Despite the steady performance of the local retail sector so far this year, experts and shopping mall operators are maintaining a cautious outlook for the remainder of 2023, in light of potential economic headwinds.
According to Sunway Malls and Theme Parks chief executive officer H.C. Chan, the prevailing theme for the second half of 2023 is addressing escalating business costs.
Chan highlights several factors that will drive costs up at both the micro and macro level. He mentions the continuous subsidy rationalisation for electricity, which has already led to higher utility costs for businesses. He also emphasizes the potential hikes in petrol and diesel prices, which are another point to consider. Additionally, Chan points out that the weak ringgit is expected to weigh in for the remainder of the year, causing inflationary pressure to persist and having a cooling effect on consumer sentiment and spending.
Malaysia Shopping Malls Association president Tan Sri Teo Chiang Kok shares the cautious stance for the remainder of the year. He points to continuing high inflation and the prospects of a global recession as reasons for the less optimistic outlook. Teo believes that due to rising inflation, spending is becoming more discerning, resulting in fewer goods being bought for the same ringgit spend.
Despite the less-than-stellar outlook, Chan remains optimistic about the future of Sunway Malls in the second half of the year. He foresees incremental growth in the range of 5% to 10%, mainly driven by seasonal festivities. Chan projects that 2023 sales performance will exceed that of 2022, with a growth rate of 5%, in line with the country’s gross domestic product growth. He also mentions that Sunway Malls achieved 15% growth compared to pre-pandemic levels last year, making it their best year in 25 years of business.
According to Retail Group Malaysia (RGM), the first quarter of 2023 witnessed a better-than-expected growth rate of 13.8% in retail sales compared to the same period in 2022. The strong growth rate was attributed to the Chinese New Year celebration in January and the one-month school holiday in February and March. RGM revised its annual retail industry growth rate for 2023 to 4.8%, higher than the earlier forecast of 4%, due to the robust retail results in the first quarter.
Looking ahead to the second quarter, Teo believes that sales performance will not be as strong as in the first quarter due to inflationary pressures and a slower economic recovery. Similarly, Chan expects retail sales performance to moderate in the second quarter due to a large absence of liquidity injection. However, he anticipates that Sunway Malls will maintain a sales performance similar to that of the second quarter of last year. RGM projects a 2.6% growth in retail sales for the second quarter of 2023.
Regarding the recovery of Chinese tourists, Teo mentions that there has been no significant impact to date. He urges the government to swiftly implement visas for tourist arrivals, especially from China, which is the biggest potential market. Chan remains hopeful that there will be a meaningful influx of Chinese tourists in the second half of 2023, particularly during China’s summer holidays. He emphasizes the need to increase flight capacity and frequency to accommodate more tourists and address concerns like the slow recovery of flight capacity and ease of visa approval. Chan notes that the recovery of Chinese tourists across the region is still patchy, with countries like Thailand reporting only 40% of the pre-pandemic level of influx.
Credit: The Star : Business Feed
