This article first appeared in The Edge Financial Daily on March 20, 2019

KUALA LUMPUR: Malaysia’s retail industry growth rate slowed to 2.7% year-on-year for the fourth quarter of 2018 (4Q18), compared with the 3.1% recorded in the same quarter a year earlier, significantly below an expected 4.7% growth.

In a statement yesterday, the Retail Group Malaysia said the year-end festival and school holiday period failed to boost the growth rate for 2018, and was consistent with the dampened Consumer Sentiment Index as reported by the Malaysian Institute of Economic Research.

“For the whole of 2018, the retail sales growth rate was 3.9% compared with the same period a year ago. The three-month tax holiday failed to lift the sluggish retail industry.

“For the sixth consecutive year, the retail industry performance lagged behind GDP (gross domestic product) growth rate,” it said.

The supermarket and hypermarket sub-sector was the worst performer, reporting a 4% decline for the quarter and a 5% decline for the year.

The best performer was the pharmacy and personal care sub-sector, which grew 8.7% and 10.2% for the quarter and the year respectively.

Looking ahead, members of the association expect conditions to stabilise and see growth of 3.1% for 1Q19.

This will be contributed by a sustained 4.4% expected growth by department store cum supermarket operators, and a rebound in department store growth to 7.6% after a dismal performance in 2018.

However, supermarket and hypermarket operators do not see recovery ahead, expecting negative growth of 7.6% for 1Q19.

“Based on our first quarterly projections of retail sales for 2019, Retail Group Malaysia estimates a 4.5% growth rate in retail sales for 2019 or RM108.3 billion,” it said.

Retail activity is expected to pick up in the second half of the year, with the association forecasting a retail growth of 3.9% and 5.8% for the third and fourth quarters respectively.