Looking ahead into 3Q20, distributive trade performance is anticipated to gradually improve while consumption slowly return amid improving labour market, but concerns over new wave of Covid-19 is mounting could limit recovery. — Bernama photo
KUCHING: Malaysia’s distributive trade performance has been anticipated to gradually improve in the third quarter of 2020 (3Q20), compared to what has been recorded in 2Q20.
The country’s sales value of wholesale and retail trade recorded RM108.7 billion in July 2020, contracting 3.5 per cent as compared with the same period last year, according to the Department of Statistics Malaysia (DOSM).
“In line with our expectation, distributive sales contracted by 22.6 per cent year on year (y-o-y) in 2Q20, the lowest performance so far as economic activities were largely shut during the period due to Covid-19,” the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said.
“International border closures also weigh down on the sentiment which affected the performance as well. This point towards significant contraction in gross domestic product (GDP) for 2Q20 as private consumption is the biggest contributor to Malaysian economy.
“Looking ahead into 3Q20, distributive trade performance is anticipated to gradually improve than what we have seen in 2Q20. While consumption slowly return amid improving labour market, concerns over new wave of Covid-19 is mounting. This could limit the recovery.”
MIDF Research highlighted that Covid-19 has stifled domestic demand as consumers reduce their economic activities and tight their purse string due to uncertainty over the near future.
“This was reflected in double digit contraction for the GDP of these two segments in 2Q20.”
While the research arm believed 2Q20 is the trough particularly because of the Movement Control Order (MCO) in placed, consumption will only advance slowly moving forward backed by low inflationary pressure, overnight policy rate (OPR) cuts and economic stimulus package particularly through Rakyat-centric measures.
“This is because most of the Rakyat still avoid outside activities amid resurgence of new clusters of Covid-19.
“Services sector particularly involving hotel and aviation will continue to be pressured by the internal border closure.”
As such, MIDF Research foresees private consumption and services sector to decline by 3.4 per cent y-o-y and 3.9 per cent y-o-y respectively for this year.