Poor Ramadan sales vex Malaysian retailers

As the Muslim fasting month draws to a close, Malaysian retailers are lamenting the most dispiriting Ramadan sales in years, adding to evidence recent hard decisions on taxes and subsidies might be costing the economy its main growth engine.

The fasting month is traditionally the busiest time of the year for Malaysian retailers, but the country's retailers association are predicting a plunge in Ramadan sales of as much as 20 percent compared with last year.

"Shoppers are more cautious with their money," said Indah Asbiran, who sells traditional Malay costumes for women at a stall in Tunku Abdul Rahman bazaar, the grande dame of festive shopping in Kuala Lumpur. "You see people walking by but not buying much."

A recent survey by the Malaysian Institute of Economic Research showed consumer sentiment had dropped to the lowest for six years. Sentiment worsened after the government dismantled petrol subsidies in December and introduced a goods and services tax (GST) this year. With many households shouldering heavy debts, some shoppers are looking and not buying.

Private consumption accounts for over half of Malaysia's gross domestic product. Its 8.8 percent expansion in the first quarter drove the economy's growth of 5.6 percent, the fastest among Southeast Asia's five biggest economies.

But all the signs are that consumption is slowing, making it harder for Prime Minister Najib Razak's government, already battling weak oil, gas and manufacturing exports, to achieve this year's 4.5-5.5 percent growth target.

Najib's government had hoped consumption might anchor domestic demand at a time when the government is seeking to rein in its fiscal deficit. But there is little sign of that happening.

Ninety percent of respondents to a survey by employment firm Jobstreet said they could not cope with daily expenses after the government imposed the 6 percent GST in April. Auto sales dropped by more than 30 percent that month compared with March.

To counter sluggish sales, retailers are fighting for market share, and that means accepting smaller profits, said H C Chan, chief executive of Sunway Pyramid Shopping Mall, one of the country's largest malls.

Vendors are giving out additional discounts, discounts for buying more items, and discounts for bundle buys.

Hasliza Hasnawi, a schoolteacher, said she still had to do her shopping during Ramadan, which ends on Thursday.

But like many shoppers at Tunku Abdul Rahman bazaar, Hasliza was carrying few shopping bags, choosing to window-shop extensively before settling on a purchase.