KUALA LUMPUR (April 3): Private consumption continued to grow but at a slower pace at 7.6% in 2019 compared to 8% in 2018. 

Still, the growth pace in 2019 was higher than the long-term average (2011 to 2018) of 7%. 

Private consumption accounts for nearly 60% of the Malaysian gross domestic product (GDP) in 2019. As private consumption is expected to weaken this year, Bank Negara Malaysia (BNM) has projected a slower economic growth at -2% to 0.5% in 2020, against 4.3% growth in 2019. 

The central bank said in its annual report that the growth in private consumption was driven by supportive labour market conditions and selected government measures amid a modest inflation environment. Households also continued to sustain spending, particularly on necessities.  

In comparison, private consumption in 2018, which recorded 8% growth, was mainly lifted by the three-month tax holiday prior to the transition to the Sales and Services Tax (SST). 

The central bank said the dissipation of this one-off factor resulted in a more moderate expansion in private consumption in 2019. 

Notwithstanding, household spending was supported by continued income and employment growth. Lower-income households also benefited from key government measures, such as the increase in minimum wage and cash transfers such as Bantuan Sara Hidup (BSH).  

Going forward, BNM cautions that private consumption is expected to be dampened by weak labour market conditions, mobility restrictions and subdued sentiments. 

BNM said policy measures introduced in the two economic stimulus packages in the first quarter of 2020, including cash transfers to vulnerable households, flexibility to withdraw from Employees Provident Fund (EPF) savings and the moratorium on loan repayments, will increase disposable income and improve cash flow for households. 

"In addition to supporting household spending, these broad-based measures will facilitate a gradual recovery in private consumption as labour market conditions eventually stabilise following the projected improvement in global and domestic economic activities,” it added. 

For more stories on BNM's annual report, click here.