downtrend is foreseen for 2015. But we should see a temporary increase in the 1Q due to increased spending in anticipation of the GST.

“Thereafter, it is expected to dip in the 2Q but should level out for the rest of the year, [although] to be lower than 2014,” he said, adding that although lower oil prices are a positive factor driving consumer sales, it is somewhat offset by the withdrawal of fuel subsidies.

Still, Chen pointed out that more shopping malls are expected to open this year.

“The retail industry is not expected to perform well, but food and beverage should be sustainable,” he noted, adding that there will be some postponement of the purchase of non-essential items after the implementation of the GST.  

Malaysia Retail Chain Association president Datuk Liaw Choon Liang concurred, saying 2015 is going to be a challenging year for the retail sector, largely due to the dampening effects that the GST will have on market sentiment.

“The year 2014 had not been promising ... [and] we believe that spending power will further ease going forward. On their part, retailers will try to attract as much sales as possible during the first quarter in order to complement more challenging times in quarters two and three,” he said.

AllianceDBS Research consumer analyst Cheah King Yoong said the 3Q14 consumer sentiment index had dropped by 2.1 points quarter-on-quarter to settle below the threshold points of 100 at 98 points.

“This indicates that consumers are becoming more cautious about their sentiments, given the rising high cost of living and heightened interest rate environment,” he said, adding that the consumer sector is generally plagued by rising cost pressure and the inability to pass on the higher costs.

AllianceDBS has downgraded its recommendation on the retail sector to “underweight” from “neutral”, with OldTown Bhd as its top pick.

This article first appeared in The Edge Financial Daily, on January 15, 2015.