How will new government policies impact retail growth?

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New Government Policies Are Expected to Support Retail Growth Amidst Mixed Performance

Malaysia's retail sector experienced a notable 4.9 per cent expansion in the third quarter of 2025, leading Retail Group Malaysia (RGM) to revise its full-year growth projection upwards to 3.6 per cent. This resilience in consumer spending is occurring despite the introduction of several new government policies between July and September 2025. These measures, which include adjustments to the electricity tariff, an expanded Sales and Services Tax (SST), and increased luxury taxes, were implemented alongside a cut in Bank Negara Malaysia’s Overnight Policy Rate to 2.75 per cent. Furthermore, the enforcement of a monthly minimum wage for small firms and the rollout of a RM100 credit under the Sumbangan Asas Rahmah (Sara) programme have also shaped the retail landscape. By the end of September, over 13 million adults had utilized the RM100 credit, and a reduction in RON95 petrol prices to RM1.99 per litre contributed to easing household expenditure.
Impact of Policy Adjustments on Consumer Spending

The period between July and September 2025 saw the implementation of several key government initiatives that have influenced consumer behaviour and retail performance. While the specifics of how each policy directly affected particular retail sub-sectors are not detailed, the aggregate impact suggests a continued, albeit varied, spending trend. The expansion of the SST and higher luxury taxes may have influenced purchasing decisions in certain categories, while the reduction in the Overnight Policy Rate by Bank Negara Malaysia could have theoretically made borrowing more accessible, potentially supporting spending, though the direct transmission to retail demand is not elaborated upon. The enforcement of a minimum wage for small businesses could also have implications for operational costs and, consequently, pricing or employment within those firms.
The Role of Direct Financial Assistance and Subsidies

Direct financial support and subsidies played a significant role in bolstering consumer spending during the third quarter of 2025. The nationwide RM100 credit offered under the Sumbangan Asas Rahmah (Sara) programme saw substantial uptake, with more than 13 million adults redeeming the credit by late September. This direct injection of funds into consumers' hands likely supported spending, particularly at participating stores. Additionally, the government's decision to lower the price of RON95 petrol to RM1.99 per litre provided tangible relief to household budgets, freeing up funds that could be allocated to other retail purchases.
Sub-Sector Performance and Forward-Looking Expectations

The retail landscape presented a mixed performance across various sub-sectors in the third quarter of 2025. Mini-markets and convenience stores demonstrated robust growth of 18.1 per cent, while fashion retail expanded by 10.9 per cent, and supermarkets saw a rebound of 5.1 per cent. Conversely, department stores experienced a decline of 5.5 per cent, personal care outlets dropped by 6.8 per cent, and furniture, home improvement, and electrical retailers saw a significant contraction of 7.1 per cent. Other specialty stores registered minimal growth of 0.2 per cent. Looking ahead, retailers anticipate a stronger fourth quarter with projected growth of 5.0 per cent, driven by year-end festivities. Personal care stores are expected to see a notable turnaround with an estimated 14.5 per cent growth in Q4, alongside optimistic outlooks for fashion and mini-markets. However, furniture and electrical goods retailers anticipate a continued dip in sales during the final quarter.

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How will new government policies impact retail growth?

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